More than half a year into the Covid pandemic the grim toll on not just lives but also mental health and our economy continues to build with no end in sight. There will surely be much accounting to be done in terms of which responses were right and which misguided, with many learnings and lessons for the future. Part of this post mortem will surely also include how various business reacted, and what they did to help their respective communities.
In that spirit, Capitalise (which is also a QED investment) constitutes a very interesting case study as the team very much found themselves in the eye of an unexpected but nonetheless perfect storm.
By ways of context, Capitalise works with accountants to give them the tech enabled tools to better serve their small business clients. These tools are varied, but many of them center around helping the small businesses get the funding they need to grow and prosper.
Shortly before the pandemic was yet to hit, Capitalise had embarked on a fundraise as part of its normal fundraising cycle. Given strong traction in the latter half of 2019, the company had decided to push back the fundraise to early 2020. The logic behind this was sound: It would mean using up more of their capital cushion, but nobody had any doubt that they would complete a successful fundraise given the performance metrics they had under their belt.
The fundraise was progressing quite nicely when in February, in the span of a few fateful weeks, it became clear that the virus that had originated on the other side of the planet was now spreading across the globe and would soon be classified as a pandemic. The impact of this on Capitalise was immediate: Small business funding, and by extension Capitalise’s revenue took a big hit, and all the potential investors that had lined up decided to play for time to see how things would shape up.
With revenue falling and the funding round on hold, the team at Capitalise found themselves in a position any founder would dread. Of course, on top of all this came the stress of trying to run a business which was situated in London that was quickly becoming the global epicenter of the pandemic.
There comes a point in every classic drama where the protagonist has to make a decision that will determine how the story will end and how the finale will unfold. This is commonly referred to as the second act turning point, and typically requires the main character to draw on their values, strengths, and powers in facing the adverse circumstances. The founders and team at Capitalise were now in for such an epic test, and without hesitation chose to focus on how they could give their accountant customers the tools to go out and help the thousands of small businesses that were now facing severe and in many cases existential cash flow issues.
The quick and decisive action by the UK Chancellor Rishi Sunak had already made a tremendous difference with their Bounce Back and CBILS initiatives, but these impactful initiatives came a long way from covering every impacted business. To address this gap, in conjunction with The Corporate Finance Network, Capitalise launched #LeaveNoBusinessBehind drawing from the UN’s similarly named initiative. The movement was supported by the Association of Chartered Certified Accountants (ACCA), AccountingWeb, Accountex, AVN, Clarity & Forgotten LTD. Its objective was to provide accountants resources to support their clients.
As they started working in tandem with the government programs to enable the accountants to deliver much needed lifelines to the small businesses, Capitalise faced the first of many choices it would have to take. To deliver the maximum level of loans to businesses in need would mean Capitalise having to forego its own commission income in many circumstances, and this at a point in time where every pound of revenue mattered immensely. Needless to say, the team decided to do the work needed to process many of these loans for free.
In parallel to this, the company also got busy on the product side, and in the span of a few weeks took to market a new product that would enable businesses to litigate on bad debts, which at this point in time was becoming a crucial priority for many businesses.
The story is far from over, but after those initial fateful months in March, April, and May Capitalise closed a significant funding round with a mixture of its internal and new external investors, and after the initial hit and sacrifices, delivered record revenues in both June and July.
There are surely many such stories yet to come out, and what we do in the commercially focused startup world pales in comparison to the heroic efforts by the doctors, healthcare workers, delivery staff, all other essential workers that toiled so hard during this period. But in the end, every business matters, and it is the sum total of all these small businesses, whether they be pubs, restaurants, theatres, or retailers that make up the fabric of our modern society. In normal times, these businesses serve us on a daily basis, adding to our quality of life. As the going gets tough, it is important we do all we can to not leave any of these small businesses behind.