Here in New York, we’re all recovering from the end of 2020’s second quarter. With the year already halfway over, investors are busy tying up loose ends on six months of data – and now, it’s time to look ahead towards the rest of the year.
But first, it is important to examine the trends that defined Q2 2020 (April through June), the first full quarter during COVID-19, to see which trends will persist and which trends may reverse. It is important to note that as investors we are not investing for one or two quarters, but rather many years into the future.
In order to maximize our returns, we need to examine what shifts in consumer (or business) preference will be short term vs. long term in nature.
Let’s get started.
Vertical #1: Commercial Office Space and Real Estate.
Few asset classes have taken a harder hit this year than commercial official space. With quarantine in effect, companies large and small closed down their offices, and many were prohibited from visiting their office spaces by state or local governments.
To make matters worse, work from home technologies such as Zoom Video Communications (up almost 400% this year) have shown businesses that you no longer have to take every meeting in person in order to be effective.
In fact, many have come to realize that Zoom calls can be even better than in person meetings as you get to avoid the commute and still have a similar personal experience.
There’s no doubt that in-person meetings are still necessary in order to close large pieces of business (although several large deals have been done in COVID without in-person meetings).
Still, it seems that commercial office space has gone from essential to non-essential for companies, with most companies discussing smaller permanent workspaces.
My verdict: Pass.
Vertical #2: Restaurants and Food Industry
The most talked-about vertical affected by COVID-19 is the food and restaurant industry. This industry has generated a grassroots campaign in cities like NYC, with the #takeoutNYC hashtag used by consumers in order to try and help keep restaurants afloat.
Despite this support, restaurants are still businesses at their core, and have to subscribe to the same law:
Profit = [Number of orders] * [Profit/order] – [Costs].
With less space open for dining, restaurants will have to evolve into the online ordering business, a feat that is difficult for many incumbent restaurants due to the high cost and complicated logistics.
However, there is one such vertical that is benefitting greatly from COVID-19: the ghost kitchen industry. Ghost kitchens are restaurants that are made exclusively for online ordering, and do not have traditional restaurant offerings such as tables, waiters or a storefront. The most famous ghost kitchen startup is CloudKitchens, which was started last year by former Uber Founder/CEO Travis Kalanick.
My verdict: Buy Ghost Kitchens, Sell Traditional Restaurants.
Vertical #3: “Tele-anything”
With many basic businesses closed, including what many would deem as essential (doctor visits, dentist visits, etc.), telemedicine – and, really, tele-anything – has experienced a significant boom.
As I mentioned earlier, Zoom Video Communications has experienced over a 400% return in less than 6 months. Anything that helps people do things via phone or computer that used to be done primarily in person will continue to boom.
The obvious reason for this is that people don’t want to contract the COVID-19 virus, and in a mature economy like the United States, consumers are willing to pay in order to reduce the risk of infection.
Like Zoom Video Communications, I hypothesize that many of the tele-services that consumers are subscribing to during the pandemic will continue to persist post-pandemic, as they are simply easier, more efficient, and oftentimes cheaper.
My verdict: Buy.
In the months and years leading up to the COVID crisis, I saw many investment opportunities that left me feeling skeptical, due to high valuations and overly optimistic thinking.
What I see today is that many high-quality startups are available at highly attractive valuations. Warren Buffett’s adage of “be fearful when others are greedy, and greedy when others are fearful” couldn’t be more relevant than when it comes to investing into startups today.
Keep in mind that during the last market downturn (the Great Recession) some of the greatest tech companies of the generation were started… including WhatsApp (acquired by Facebook for $15 billion), Uber ($58 billion market cap), Instagram (valued at $100+ billion), Pinterest ($15 billion market cap), Slack ($19 billion market cap) and many others.
On top of this, those who invested in 2008 and 2009 had the benefit of investing at a much lower valuation than those who invested before and after the Great Recession.
Whatever verticals you choose to invest into, the key is to continue investing, continue diversifying, and stay the course. In angel investing, as with most things in life, patience and perseverance are rewarded greatly in the long term.
Have a great rest of your week. I’ll be back soon with more updates.
