COVID has changed investment. These principles hold fast.
Amit Raizada Foundation
December 14, 2020
With Pfizer and Moderna’s announcements in November that their vaccines had reached and surpassed 90 percent efficacy rates in clinical trials, the stock market went crazy. Buoyed by hopes that an FDA-approved vaccine could return life to normal and allow the economy to resume its pre-pandemic rout, investors poured money into American financial markets. On the Monday of Pfizer’s announcement, the Dow shot up almost 800 points, followed by another 250 the next day.
Markets hate uncertainty; and there’s little doubt that this increase was compounded by the conclusion of the United States presidential election, the outcome of which—regardless of which candidate won—promised to exert significant influence over international trade, supply chains, and finance.
As we enter 2021, we’ve reached an inflection point. The post-COVID world will be different than the one that proceeded it. In the last eight months, consumer behavior has changed, aggregate demand has shifted, longstanding economic models have been challenged and the era of stringent monetary policy very well may have ended.
We sat down with Amit Raizada, a veteran venture capitalist and CEO of Spectrum Business Ventures, to learn more about what this news could portend for aspiring investors.
“When it comes to investment, we’ve reached an open frontier,” Raizada said. “It’s clear that the post-COVID world will differ significantly from the one that preceded it. With this comes the opportunity to get in on the ground floor of the industries of the future.”
INVESTING IN THE FUTURE
Raizada said that investors should look for long-run opportunities in the firms and industries set to expand over the next few years. He recommended investors pursue these opportunities over flashy, “get rich quick” opportunities like IPOs.
“I’ve long advocated, even before the pandemic, for investing in the industries and services that, while perhaps not immediately profitable, offer investors and venture capital firms footholds in the industries that could come to define the course of consumption in ten, fifteen, or twenty years,” Raizada said.
One of Raizada’s most successful ventures, which helped launch his career as a venture capitalist, was the result of such strategy.
“In the late 1990s, vendors across the country slowly began to phase out paper gift vouchers in favor of electronic gift certificates that looked and functioned like credit cards,” Raizada said. “Noticing consumers’ preference for this new medium, I invested early on in two service providers that helped the companies issuing gift cards manage outstanding funds and observe local and state escheat laws. Electronic gift cards have since become ubiquitous, and these services helped lift the industry off the ground.”
Raizada offered aspiring investors a word of advice about ways to seek out these opportunities.
“Closely observe and take stock of the unique preferences of young consumers,” Raizada said. “While their preferences may not always make sense to older generations, they are ultimately the consumers of the future. Look for the products and markets for which they demonstrate a penchant, seek out the innovative firms making waves within that space, and stick with the venture for the long-run—that’s how successful ventures play out over time.”
INVESTING IN PURPOSE
Within this new investment paradigm, Raizada cautioned aspiring investors to pursue more than merely profit.
“With so much opportunity, investors should look for strategic ventures that not only deliver returns to their firms and partners, but that also improve the lives of people hungry for innovation,” said Raizada. “This has been a guiding principle of my more than two decades in investing.”
Often, these strategic and moral imperatives are aligned. Over the course of this pandemic, for example, we’ve seen the importance of investing in medical technology. These opportunities are not just lucrative—they are life-changing for millions of hard-working Americans.
“As you begin to consider how you can jump into the market over these next few years, consider how you can provide a boost to the startups and engineers working to develop solutions to social challenges,” Raizada said. “Whether medical services, sustainability, or working to bridge the digital divide, watch emerging market trends and incipient needs to determine where you can exert the greatest impact.”