Preparing for a post-Covid world

In early 2020, I tweaked my portfolio to weather the Coronaconomy storm, increasing my investment in several key ‘work from home’ companies, including e-commerce stocks such as Shopify and MercadoLibre, remote-working companies like Zoom, Docusign and Fiverr, and telemedicine companies such as Teladoc.

Although 2020 has been a tough year for many companies, this part of my portfolio has done incredibly well, yielding stellar year-to-date returns:

Fiverr +677% (but admittedly, I was very late to this party!)
Zoom +480%
Docusign +174%
Shopify +125%
Teladoc +112%
MercadoLibre +110%

The Coronavirus pandemic has accelerated the take-up of e-commerce and remote working across a broad range of society, as many people have been forced to shop, and to work, online. Although we’re all looking forward to getting back to a semblance of normal pre-Covid life as soon as possible, we’ve realised efficiencies and flexibility in our own lives that we’re very unlikely to walk-back when the virus is in the rear-view mirror.

  • Who would honestly prefer the headache of physically printing, signing, scanning & emailing a contract – or the minor inconvenience of licking an envelope (yuck!) and walking it to the post-box, when you can achieve the same thing – in a far more secure manner – with a click on your phone?

  • Who honestly doesn’t enjoy the flexibility of a day or two a week working from home, even if it is nice to be in the office environment and socialising with colleagues on the other days?

  • Does anybody really enjoy shopping for essentials every week, rather than having groceries and those little bits and pieces delivered – especially when the delivery capability of most e-commerce providers can now get the goods to you within two days (or in some locations, two hours)?

I’m expecting some fairly wild volatility as vaccines roll-out over the next twelve months, but many of these companies have leveraged national lockdowns to move their strategy forwards by years, and these are not trends that I’d anticipate reversing. Sure, I’m expecting my Coronaconomy stocks to take a bit of a bashing in the short- to medium-term, however, it’s my intention to hold the course with all of these investments.

With all that said, the one stock listed above that I am challenging myself around is Zoom. Many companies have been forced to adopt video conferencing in a rush, and I do wonder if once Covid has passed, whether they will reassess their comms strategy.

To better inform my investment thesis, I took a look at the Zoom keynote presentation from their October conference. A couple of highlights I noted:

  • better integration of room and remote attendees, where machine learning is used to drop each physical attendee into their own individual zoom window, so it feels like a more joined-up conversation

  • integration with Slack and other Agile tools for e.g. better managing daily standup meetings

  • an implementation of realtime performance feedback aggregated across a year of conference calls (interesting but it’s probably going to lead to some pretty awful HR outcomes in companies that adopt it poorly!)

  • a slightly bizarre but interesting to think about use-case where an employee calls 911 on a zoom phone, the building control room gets alerted in parallel and can join the call to provide support, and zoom signage in the building can dynamically update to direct emergency services to the location of the incident

Despite the culture of innovation demonstrated on the keynote call, I do feel that Zoom will struggle to compete around internal collaboration pie. Microsoft Teams is already licensed in most companies who use Office365, and Google Meet is already very strong in education. However, if we think about Zoom as an external collaboration tool - the b2b and b2c market is pretty big, and Zoom potentially begin to drink Twilio’s milkshake as they build out their APIs and embedded comms capabilities with Zoom Apps.

An anecdotal example only, I work for a global bank. We use Microsoft on the desktop, Cisco for video, and transitioned to Zoom late in 2019 as it was impossible to integrate our internal VC with external partners and consultancies. Zoom has now rolled-out for b2c communication in certain use cases (e.g. selling mortgages), and we’re looking at how we can expand this offering to better serve our customers in key markets.

In terms of this overall landscape, external video collaboration from businesses to their customers is currently in very very early stages, but I’d anticipate this market opportunity growing significantly over the next five years. You could argue that Facebook Messenger and Whatsapp are better positioned than Zoom to own this, but Zoom are innovating hard, and if they can use the Zoom Apps platform to implement transactionality alongside comms, they could prevail.