David, the one thing that most confuses me is if an event occurs an exit verse an IPO. You currently explained if an event occurs I will be notified. What I don’t understand and I’m sure many others don’t is the math when an event occurs. For example, If I got in every round from the first to the last at different share prices and accumulated 500 shares at a total cost of $5,000 if it IPOs would I get the number of shares 500 times whatever it cost per share on stock market or would I get $5,000 times something please explain my confusion. Thankyou
Thank you very much I’m so speechless in by of all that ! Its sounds so wonderful anyway, I want to making myself to be so sure that all of you KNOWING as full awareness about who am I, I’m tottaly deaf since I was birth that’s way . Ok there is an private interpreter relay service calls for the hearing IMPAIRED ph no it is 530 210 2239 as my please wants to hear forward from you asap as you can as my please thank you so much ! From, Mr. Brian NICHOLAS Buono. brianbuono4@gmail.com.
That’s a pretty good article sir thank you for your insight
Sogie E Favor
3 years ago
How can one buy into these opportunities.
Tesa
3 years ago
I have a similar question as Harry B. when i invest, how do we know when it IPO’s and moreover when and if it comes time for a payout on the start up, do you just receive a check one day? I am new to all of this investing, and in stocks and stock options. I have a lot of questions.
Nicole Diaz
3 years ago
Really love this input. Thanks! Will keep an eye out for those things
For David Weisburd: since you are “passing” on commercial real estate as Vertical #1, does that mean the deal on Janover should be passed on too? Or do you expect turmoil in the commercial/rental/etc. markets to open up extraordinary opportunity as borrowers and lenders scramble to culminate deals?
Neil Patel is a successful entrepreneur and investor who has been active in the startup scene for nearly two decades. Born in London, England, he moved with his family to Orange County, California when he was two years old, where he was surrounded by entrepreneurs and innovators from an early age. Neil is the founder of several companies, including Crazy Egg, Hello Bar, and Quicksprout – companies that established Neil as one of the world’s leading digital marketers. But Neil spends more time these days on the other side of the table – as an angel investor. He has made some unbelievable returns backing early-stage startups. Now, he’s here to teach you to do the same. Neil launched the Angels & Entrepreneurs Network to pull back the curtain on the world of “pre-IPO” investment, because he believes everyone should have access to the same playing field – not just society’s high and mighty.
David, the one thing that most confuses me is if an event occurs an exit verse an IPO. You currently explained if an event occurs I will be notified. What I don’t understand and I’m sure many others don’t is the math when an event occurs. For example, If I got in every round from the first to the last at different share prices and accumulated 500 shares at a total cost of $5,000 if it IPOs would I get the number of shares 500 times whatever it cost per share on stock market or would I get $5,000 times something please explain my confusion. Thankyou
Thank you very much I’m so speechless in by of all that ! Its sounds so wonderful anyway, I want to making myself to be so sure that all of you KNOWING as full awareness about who am I, I’m tottaly deaf since I was birth that’s way . Ok there is an private interpreter relay service calls for the hearing IMPAIRED ph no it is 530 210 2239 as my please wants to hear forward from you asap as you can as my please thank you so much ! From, Mr. Brian NICHOLAS Buono. brianbuono4@gmail.com.
Great to meet you Brian! Thank you for sharing and look forward to meeting soon.
Love your experience and advice
Thank you Keith! Please let me know if there are topics you’d like to see covered soon.
What IPO are you recommending next?
We only deal with private companies not IPO’s.
That’s a pretty good article sir thank you for your insight
How can one buy into these opportunities.
I have a similar question as Harry B. when i invest, how do we know when it IPO’s and moreover when and if it comes time for a payout on the start up, do you just receive a check one day? I am new to all of this investing, and in stocks and stock options. I have a lot of questions.
Really love this input. Thanks! Will keep an eye out for those things
How do I buy tele-anything
copy that!
Hi David, Thanks for your plain English advice. I can follow that.
For David Weisburd: since you are “passing” on commercial real estate as Vertical #1, does that mean the deal on Janover should be passed on too? Or do you expect turmoil in the commercial/rental/etc. markets to open up extraordinary opportunity as borrowers and lenders scramble to culminate deals?