Although tech has grown exponentially over the past several decades, the industry is now bracing for tough times. Seasoned investor Aleksandr Kuraksin, co-founder and partner at Prospective Technologies Ventures (PTV), shares some insights into the market along with his strategic moves.
According to a recent survey by Zapier, over half of tech firms don’t believe they’ll survive a recession if it lasts more than two years. Researchers interviewed more than 500 founders, executives, and employees to discuss their contingency plans for surviving a downturn.
Although 88% of tech firms predicted that a recession would likely occur in the next year, one in five felt they were unprepared to weather the difficulties ahead. And those anticipating the worst-case scenario listed automation and cutting operating expenses as the primary “evasive actions” they were relying on to survive a coming recession.
Automation of supply chain and software for IT teams became the focus of PTV, a fund recently co-founded by Aleksandr Kuraksin.
Where did the idea for the fund come from? What motivated you?
I’ve had a long and successful career in investment banking, developing complex debt instruments and structured products. Later I spent some time as an angel investor and advisor to startups.
During COVID, when venture funding underwent the steepest climb in history, my partners and I got the idea of a recession proof fund. We started investing and crafting an effective strategy in 2021. In the beginning of 2022, we finally officially launched PTV, with a focus on B2B software.
What’s your strategy? Why software companies?
B2B software companies have stable cash flow. They are less vulnerable and more resilient through upheaval than consumer tech or innovative projects, such as hydrogen engines or flying cars. I believe the recession could affect everybody. However, if a SaaS company has at least $1 million in revenue and strong unit economics (UE), it’s very unlikely to go bankrupt. We invest in B2B software companies that have revenue and clients.
We focus on businesses that help automate the supply chain and improve the efficiency of various manufacturing processes. For example, software that increases production speed. Another example is airobotics and solutions for industrial automated drones that allow managers to make informed decisions.
We source our deals from our network of tech founders formed during the past 12 years of active venture investments. This gives us an opportunity to find hidden gems: unique projects that haven’t been noticed yet by big institutional funds in the U.S. or elsewhere.
What’s your value proposition to founders? Why choose you?
We engage U.S. corporate partners that are interested in selling our startups’ innovative products and services. For many established tech companies, new products or services can help boost sales and strengthen relationships with their existing clients.
Even market leaders should keep something fresh in rotation if they want to stand out in such a competitive market. Thanks to our portfolio companies, they can integrate new solutions into their standard offerings.
Is recession a part of your investment strategy?
Yes, we believe it’s time to get very conservative about the market. There are fewer investment deals, and most VCs are adding different protective provisions to their agreements. Now is the time to look toward those tech companies with profit, not just revenue. We take a risk-averse approach and focus on investing in sustainable projects.
As the world adjusts to the pandemic, production is shifting back to the U.S. and EU from the developing markets. Automating manufacturing processes is the only way American businesses can compete with cheaper labor in developing countries. We can help them succeed through unique solutions developed by our portfolio companies.
In software development a shortage of IT talent is growing as different countries start to develop their own IT infrastructure. These trends will continue in a recession, thus helping our portfolio companies to maintain stable cash flow. They can withstand tough economic conditions because they’re less vulnerable to the whims of the market.