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6 investment trends that could emerge from the COVID-19 pandemic

Rocio Wu
Contributor

Rocio Wu is a venture partner at F-Prime Capital who focuses on early-stage investments in software/applied AI, fintech and frontier tech investments.

While some U.S. investors might have taken comfort from China’s rebound, we still find ourselves in the early innings of this period of uncertainty.

Some epidemiologists have estimated that COVID-19 cases will peak in April, but PitchBook reports that dealmaking was down -26% in March, compared to February’s weekly average. The decline is likely to continue in coming weeks — many of the deals that closed last month were initiated before the pandemic, and there is a lag between when deals are made and when they are announced.

However, there’s still hope. A recent report concluded that because valuations are lower and there’s less competition for deals, “the best-performing vintages tend to be those that invest at the nadir of a downturn and into the early stage of recovery.” There are countless examples from the 2008 recession, including many highly valued VC-backed businesses such as WhatsApp, Venmo, Groupon, Uber, Slack and Square. Other early-stage VCs seem to have arrived at a similar conclusion.

Also, early-stage investing seems more resilient. During the last recession, angel and seed activity increased 34% as interest in the stage boomed during a period of prolonged growth.

Furthermore, there is still capital to be deployed in categories that interested investors before the pandemic, which may set the new order in a post-COVID-19 world. According to data provider Preqin Ltd., VC dry powder rose for a seventh consecutive year to roughly $276 billion in 2019, and another $21 billion were raised last quarter. And looking at the deals on the early-stage side that were made year to date, especially in March, the vertical categories that garnered the most funding were enterprise SaaS, fintech, life sciences, healthcare IT, edtech and cybersecurity.

Image Credits: PitchBook

That said, if VCs have the capital to deploy and are able to overcome the obstacle of “having never met in person,” here are six investment trends that could emerge when the pandemic is over.

1. Future of work: promoting intimacy and trust

Workers at America’s largest companies are not covered under coronavirus aid package

Workers at America’s largest companies are not covered under a bill passed by the House of Representatives on Friday that is supposed to support American workers impacted by the spread of the novel coronavirus.

The bill still has to be voted on by the Senate and approved before it can be signed into law, but its structure leaves a gaping hole in the prevention strategy the government has said is necessary to reduce the COVID-19 outbreak in the US.

“No American worker should worry about missing a paycheck if they’re feeling ill,” said Vice President Mike Pence at the Sunday press briefing from the Coronavirus Task Force. “If you’re sick with a respiratory illness stay home.”

However, millions of Americans potentially don’t have the ability to make that choice under the congressional aid package touted by both Democrats and Republicans. By excluding companies with more than 500 employees from the Congressional aid, the health and welfare of millions of Americans in industries providing goods, manufacturing, and vital services to most of the country is being left up to the discretion of their employers.

Details of the legislative compromise were first reported by The New York Times yesterday. And chart published by The New York Times illustrated just how many companies didn’t have paid sick leave policies in place as the coronavirus began to spread in the US (companies have changed policies to respond to the coronavirus).

Image courtesy of The New York Times

Big technology companies took the lead early this month in changing policies for their workers and by the end of last week many of the country’s largest employers had followed suit. But it looks like their work won’t be covered under the government’s current plan — and that any measures to extend sick leave and paid time off will be limited to a response to the current outbreak.

These large employers have already responded by closing stores or reducing hours in areas where most cases of the novel coronavirus have been diagnosed — and companies operating in most of those states are required by law to offer paid leave to their hourly employees and contractors.

Companies who have responded to the outbreak by changing their time-off and sick leave policies include Walmart, Target, Darden Restaurants (the owner of the Olive Garden restaurant chain), Starbucks, Lowes, and KFC, have joined tech companies and gig economy businesses like Alphabet (the parent company of Google), Amazon, Apple, Facebook, Instacart, Microsoft, Postmates, Salesforce, and Uber in offering extended leave benefits to employees affected by the coronavirus.

