COVID-19 Trends Observatory: the future of work, crisis impact on investments, and the impact on SG Securities Services #3

THE FUTURE OF WORK

Imagine it's October. Things are back to a new normal, meeting face to face and travel is possible. However the experience of being a customer, employee, citizen, human has definitively changed and even the long-term implications of the pandemic on the future of work are still unknown, it is clear that this crisis has accelerated workforce transformation and increased the digital demand. (i) What are the implications in terms of working spaces (ii) what about the importance of digital skills training in the short term?

(i) A revolution is underway in working space and mentalities, can we bet on the disappearance of the open space and theflex office? Density and conflict of uses generate nuisance, noise and now health risks. Do these concepts really translate the reality of openness, agility, cooperation or finally did they take the opposite view of what they should represent? It is necessary to rethink this whole value chain, to give new meaning to the collaborative, (The Culture Code de Daniel Coyle) erase the constraints of travel and enhance proximity (the city of 15 minutes by Carlos Moreno) to reduce the risks associated with a single workplace, see each other less but better. In a study of Chaire Workplace Management ESSECpublished recently, 32% of the panelists want more health and safety, 69% want to continue teleworking, this is in line with the decisions taken by certain companies from the most traditional (PSA) to “distributed companies", who adopt full remote (GitLab, Buffer, Platform.sh), and 18% claim more autonomy. This new possible organization would become more responsible and inclusive for people with disabilities if they can’t move around. 

(ii) It’s a fact, in all bad times, training budget is a big target on the wall for traditional companies. There is going to be a digital talent war. Progressive companies are going to continue to invest aggressively in their best people and also hiring in next generation of digital talent. Learning is not only for young or educated people, everyone and of course during this crisis, can go to YouTube to get hundreds of courses from the best universities in the world and the best professors. With Coursera and Udacity, people don’t need to go to Stanford to get a great job at Microsoft, Bank of America. What value does the diploma represent? Beyond that, it is necessary to improve the capacity of employees to reskill themselves permanently, more easily and cheaper according to customer needs to avoid the risk of skills becoming quickly outdated. That’s why empowerment and growth mindset are key words. In the long term, turnover essential to oxygenate organization will occur naturally since trained employees will more easily find outside jobs.

Employees are the most important asset companies have to help serve today’s customers, while adapting to tomorrow’s customer-satisfying processes and technologies, so adopt the LLL, listen, link, lead.

CRISIS IMPACT ON INVESTMENTS

It remains very uncertain how the Covid crisis will impact venture capital market over time. After a significant slowdown, funding activity seems to be picking up, especially on specific areas such as healthtech and future of work, outlining future investment trends.

According to FT Partners, there was a total of $1.45 trillion in dry powder (ie. cash reserves) across the private equity and venture capital industry at the end of 2019. This total represents twice the amount from five years prior. VC firms are mostly using this amount to help their portfolio companies get through the crisis.

Over the short to medium term, the Covid crisis will likely result on a decline in venture capital deal volume, with investors being very cautious spending their capital and spending less time evaluating new deals (cf. infra). At the same time, valuations will probably decrease for the next year. Where the pricing will move on late stage companies is quite unclear and some VC firms are looking at more early stage deals and doing more references on the founders.

According to Rosenblatt Securities, a US brokerage company, Fintech unicorns valuations could contract by 15% on average, as downturn could wipe off $76 billion of their market value. Down rounds, ie. at valuations significantly below those of prior funding rounds, already exists with UK digital bank Monzo facing a 40% valuation drop in its latest fundraising. It is important to note that tensions on neobank valuations existed before the pandemic. 

As pre-covid, investors could favour B2B models which are more resilient through subscriptions revenues, and platform players with embedded data and analytics. On the Fintech market, the Covid-19 pandemic could speed up horizontal mergers and lead to consolidation as acquisition become cheaper. 

Before the virus emerged, VC teams would spend two thirds of their time looking for new opportunities and the rest of the time supporting existing portfolio companies. The Covid crisis reversed this situation. During early months of the pandemic,VC funds assessed the crisis impact on their companies and helped them optimize their cash flow. In support of their portfolio, some investors are using dry powder to make follow-on investments.

The Covid crisis also created an adjustment on investment funnel. According to Chausson Finance, most European investors are now re-opening their deal flows and are willing to receive new investment opportunities. Regarding 1stmeetings with management teams, half of them have changed their way of assessing required qualities of founders, favoring resilience, agility and ability to monitor. The Covid crisis also impacted the way VC funds assess the structure of a startup’s unit economics during the deep dive phase. Half of them declare refocusing on profitability, cash burn and growth. To cover investment risk, investors also adapt term-sheet conditions, including milestone-based tranched equity rounds, discount on convertible notes and ratchet.

A VIEW FROM SOCIETE GENERALE SECURITY SERVICES

By Yvan Mirochnikoff and Laurent Marochini

The recent health crisis has highlighted for Societe Generale Security Services (SGSS) and its clients the need to strengthen their resilience while adapting to a new economic and social environment. As a whole, SGSS' clients (Banks, Insurance companies, Asset managers, Investment companies) have had to adapt more quickly than expected to a new environment by taking greater advantage of new technologies. In order to continue to ensure business continuity and maintain profitability, SGSS has strengthened its presence with its clients, both commercially and operationally, and to seek greater efficiency while working remotely.

In fact, we continue to rethink customer relations through simplified paths and more ergonomic interfaces, accessible anywhere and at any time, while gradually reorganising the value chains, optimising its end-to-end processes and seeking the most efficient solution for each link in the chain. This crisis has thus accelerated the concept of ATAWAD ("Any Time Any Where Any Device") by offering dematerialization solutions such as:

• The electronic signature to avoid travel and make interactions more fluid, in complete legality and security. The obstacles to deployment have thus been removed in geographical areas.
• The digitisation of boards of directors and our meetings, through our remote applications and our new communication tools such as Skype or Livestorm. In this context, Voice to text tools are also being tested to improve our efficiency and for better risk management. 
• Remote on-boarding for increased efficiency and customer satisfaction. This track is to be developed to improve the customer experience.

The support of our customers has been the key word to facilitate their remote work and our tools, such as Gallery, have demonstrated their interest in this new world.

This digitization, not having always involved emerging technologies, has nevertheless found its usefulness to our customers and for a company focused on a sustainable future. This is the positive feedback we have received from clients after these few weeks spent at a distance, during which they consider that SGSS "did the job! "as shown in the post-COVID survey of a sample of 76 major SGSS clients.

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