Weekly Financial Resources and Capital Markets Roundup: 4/3/2020
Outlined below is a collection of key financial and capital market resources from the week ending 4/3.
Instead of our usual lighthearted open, we want to start our roundup this week with a very important and current update regarding the Paycheck Protection Program (PPP). We’ve written about this in prior weeks, been in close contact with all of our portfolio companies, and suggest these resources from the Treasury (opens PDF) and NVCA (opens PDF) to get up to speed. The loan program was supposed to go live today but given complexities many banks are not yet ready to accept applications.
There are also still questions about whether venture-backed companies can participate due to the affiliation rules we wrote about last week. We’re reiterating very simple guidance for all companies as it relates to the PPP: You should operate under the assumption that you will be eligible for this program, consult with your corporate counsel to receive a final legal opinion on your eligibility and make any required changes to investor rights, connect with your bank to understand if or when they’re accepting applications, and prepare all of the required paperwork in order to apply as soon as possible. The program is a unique opportunity and all eligible companies should take advantage to be sure they can maintain payroll through these turbulent times.
On to the update! Have you ever seen a dead cat bounce? You may have this week. The phrase originated on Wall Street to describe a small, brief recovery in the price of a declining stock. Last week we bolded a warning that the worst was far from over. This week the markets finished this week down vs. last Friday (Dow -2.70, NASDAQ -0.79%, and S&P 500 -2.08%). Compared to the scale of some of large recent 1-day swings of double digits percentages though, the market seemed to largely ignore the worsening public health crisis, 701k U.S. jobs cut, and 6.6M unemployment claims (more on economic data below). The image below visualizes year-to-date performance of key indices and as you can see, after a steep drop in prices, we’ve observed “stable” volatility for two weeks despite persistent uncertainty.
Growth in turbulent times
As companies wrestle with the potential impact of COVID-19 and the rapidly changing market dynamics, Reforge hosted panel discussions for both CEO / Founders and B2B leaders we found useful. Topics ranged from customer acquisition best-practices to the latest on the changing fundraising environment. The panelists’ discussion around how to maintain a “growth mindset” in this new environment was particularly insightful. Absent solid data about the actual impact on continued operations many find themselves asking how they can make smart decisions with imperfect data, “are there opportunities to accelerate and make lemonade out of lemons?” This webinar addressed those questions and more.
Capital market resources
Howard Marks and economic data
We enjoyed this read from renowned hedge fund manager Howard Marks, who famously predicted the fall of Lehman. Marks clearly articulates bull & bear bases for the world economy from here forward.
This MarketWatch calendar of economic data is a great summary of the key dates to expect new data that will provide a clearer view into the economic impact of the virus. New data will be processed by the markets – positively or negatively – in real-time. March data (where the U.S. impact will first be felt) and Q1 earnings from companies won’t be 100% available until late April / May. The government stimulus and market response are based on models for economic impact that assume recovery beginning in June. Should these models be wrong, or underestimate the economic impact, we expect further volatility.
Other financial and capital markets reads
SaaS valuations multiples trended back up from 7.0x to 7.7x 2020E revenues to open the week. A blog from FirstRound on what successful remote teams do. How COVID-19 will impact PE and VC in the United States.
“The path of least resistance is the path of the loser,” according to author H.G. Wells. Yet time and time again we see that humans are all guilty of opting for the easier path.
Pick a mood, index, direction and percentage and you might have a future as an editor for any major newspaper—this is the “Mad Libs” like template the last few months of news has followed.