Tech investment firm Sequoia Capital told top Silicon Valley executives Thursday that the coronavirus could create opportunities for companies capable of weathering a potential economic downturn.
Major CEOs should “question every assumption” they have about their business models, Sequoia wrote in a memo addressing what companies should do in the event that the virus becomes a global economic problem. The group also called the virus a potential shock to the market.
“Coronavirus is the black swan of 2020,” the group noted before laying out a list of things tech companies should consider before moving forward in a world where the virus affects major supply chains.
A black swan is Wall Street parlance for an unforeseen event that carries major risks but also potentially huge rewards for companies that make sage moves at the right time.
Sequoia’s founders posed a few questions to executives about their business dealings, namely: “What would you do if fundraising on attractive terms proves difficult in 2020 and 2021?” and “Could you turn a challenging situation into an opportunity to set yourself up for enduring success.”
The group’s founders then reminded people that “many of the most iconic companies were forged and shaped during difficult times,” including Silicon Valley giants Google and PayPal, both of which “soldiered through the aftermath of the dot-com bust.” Sequoia also noted that Airbnb and Square were founded in the midst of the financial downturn in 2007.
Sequoia, which specializes in startups, offered similar warnings in October 2008 as the global economy was breaking down. The firm famously placed early, big bets on Google, Airbnb, WhatsApp, among others.
Meanwhile, the economy continues to droop.
The Federal Reserve lowered its fund rates to a range of 1%-1.25% in an attempt to add some life to Wall Street. President Donald Trump suggested that the Fed go further while trying to reassure Americans. The emergency cut is the largest the Fed has made since the start of the Great Recession in 2008.
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