Milan, March 23rd, 2020
A highly improbable and unpredictable event, that will have a massive impact on the days to come – the black swan of our era. We still do not know precisely how, but we are well aware that Coronavirus epidemic will alter the future of tech. More generally, the spread of COVID-19, whose progresses we are open-eyed witnessing day after day, will have a significant impact on the longer-term trajectory of our society and economy. In this uncertain scenario, we do not want to offer big picture considerations, but a much-needed message of encouragement and some spare thoughts on these exceptional days.
During these weeks, we got acquainted with the epidemiologic lexicon; we got to learn the importance of “flattening the curve” and social distancing. Measures that, at the time being, are being enforced across Europe and the whole world in response to the Coronavirus threat. Sadly, a pandemic has no borders.
We have been reading tons of reports, articles, predictions about the Coronavirus outbreak and its consequences. We had to sharpen our ability to recognize the fake news that, sometimes imperceptibly, creep into the uninterrupted flow of information we are subject to.
The sure thing is that Italy is being hit terribly hard by the epidemic. This article well describes the rapid escalation we have been living in our country in the past weeks, starting from the denial phase – the exponentiality of contagion numbers is not only tragic but also counterintuitive.
At first, we were reading news about the Chinese outbreak. I recall seeing, around the end of January, a short video of quarantined Wuhan’s citizens calling the name of their city from their windows to keep spirits up, and having goosebumps. I could never imagine I would be doing the same, just a few weeks later, joining a nation-wide chorus and singing songs of hope from my balcony in Milano. We are isolated, and yet so close to one another.
While we #stayathome to protect the most fragile part of our community and avoid the collapse of the national healthcare system, we want to acknowledge the incredible work that doctors, nurses, and hospital workers are tirelessly doing. Furthermore, we also want to spare a thought for all those workers that keep our economy up and running. Resilience and resourcefulness will help Italy going through these difficult times.
The Ultimate Disruptor
The first signs of the Coronavirus outbreak in Italy appeared on Friday, February 21st. We quickly commented on the news just before leaving the office and wishing each other a nice weekend. On Sunday 23rd, although at that time everything seemed pretty much under control, our team decided to start working remotely from the following day as a precautional measure. As you all know, the situation rapidly escalated, and all Italy is under full lockdown since March 9th. We have just entered our fifth working-from-home week.
During this time, we have remained open for business, without slowing down. We have announced a new investment, remained in constant contact with our portfolio companies, received and assessed qualified deal flow, done business as usual (although remotely). As an agile and strongly digitized firm, switching overnight from our daily office life to a full work-from-home routine has been relatively easy for us. As most of the folks in the tech and startup universe, we are used to flexible hours, massive use of video-conferencing, remote collaboration tools, etc. However, many other organizations have found themselves in trouble.
This abrupt need for digitization is one of the more immediate effects of the COVID-19 outbreak. From public administration to schools, Coronavirus is acting as the ultimate disruptor for all those sectors that – especially in Italy – are still poorly digitized. The pandemic also highlighted a need for 5G technology, potentially accelerating adoption in the near future.
Once the emergency will be over, how will this obliged digital transformation leave a mark? Today’s exceptional circumstances are forcing companies to adopt the “startup mentality”: be flexible, think fast, make errors, try again. We can reasonably affirm that the Coronavirus outbreak will have a huge impact on the way organizations work and induce on the long-term a major cultural change.
Another pressing topic raised by the Coronavirus outbreak is how data can help to keep the emergency under control. The exhaustive contact tracing that South Korea has been rigorously applying – with citizens’ movements being tracked for the purpose of COVID-19 containment –allows the competent authorities access to detailed and real-time information, and is giving positive results. On the other hand, such an approach brings a high risk of intrusive surveillance, algorithmic bias and hidden discrimination. These delicate issues underline the crucial need, for every country that wants to preserve and safeguard its democratic structure, of an extremely strong digital and technological governance, able to balance collective and individual fundamental rights.
You Can Count on Us
Our role, as Venture Capital investors, is to support our portfolio companies at our best capacity. Every portfolio company is being affected differently by the market chaos provoked by COVID-19, some businesses will undoubtedly suffer more than others. All will come out transformed, for better or worse.
We shall not panic, but at the same time, we shall not underestimate the revolutionary repercussions that Coronavirus epidemic will bring. The next 12-18 months will be tough, and we must be prepared to face a vast stress test. Dear Founders and CEOs – we want you to know that we are by your side during these complicate times. This is our piece of advice for you.
Care for your people, because your teams are the most critical asset. Be sure to put in place all the measures to have them safe and protected. Communicate effectively and realistically with your employees, clients, and stakeholders. Instill trust, stability, and hope. As the wise man once said, true leaders emerge in bad times.
Getting fundraising done and signing customer deals will be increasingly challenging in the next coming months, so: save cash and extend your runway as far as you can. Keep the burn as small as possible; reconsider your hiring plan; reduce marketing expenses.
In the next coming weeks/months you will need to act in a rapidly evolving scenario: adapt your strategy and crisis plan quickly to prevent problems from escalating. Be courageous and creative.
The implications of the crisis will be multiple, so please, reach out for every question, doubt, or need you may have. Together, we will get ahead of the curve and overcome this extraordinary challenge.
Laying the Foundations
Our job requires us to have a long-term outlook. That is why, while we face the emergency, we think it is fundamental to look ahead and ask ourselves how we can lay the foundations for a better future. We may need to rethink our economies, education and healthcare systems, spaces and cities, way of travel. Our whole lives. The world will undergo a major reconstruction, and we are ready to play our part.
According to the philosopher Nassim Taleb, whose black swan concept we have evoked in the first lines of this piece, everything that presents more advantages than disadvantages in case of random events or certain shocks is antifragile. Therefore, antifragility is the most effective antidote to black swans’ blows; the mechanism whereby the system can continuously regenerate itself by taking advantage – rather than suffering the effects – of random events, unpredictable shocks, stress and volatility factors. By grasping the mechanism of antifragility, we can build a systematic and large-scale guide to non-predictive decision-making processes in conditions of uncertainty in the most diverse fields.
Technology itself is the outcome of antifragility. And as incurably optimists, we trust in the potential of the never-ending engine of technological innovation to help us navigate these uncertain times and imagine a brighter future globally. Just a few spare examples: the European Commission launched an extemporaneous call for startups and small businesses with technologies and innovations in treating, testing, monitoring and other aspects of COVID-19; 3D printing companies are studying emergency-related applications, such as new respirator valves; smart city solutions are proving to be an effective crisis management tool.
We trust that now more than ever it is crucial to focus our energy and attention on promoting sustainable growth, fostering the sense of a global community, and identifying technological innovations that can improve the human experience. We won’t stop backing game-changing entrepreneurs and technologies with the potential to transform society and economies for the better.
While we do so – let’s stay safe, and United.