Coronavirus Stokes Investor Fears – From Venture Capital to Wall Street

For Tom McInerney, a Los Angeles-based angel investor who has sunk cash into the likes of Bird, Tala, and Uber, the Coronavirus has changed the way he does business. He's stopped in-person meetings and on Monday pulled his three-year-old out of school for at least two weeks.

The family is on day four of quarantine in their Santa Monica home. And, he's done some basic preparations — buying masks and going to stores for what he's calling "pre-corona" food because it's not handled by humans. "This is extreme, and I know this is extreme," he told dot.LA. McInerney is an entrepreneur before he started investing in startups, and began his career as a software engineer at Apple and Sony.

"It's just a hyperconnected world," he said. "There's 10 times as many flights out of China than there were during SARS." He's also been doing the math and watching COVID-19 closely for months, and he thinks it's smart. "I'm definitely not getting on an airplane. No way."

On Friday, the Dow Jones Industrial Average and S&P 500 sank again in trades over COVID-19 fears, firmly in correction territory. The Dow lost more than 3,500 points in the past week. That's the largest selloff in a decade.

McInerney said he doesn't really trust the few reported cases in the U.S. given the numbers of flights coming in to Los Angeles International Airport alone.

Meanwhile, Marc Andreessen, co-founder and general partner of VC firm Andreessen Horowitz has taken to Twitter with 22 of his last 23 tweets, dedicated to COVID-19 studies, reports and news articles that he captions with "Public Service Announcement."

Gautam Gupta, a San Francisco-based partner at Santa Monica's M13 Ventures, said he suddenly has been getting lots of questions about COVID-19. For now at least, the queries are about how turmoil in financial markets will trickle down to early-stage investing, rather than about how the virus will impact operations.

"I would say it comes up in more than half of conversations with other investors," Gupta said.

Conference organizers for next week's influential Montgomery Summit are taking precautionary measures, including asking guests who have been to China or other areas of outbreak to use discretion and not attend the summit. The spokesperson said the summit will have medical staff "present and available to assess any potential situation that might arise."

Jamie Montgomery, founder and managing director of March Capital Partners, who founded the summit, sent a lengthy email to conference attendees Friday afternoon noting that "we have cancelled overseas registrations from countries with significant exposure, such as China and Korea."

Montgomery said conference planners are aiming to have hand sanitizer stations in every room and are encouraging attendees not to shake hands and to wash their hands several times a day. Hotel staff will be cleaning common surfaces hourly with antiseptic wipes to avoid spread of any potential germs.

Facebook's F8 software developer conference was cancelled entirely.

McInerney at this point has turned his portfolio to basically 80% to 85% cash, but he wishes he'd put "massive out-of-there-money put options two to three weeks ago." A put option reserves the right to sell a stock at a specified price and generally communicates that you think the stock price will drop.

He's been telling every single entrepreneur that he's closed for business and is encouraging founders to watch their spending and to get their next rounds done as quickly as they can — "batten down the hatches." He thinks it will be a very tough year and most folks will likely be risk averse on the investment front.

"Net, all but very few of us are going to lose money on this, and life is going to be worse...I think this can be a Lehman crisis or '99 level correction," McInerney said.

__

Ben Bergman contributed reporting to this story.

Do you have a story that needs to be told? My DMs are open on Twitter @latams. You can also email me, or ask for my Signal.