In our discussion today at Localogy 20/20, investor Michael Yang, managing partner at OMERS Ventures, and I talked about a wide range of issues, including prop-tech, insurance, health care, and enterprise SaaS. Early in our discussion, we discussed how Covid-19 has changed what a “hub” means. Michael also talked at length about the notion of native virtual companies. He noted that one of his portfolio companies, whose CEO is located here in the Bay Area, is completely virtual. Increasingly, though sales and engineering are considered remote options. The office in Michael’s mind is becoming a “really expensive conference room, hotel, and social convening [space].”

One of the most interesting topics we dove into was prop-tech. Michael believes that residential rents are coming down in high priced markets like San Francisco and New York City. And that people are once again moving to the suburbs. In particular, knowledge or information worker are making the move.

There are innovations that are coming to the commercial real estate world to help “property owners manage the public space” such as thermal scanners to measure temperatures on people. Then there’s the notion of companies like Clear helping property managers move people in and out of buildings safely and efficiently. According to Michael, there’s a ton of innovation coming to the commercial property market to help with sanitation solutions and HVAC issues. 

“What’s Your COVID Advantage?”

We also touch on the notion of fast scaling of SaaS businesses and the tension between substantive business models and the chase for the Unicorn. We talk at some length about growth at all and any cost. Michael believes COVID was just the final push to move businesses to chase appropriate and sustainable growth. He goes on to say that sentiment lasted for about three months from March until perhaps June or July. Now according to Michael deals are happening again “as if COVID didn’t happen”.

Michael said seed funding seems to be down these days, but the opportunity for A, B, C series funding is wide open. Michael used a phase during our conversation that stuck with me.  “Everyone is asking are you COVID advantaged or COVID disadvantaged.” This is a great way to think about investing these days. In prop-tech, Michael’s firm is looking specifically at the intersection of prop-tech and health care. For example, he closely following what’s happening testing technologies for air and surface areas in the office environment, and virus detection technologies. Seems like a huge growth area since it’s unlikely Covid-19 will be the last virus we ever face. 

Digital Natives vs. The Transformed

Michael and I talked about the difference between how digital-first companies can react versus traditional businesses. I noted that I had to proactively call our “traditional” auto insurance carrier to request a premium reduction since we were driving many fewer miles because of COVID-19. Michael said a digital-first insurance provider should be able to proactively reduce premiums because it had this data flowing into its system through a connected mobile app.

We concluded our conversation with me asking Michael what the other side of this COVID-19 world looks like. He said it’s best to assume the state we’re in now is the steady-state. And plan as though this is the future state. They’ve worked with their portfolio companies to rebuild budgets and forecasts assuming what we are experiencing now is the new normal. 

Shifting Innovation Hubs
How has COVID-19 reshaped the innovation landscape? Will the traditional hubs of innovation lose out to areas of the country that offer more affordable living? Will WFH trends alter the power centers for innovation and if so, where will the new hubs locate?

Micheal Yang, Omers Ventures
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