Below is a note from MMC Managing Partner, Bruce Macfarlane, providing an update on the impact on MMC and our portfolio companies from the coronavirus.
We have been asked by several clients to provide a commentary on the impact on MMC and our portfolio companies of the current coronavirus epidemic. Hence this note.
MMC itself operates out of one office in High Holborn, and our 21 person staff travel to work on public transport. However, we are a young (excluding me), healthy team, and well set up to work from any location (since we travel a lot to meet companies and clients). We, therefore, do not anticipate any impact on either our investing activity or our client service.
We are seeing no impact on our deal flow, which continues to be strong and high quality. Evidence of that is our current deployment rate, with new EIS subscriptions being fully invested within 12 months. As the market impact of the virus turns into a wider and deeper correction (long anticipated by investors and market commentators) we hope to see the valuations of early stage businesses return to the levels that prevailed before the run-up of the last three years. We have the capital and the confidence of our deep research and sector expertise to take advantage of a nervous market and invest where we see value and opportunity.
Each of the 50 companies in our portfolio is taking active steps to plan for possible eventualities and we are in discussions with all of them. Those that process or distribute physical products (they include: Lookiero: women’s fashion; Pact: coffee; Gousto: fresh food; Bloom & Wild: fresh flowers) are more exposed to supply chain risks and in each case are evaluating inventory levels, staying close to key suppliers, finding alternative sources of supply and suspending non-essential travel. In some cases, companies are finding that work they had undertaken in planning for a hard Brexit can be adapted to the current situation. Software companies (which comprise the bulk of our portfolio) are making plans for remote working.
As business activity drops companies will need to conserve cash and ensure they have adequate resources (cash and funding lines) to see them through. Thorough planning is essential. In anticipation of a market slowdown we had engaged with the portfolio over the last year or so to try to ensure that each company has raised sufficient cash to survive in a low growth mode for 12 months or longer. We are revisiting those forecasts with the relevant companies and our co-investors.
Given the origin of the virus, it is worth noting that the Chinese word for “crisis” is made up of the characters signifying “danger” and “opportunity” and some businesses will come out of this period stronger.
Please contact us if you have specific concerns or issues and we will do our best to address them.
Best wishes,
Bruce Macfarlane, Managing Partner