These kinds of guarantees can go a long way to ensuring that hourly workers in the country don’t have to choose between their health and their employment. The inability to pass a law that would cover all workers puts everyone at risk.

Without government stepping in, industries are crafting their own responses. Late Sunday, automakers including GM, Ford, and FiatChrysler joined the United Auto Workers union in announcing the creation of a coronavirus task force to coordinate an industrywide response for the automotive sector.

As the Pew Research Center noted last week, the bill proposed by House Democrats had initially proposed temporary federal sick leave covering workers with COVID-19 or caring for family members with two-thirds of their wages for up to three months; expiring in January 2021. The measure would have also guaranteed private employers give workers seven days of paid sick leave with another 14 days available immediately in the event of future public health emergencies.

Most workers have less than nine days of sick leave covered under current state legislation. There is no national mandate for paid sick leave. After one year on the job, 22 percent of workers have access to less than five days, while another 46 percent of employees can get five-to-nine days of paid sick leave. Only 38 percent of workers have between ten and fourteen days of leave.

The Pew Research Center also reported that the lack of access to paid sick leave increases as wages decline. Over 90 percent of workers receiving hourly rages over $32.21 have some form of paid sick leave. Only about 50 percent of workers who make $13.80 or less have access to some form of paid sick leave. For Americans who make under $10.80 an hour, only about 30 percent receive any sick leave.

The first SpaceX Dragon capsule is taking its final flight

Last night, SpaceX launched its first generation Dragon capsule on its twentieth — and final — resupply run to the International Space Station.

The launch marks the Dragon’s last mission as the capsule makes way for SpaceX’s updated and improved Dragon 2 capsule, which will begin making resupply runs to the space station in October.

Alongside cargo to resupply the ISS, the Dragon will be bringing along payloads for experimental research aboard the space station. Including an Adidas experiment to see how it can manufacture midsoles in space; a project from the faucet maker, Delta, to see how water droplets form in zero gravity; and Emulate is sending up an organ-on-a-chip to examine how microgravity affects intestinal immune cells and how heart tissue can be cultured in space.

It’s been twelve years since SpaceX first won a $1.6 billion contract to resupply the space station, and over that time, the space industry has changed dramatically.

The company’s technical innovations around manufacturing and reusing rocket components revolutionized the space industry and created an environment where entrepreneurs believed in the possibility of competing with industry giants like Aerojet Rocketdyne, Boeing, and Lockheed Martin.

Since SpaceX first emerged to challenge those longtime government contractors, which had a lock on government space missions, a wave of commercial activity has emerged around the International Space Station, supporting the creation of new industries.

Earlier this week, Axiom Space announced that it would be using SpaceX to ferry the first entirely private crew of passengers to the International Space Station for a ten-day trip (albeit at a cost of $55 million). Axiom’s vision of building a private orbiting space station off of the existing International Space Station is a bold step forward for the commercialization of space — and one which would be less likely if not for SpaceX’s work and the success of the first Dragon.

Apple says iPhones remain on sale in China following court injunction

Apple has filed an appeal to overturn a court decision that could ban iPhone sales in China, the company said on Monday, adding that all of its models remain available in its third-largest market.

The American giant is locked in a legal battle in the world’s biggest smartphone market. On Monday, Qualcomm announced that a court in Fujian Province has granted a preliminary injunction banning the import and sales of old iPhone models in China because they violated two patents owned by the American chipmaker.

The patents in question relate to features enabling consumers to edit photos and manage apps on smartphone touchscreens, according to Qualcomm.

“Apple continues to benefit from our intellectual property while refusing to compensate us. These Court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio,” said Don Rosenberg, executive vice president and general counsel of Qualcomm, in a statement.

Apple fought back in a statement calling Qualcomm’s effort to ban its products “another desperate move by a company whose illegal practices are under investigation by regulators around the world.” It also claimed that Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated.

It is unclear at this point what final effects the court injunction will have on Apple’s sales in China.

The case is part of an ongoing global patent dispute between Qualcomm and Apple, which saw the former seek to block the manufacturing and sale of iPhones in China over patent issues pertaining to payments last year.

