That’s what he hopes his fund’s recent investment in Bellevue-based Qorus sent to startups.
“It's a scary time for entrepreneurs. The market's changing,” Bontrager said. “We're entering into a different cycle right now, but for entrepreneurs with good business plans, don't be afraid to pitch VCs or reach out because we do want to remain active in the market.”
Bontrager co-leads WestRiver Group's $150 million Pacific Northwest fund alongside managing partner Laurel Buckner. Bontrager said his fund likely won’t do any new deals until June or July after the Qorus financing round and another recent deal that’s yet to be announced.
In an analysis of Q1 venture capital, Seattle-based PitchBook reported that the city's venture capital had slowed a bit, though deals were still closing as many had been in the works for months. PitchBook analysts projected that the pace of investments will likely slow people are still sheltering in place after deals that originated prior to the pandemic are closed.
WestRiver Group is early in the process of determining how to more appropriately price potential investments in the current market as fewer deals are occurring and seed rounds are reverting. For now, Bontrager said startups should look at lessons from the past 10-year venture capital cycle: Control spending and don't hire beyond what's immediately needed.
“I think the idea of ‘growth at all costs,’ irrespective of what the cash burn has been, is going to be largely behind us – though that's more of an issue with within Silicon Valley than in the Pacific Northwest,” Bontrager said. “At the end of the day, no matter what part of the market cycle you are in, the simple fact that fundamentals matter should never be forgotten.”
The VC group is actively connecting with startup founders, but is conducting its meetings over Zoom, phone calls and other virtual programs. It’s a challenge, Bontrager said, because when his group invests in a startup, it focuses on the team of entrepreneurs. WestRiver Group is looking for teams that are coachable and have a fluid view of how their business could potentially grow – traits that can be difficult to uncover in a digital environment.
“It's a learning curve for both entrepreneurs as well as investors, is this new normal that not everything is going to be a face-to-face meeting, at least for the foreseeable future,” Bontrager said. “We're still evolving how we do business.”
The Covid-19 pandemic hasn’t changed the kinds of companies WestRiver Group is investing in, at least through its Pacific Northwest fund. It’s focused on local business-to-business technology companies that utilize machine learning and artificial intelligence, largely in areas like future of work and cloud services. Many of the startups the firm has a stake in are seeing increased traction in a virtual working world.
“I hate to say it, but it is somewhat of a silver lining right now, because the markets within which we participate are in some ways buoyed by this new way of doing business,” Bontrager said. “As a society, I think we're getting more and more comfortable truly leveraging the cloud and the digital applications that sit on top of the cloud to actually do our business, and I do think that the way the world works is going to see a dramatic shift as a result of what we're going through today.”
