Quick thoughts
It feels quite odd putting some perspective on paper during such a crazy time. As many of you know, I am based in the Orlando area and this is a scary time for family members, friends and neighbors as the backbone of our economy (tourism & hospitality) is being absolutely shredded. McKinsey has a fantastic overview that I highly recommend reading: https://www.mckinsey.com/industries/public-sector/our-insights/lives-and-livelihoods-assessing-the-near-term-impact-of-covid-19-on-us-workers
As a note, while the economic impacts are significant, it pales in comparison to everyone’s health and safety right now – please refer to the CDC (https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/index.html) as a resource.
I expect that we will begin to see significant expansion in “2nd tier” tech markets. (Raleigh, Charleston, Dallas, Atlanta, Tampa Bay, etc). Over the last 3 years, ON has seen a significant uptick in Private Equity and Venture investment in these locations for a few reasons:
- From the Private Equity perspective, many vertically focused software companies have been able to operate in a scalable, profitable manner to a $20m-50m revenue scale (typically over a 10+ year ramp). PE saw a natural opportunity to acquire these businesses, professionalize the leadership and then position for an exit over a 4-6 year period of time.
- From the Venture side, the startup mythology has been a huge draw for young Founders to stay local. The Stanford/Harvard connections continue to serve as a massive pipeline in SF/Boston; but, the UNC, Duke, Georgia Tech, NC State environments have all begun to foster the next generation of leaders who decide to stay local.
- As the next generation of founders are being created, the ability/reach outside of SF/NYC/Boston is so much more powerful than in previous history. These locations also allow for a more sustainable approach during recessions/downturns due to Cost of Living and the type of financial obligation that can be found elsewhere. In some ways, the Bay area allows companies to either grow or die in “Dog Years.” This can be a powerful tool, BUT it also crippling when you may be ahead of the market.
Building on the previous point, I anticipate that companies will try to assemble additional geographic diversity in their teams. I do not believe that this will come in the form of outsourcing (although clearly that market will continue to be a significant player in tech globalization). Instead, the shared service centers in Orlando, Raleigh, Jacksonville, etc will begin to house additional capabilities versus the traditional approach of transactional accounting and Customer Support.
I also anticipate that the industrial push toward the US-based manufacturing of the N-95 masks will result in a shift toward the revitalization of the Midwest and more investment in preserving near-shore manufacturing capabilities. This has traditionally be a real challenge for businesses that marry horizon-based technical advances with more traditional manufacturing (automotive and medical devices are probably the most natural examples). Will this change as a result of COVID-19? I am optimistic, but I know that it will take substantial flex from both sides of the table.
I am sure that more thoughts will come up over the coming days (hopefully we are all taking time to self-reflect), but the most important takeaway for me right now is empathy. I hope that this will be a reminder of how much we rely on hourly workers and the supply chain infrastructure for our daily needs (if I were clever, I’d have a toilet paper joke here). I am incredibly lucky & blessed to have a position where I can comfortably work from home – we are also fortunate to have clients who are still trusting us to bring on executives during this unprecedented time in our history. If you have freedom, tip generously and use the resources you have to help.
I happen to be quite a soccer nerd and a huge fan of Men in Blazers (YNWA). One of Rog’s favorite passages of poetry rings true today – “We should be careful of each other, we should be kind … while there is time”