Qualcomm shares were up 3 percent on Monday. Apple opened down more than 2 percent before closing up 0.7 percent. Citi lowered its Apple price target to $200 a share from $240 a share, saying in a note to investors that while it does not expect China to ban or impose additional tariffs on Apple, “should this occur Apple has material exposure to China.”

The Apple case comes as the tech giant faces intensifying competition in China, which represented 18 percent of its total sales from the third quarter. The American company’s market share in China shrunk from 7.2 percent to 6.7 percent year-over-year in the second quarter as local competitors Huawei and Oppo gained more ground, according to market research firm IDC.

The annual drop is due to Apple’s high prices, IDC suggests, but its name “is still very strong in China” and “the company will fare well should it release slightly cheaper options later in the year.”

Samsung heir handed 5-year jail sentence for bribery

 Samsung vice chairman and the company’s heir apparent Jay Y. Lee is headed to jail after a court in Korean ruled that he is guilty of bribery, embezzlement, capital flight and perjury charges. Lee, who has been earmarked as the future leader of the company, was handed a five-year jail sentence, although he is expected to appeal the decision. He took a board seat at Samsung last year in… Read More

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Samsung posts record quarterly profit despite scandals

 Despite being slammed by scandals, Samsung just recorded a record quarter of business with a net profit of $9.9 billion for Q2 2017. The Korea firm has been rocked by the recall of the Galaxy Note 7 and the prosecution of de facto leader Jay Y. Lee on bribery charges, but that didn’t stop it from pulling in revenue of $54.8 billion during the three-month period. That revenue figure rose… Read More

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LG launches a mobile payment service in Korea

 LG announced plans for its own mobile payment service way back in November 2015, and today it finally went official with the launch.
The LG Pay service is initially limited to the G6, LG’s flagship smartphone, via a software update, but it is only available in Korea. There is launch support for cards from Shinhan Bank, KB, BC and Lotte, and LG plans to cover all of Korea’s card… Read More

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Pittsburgh’s Kerf Cases enrobes your phone in fine wood

 One iPhone case is much like the other unless it’s made of figured walnut wood from a retired woodworker in California and feels like the surface of a finely-sanded and well-made piece of antique cabinetry. That’s why Kerf Cases, a Pittsburgh-based manufacturer, is so cool.
The founder, Ben Saks, has been working in wood for most of his life. While working at Carnegie Mellon… Read More

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BeeHex cooks up $1 million for 3D food printers that make pizzas

A heart-shaped pizza printed by BeeHex. The phrase “3-D printer” typically brings to mind devices that churn out plastic objects like jewelry, toys, hardware prototypes or even prosthetics. Now, a startup building a 3-D food printer, BeeHex, has raised $1 million in seed funding to launch its first product, a pizza printer called the Chef 3D. Initially, BeeHex wanted to develop a printer that would be able to make a… Read More

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Samsung’s de facto leader indicted on bribery charges

shutterstock samsung The de facto head of Samsung, Jay Y. Lee, is facing the potential of years behind bars after South Korean prosecutors said today that they intend to indite him on bribery charges, the Wall Street Journal reported. Lee was arrested earlier this month on bribery, embezzlement, and perjury charges related to giving $37 million to an advisor of President Park Geun-hye in exchange for… Read More

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Crunch Report | Galaxy S8 Coming in March

The Trump administration names its manufacturing council, Tesla is suing an ex-employee for reportedly stealing proprietary autopilot information and poaching talent, Samsung Galaxy S8 is reportedly launching in March and Apple is using iCloud to improve Siri. All this on Crunch Report! Read More

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Driving the 2017 Chevrolet Bolt EV

bolt-ev147a0384 The Bolt is designed to be approachable and at least a little familiar at first, even though it’s actually a very different kind of car under the hood, thanks to its 60 kWh battery and electric motor. Chevrolet knows that a lot of its owners will be first-time EV buyers, and that there’s a learning curve when you’re coming from a long history of driving gas-powered cars. Bolt… Read More

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