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The future of local investing

At present, it is difficult to anticipate the challenges that await us in the coming weeks and months. The coronavirus and the Covid-19 pandemic will continue to affect all of us personally and professionally. We remain at an economic and geopolitical turning point. It will take a long time for our economies to recover from the pandemic. But with well-managed investments with a focus on high-quality founders and the right sectors and products, it is possible to turn even such a crisis into an advantage and consistently generate attractive capital returns for investors. Locally.

The situation surrounding the coronavirus has tested not only the inner workings of society, but also of private companies. Paradoxically, it is from China – from where the coronavirus has spread around the world – that the expression that bears the idea of both the crisis and the turning point comes: weiji. This term accurately describes what our generation will go through in the coming period. It would be premature to talk about specific ramifications, because further developments may play out according to different scenarios. However, we at Crowdberry see several clues as to how this “tectonic shift” in the world economy and local behaviour will influence the future of business and overall trends. Some of them can also be an inspiration for investors and future investment opportunities:

• Localisation of production and consumption: We anticipate a return to domestic production due not only to solidarity with local companies, but mainly because of the limits on products available for import and the paralysis of the supply chain.
• Shift of sales channels to the online world: The winners of the global pandemic are digital business models and e-commerce platforms that operate in the online environment. Their flexibility and cost base and the fact that they do not require personal contact are proving to be major advantages over brick-and-mortar operations. Digitalisation and e-commerce will gain even greater momentum.
• Automation and robotisation of processes: The interruption and shortage of human labour during crisis scenarios is another trend that will be reinforced by the current pandemic. Continuous production and flexibility in managing volume (in the event of rising or excess demand) will become a fundamental competitive advantage.
• Capital appreciation: Flexible financing with decreased dependence on banks and lessened sensitivity to unexpected shocks in direct relationship to capital providers, will become a necessary part of shoring up companies' resilience against external shocks. This is also inevitable in light of the economy's reduced dependence on the automotive and manufacturing sectors.
• Zero-interest rates: Due to the rapid increase of public debt, “lower for longer” will become “lower forever”. Capital investments that bring growth and dividends will be one of the few havens for return-seeking capital, particularly in sectors that profit from structural changes in the world order. Cooling in the area of residential real estate and rental income shortfalls (e.g. Airbnb, labour mobility) will further strengthen this trend.

Local investment in small and medium-sized enterprises has a fundamental impact on domestic companies, while external shocks can also have a positive effect on companies’ business models. We are currently observing a similar situation with some companies in the Crowdberry portfolio (e.g. GymBeam and Isadore Apparel). In more complicated situations – where a helping hand is needed – it is possible to overcome a difficult period with targeted control of investments and support for investors, allowing companies to gain a better competitive position in the market with their products and services.

Of no less importance, the allocation of domestic capital to local companies also helps our economy and secures job opportunities. Local investment can then directly support a change in the structure of the economy toward sectors with higher value added. For our future.

Author: Daniel Gašpar, partner, Crowdberry

ABOUT THE AUTHOR:

Since 2017, Daniel Gašpar has served as the Managing Partner at Crowdberry, where he is responsible for the company’s management and business development. He is currently in charge of the management of the investment fund CB Investment Management, a subsidiary of Crowdberry.

Daniel has extensive experience in industry, corporate investment financing, and risk and portfolio management, as well as project management and team management. He worked abroad for several years. After completing internships and projects at Kaufman Bros. LLP, BASF and Daimler, he continued the development of his career at NIBC Bank as an analyst in the acquisition finance and private equity department. Daniel helped build up the German branch of this major Dutch investment bank by closing more than twenty transactions worth over EUR 2.6 billion. In 2011, he became NIBC Bank’s vice-president for investment banking. After more than a decade abroad, he returned to Slovakia, where he co-founded the investment and consulting firm EWAMCo. Daniel studied strategy and international management at Comenius University in Bratislava and Universität Mannheim in Germany and also completed postgraduate studies in financial management at the Vlerick Management School in Belgium.

ABOUT CROWDBERRY:

Crowdberry was established in 2015 and is the first crowd-investing platform operating in the Czech Republic and Slovakia. It is an investment marketplace that brings interesting and innovative companies that have already demonstrated the operability of their business models together with private investors (the Crowdberry crowd). Crowdberry’s ambition is to create an alternative segment of local investment and, at the same time, to help companies and investors and thus contribute to the long-term growth of the economy.

As a modern and effective way to directly invest in dynamic companies, the Crowdberry crowd-investing platform is an innovative supplement to traditional bank financing. Companies can obtain money – and new partners – to expand their business, even in the phase when they do not have access to bank financing. And private investors in turn have the opportunity to increase the value of their invested funds and acquire an ownership share in innovative companies. And not only that. With their experience in a specific area, they can actively contribute to the success of the companies that they have chosen. www.crowdberry.eu