This week, GV General Partner – and former TechCrunch contributor – MG Siegler appeared on Extra Crunch Live for an extensive discussion covering the elements of a successful investor-startup dynamic, the evolution of portfolio oversight and investment strategies amid the ongoing COVID-19 pandemic, and Siegler’s predictions regarding which pandemic-driven shifts in investment and entrepreneurial practices will be lasting.

Our previous conversation with Siegler occurred shortly after his investment in Universe, a startup concentrating on creating e-commerce businesses for mobile platforms. At that time, the coronavirus pandemic was in its early stages, and the duration and necessary containment strategies remained uncertain. Having gained several months of experience, Siegler shared with me that, from his viewpoint as an investor, conditions have largely stabilized into a new pattern – occasionally with negative consequences, sometimes with improvements, but generally necessitating adjustments in approach.

The following transcript has been condensed for brevity and improved readability. All text presented below, excluding section headings, originates from MG Siegler’s answers to my inquiries.

Business impacts of coping with the pandemic six months on

Regarding the commercial aspects of this situation, I believe a degree of stability has been achieved in our regular activities. For our organization, a significant aspect has been adapting to function within this unusual and often unreal context, and improving our proficiency with conducting meetings remotely. This includes becoming adept at quickly initiating video conferences via platforms like Zoom and Hangouts, as well as utilizing phone calls, to support our portfolio companies in resolving issues. Furthermore, we are managing all board meetings and related activities in a virtual format.

While this may appear simple in theory, the daily execution involves numerous small adjustments and ongoing learning experiences. I believe operations are now proceeding in a relatively efficient manner, given the circumstances. However, unforeseen challenges remain – for example, the US election is just a week away at this time.

Does virtual interaction mean more time spent working with portfolio companies?

The extent of this varies depending on the specific company, but generally speaking, I believe it has led to an increase in engagement in notable ways. This is largely because virtual and phone communication have become standard practice. While these methods were available previously, there was often a tendency to defer detailed discussions until in-person meetings. With those meetings less frequent, there’s now a greater inclination to quickly connect via phone, Zoom, or similar platforms to address issues.

This shift represents a positive outcome, as it has established a new avenue for communication that didn’t previously exist. Furthermore, my level of involvement with our portfolio companies has grown, due in part to my increased participation in their Slack channels. The introduction of shared channels has been particularly helpful; previously, access required being added as a guest to each individual company’s Slack workspace, which I have done in the past. Now, I’m integrated into numerous portfolio companies on a daily basis, which is both beneficial and insightful.

Is Silicon Valley’s outward migration real, and will it persist?

There's a strong argument to suggest this represents a sustained shift that began prior to the COVID-19 pandemic. The Bay Area has become well-known for its high cost of living and other challenges, leading to a shift in people’s perspectives regarding the necessity of residing in the region.

A significant factor contributing to this trend is the development of collaborative platforms, such as Slack and Zoom, which existed before the pandemic but facilitated remote work for businesses. This was a developing pattern, and it wasn’t expected that all companies would be located in the Bay Area. However, the pandemic undoubtedly sped up the relocation process, and the key question now is what the future holds as we potentially return to pre-pandemic conditions.

As workplaces begin to reopen, will individuals return to traditional office settings? Or will a portion of the workforce remain remote? There isn’t a simple answer to this question. A blended approach is the most likely outcome. Many offices will resume operations, and a considerable number of employees may actively seek to return, experiencing fatigue from remote work and video conferencing, and desiring face-to-face interactions.

However, others will have decided that a different location, even internationally, offers a better quality of life for themselves and their families. Having demonstrated our collective ability to operate effectively in this manner, it’s reasonable to anticipate that some individuals will consistently work remotely, making in-office presence less common.

What entrepreneurs should focus on when choosing investors

The ideal considerations will naturally shift based on the specifics of the business and a variety of other factors. However, if I were to offer a broad recommendation, I would emphasize the importance of the interpersonal connection. This aspect is truly vital to the partnership, as you will be collaborating closely on a regular basis – whether daily, weekly, or quarterly. Therefore, I believe it’s best to first build a rapport with potential investors face-to-face, prior to finalizing any investment agreements.

The process is fundamentally about mutual assessment – not only do investors evaluate entrepreneurs, but entrepreneurs should also determine if an investor is a suitable partner. This includes considering whether they would be a valuable addition to the company’s board, and even if a board seat isn’t involved, whether they are someone with whom ideas can be freely exchanged, constructive dialogues can be held, and challenging conversations can take place. I consider all of these elements to be absolutely essential.

The key to success for startups surviving and thriving during the pandemic

The most critical factor is maintaining sufficient financial resources. While this may seem self-evident, it was a recurring theme in discussions during the initial stages of the pandemic, and a challenge everyone had to address. When working with companies in our portfolio and those seeking funding, the financial landscape shifted dramatically overnight, impacting spending needs and priorities.

This applied in multiple ways. For some businesses, revenue streams were disrupted, necessitating careful consideration of financial stability. Conversely, others experienced an unexpected increase in capital due to reduced travel and office costs – both substantial expenses. Numerous conversations were held with various companies to determine the optimal way to balance these factors, and it took time for organizations to adapt and establish effective operational strategies.

More recently, as conditions have become more stable, it has been insightful to discuss fundraising strategies with companies, considering the ongoing impact of COVID-19 and the potential for a return to normalcy.

Should fundraising efforts be geared towards a continued COVID-like environment, or a return to pre-pandemic conditions? The pragmatic approach is a combination of both. While anticipating a return to normal, it’s essential to prepare for the possibility of continued disruptions, potential setbacks, or even recurring waves of the virus. It’s important to consider scenarios such as a yearly recurrence, particularly if vaccination rates remain insufficient.

Naturally, financial stability is paramount to ensuring a company’s continued operation. However, other factors are equally crucial. Specifically, prioritizing employee well-being is vital, including preventing burnout in an era of constant virtual connection. The ease of communication through platforms like Zoom, facilitated by remote work, has blurred the lines between professional and personal life.

However, many individuals are experiencing the negative consequences of being constantly connected. It remains essential to prioritize both mental and physical health. Personally, I’ve made a conscious effort to increase phone calls over video conferencing, allowing me to remain active while communicating, rather than being confined to a chair all day. From a company standpoint, it’s important to consider how to best support employees and leadership in maintaining their well-being within this unusual situation.