PE HUB | Five Questions with Catalyst Investors’ Brian Rich on preparing for a downturn
By Luisa Beltran, PE HUB
Rich advises VCs and growth firms to conduct stress tests of their portfolio cos
Consider how cos in a sector performed in last recession
Taking a down round in a recession may be painful but necessary
It’s been 10 years since the last recession and Brian Rich, managing partner of growth equity firm Catalyst Investors and secretary of the NVCA’s Executive Committee, has some advice for venture-backed and growth firms about recession-proofing their businesses. Rich doesn’t think it’s the responsibility of firms to predict the next recession, but he does think they should bullet-proof their companies and prepare them to weather the storm whenever it comes.
How did you prepare Catalyst’s 17 portfolio companies?
We did a liquidity analysis of every single one of our companies to see if, when an economic downturn happens, how badly would the company be affected. We have some companies that will be more affected than others. In some cases, we raised more equity capital, some cases we increased the bank facilities so we had larger revolvers to draw down on. No [it’s not bad to increase the debt] as long as they can amortize. The death knell is running out of liquidity. You just don’t want to run out of money.