What Are You Looking For?
Moving from an off-price to e-commerce shopping mindset in this market
Moving from a discount to e-commerce shopper mindset as an investor
I started my career on Wall Street in July 2007. So my first months of working introduced me to the possibilities of a bear market. At the time I was working as an equity research associate covering the REIT market, a sector that had outperformed the S&P 500 for the prior five years — until I got there. The Great Recession taught me early in my career that no matter how big a company is (or how long it has been any industry leaders) can disappear in an instance…remember Bear Sterns or Lehman Brothers? In Equity Research, I was repeatedly told that careers can be made during the down markets because investing opportunities will present themselves if you have strong micro theses. During that period my team attempted to develop investment recommendations around what underlying trends were emerging and not short-term reactions to the financial crisis and credit freeze caused by mortgage back securities market.
Since that character-building experience of 2008, I’ve always felt that this shift in an investor’s thesis mindset from a bull market (that features aligning with mainstream or proven trends) to bear market (featuring sifting through reactionary trends to the new emerging underlying trends that will promote growth in the next bull market) as similar to shopping. Yes, I said shopping. Let me explain, as a second-year associate, I would often go to discount retailers like Ross and Burlington Coat Factory, browsing opportunistically for a nice shirt, pair of slacks, or sweater to add to my wardrobe. The experience was very optimistic and free-flowing where I would usually find a great button-down shirt that was my size but misplaced in the kid’s section. Whereas, when I was focused on purchasing an article of clothing that met a need, you wouldn’t find me going to those stores — maybe I didn’t go to a store at all. In those instances, I had a clear plan that I executed at a particular store (for a particular brand) or purchased online.
This mindset shift is what I experienced as an equity research analyst and what I currently feel as a venture capitalist. Most VCs of my generation are experiencing their first down market in the business but we have all been told — similarly what I heard on Wall Street — that the best investors thrive during a downturn. Looking at the last two recessions, you see that the best venture investments all were aligned with underlying trends that would propel the general economy to its next chapter of growth. In 2000 that trend was a shift from on-premise computing to cloud computing, while 2008 saw a shift from desktop to mobile applications.
So, since early March, every conversion that I’ve had with founders, technologists, other investors, and corporate executives has been driven by the desire to understand “what’s the current underlying technological and/or behavioral shifts that will drive the next chapter of economic growth?” I’m not sure if identifying these shifts is any easier or harder than previous economic downturns but it feels that the Covid-19 pandemic has so many direct and indirect consequences to various industries. While 2008 felt like it primarily impacted financial services and real estate companies. I’ve diligently attempted to speak with several much smarter individuals than myself to get insight where they see short term reactions are occurring and how these macro events could create significant shifts to industries’ long term strategies.
So now we all have to (or have had to) change our investment mindsets from the opportunistic strolls in a Ross to the feverish focused online shopper when you have a deadline. I’m curious what you (founders, investors, technologists, or corporate execs) think are the longterm shifts that will arise from this historic year and what reactionary trends will decline as the world because more (new) normal. Is it Telehealth? E-commerce enablement? Collaboration software? What do you think?
Over the next few months, I will share uses cases and sectors in the enterprise and healthcare industries that I think are primed to leverage underlying trends that will drive the future growth economy.
Wow you actually made it this far. Thanks for reading (or skimming) this post. Check out other blog posts from The Importance of Reading Earnest archive. To stay updated with my latest musings follow me on Twitter, LinkedIn, or check out the GreatPoint Ventures website.