Survive and thrive

David Tang, our Partner in China, described our COVID-19 operational strategy succinctly as far back as early February and it has since become a mantra within NGP Capital.

We have to first help our portfolio companies survive the lockdown, any impairment to their operations, and impacts on their workforce. After securing survival and in order to thrive, companies need to protect and improve their core value proposition.

Managing cash flow, cutting costs, fundraising, extending runways, and executing online strategy pivots have been key to the survival of many Chinese companies in early 2020.

My advice to companies is to seek online models and cut costs holistically. Companies who are able to switch a good portion of their business to an online model will have a clear advantage over others. Cutting needs to be looked at holistically with a long-term view focused on increasing efficiencies and modifying the business model according to market needs while enhancing the customer offering.

Learning from the Chinese experience, we are recommending to our portfolio companies worldwide that they think of 2020 as the year to survive and that they hunker down to thrive in 2021 (and beyond). For now, job number one for our companies is to react, replan, cut burn as needed, and secure 18-24 months of runway so they emerge stronger on the other side.

"For now, job number one for our companies is to react, replan, cut burn as needed, and secure 18-24 months of runway so they emerge stronger on the other side."

Only then can we turn our attention to help them thrive. Surviving the downturn involves a wholesale shift to working online. For many Chinese workers, this is the first time they have worked remotely, and we are already seeing companies offer stronger tools for remote work that are localized to Chinese needs. NGP Capital expects to invest in enterprise collaboration companies in China as employees there develop new work habits.