We haven’t even seen the coronavirus’s full impact on consumers, says this VC

Early on during the pandemic, I heard a common refrain: This time, unlike in 2008, Main Street was getting stung first and foremost—meaning consumers would initially face the brunt of the downturn.

It seems as if the fallout was less than what many had feared. Certainly the unemployment rate has risen dramatically: The figure stood around 11.1% as of June. But while some consumer-facing startups have suffered from the pandemic, consumer spending has actually shown increases. However, uncertainty looms over the rest of the year.

To dig into this, Term Sheet spoke with Rick Yang, general partner at New Enterprise Associates and head of the firm’s consumer investing practice.

Yang has made notable bets: He currently sits on the board of fintech company Plaid, which Visa announced plans to acquire for $5.3 billion, as well as MasterClass, which sells classes taught by successful and famous people. Other names include Robinhood, Lyric, and Opendoor. Most recently, Yang helped form Connect Ventures, a joint venture between NEA and Hollywood talent agency Creative Artists Agency.

We hopped on the phone to chat about what he is seeing in the consumer space and why, even though deal activity appears to be bouncing back, he’s still operating conservatively.

Here’s our conversation, lightly edited for clarity.

Give me an overview of what happened to your portfolio as the coronavirus ramped up.

A lot of venture firms did the same thing as us in the April and March time frame, which was locking down and figuring out how we scenario plan for something that is very unknowable. There are a handful of companies that were very hard hit by the pandemic and what has happened with consumers. Our companies that were more indexed towards more physical locations or were in the travel or hospitality space were deeply affected. I would say the vast majority of our portfolio, though, has a certain acceleration in their business and there was certainly a lot more consumer engagement and awareness that led to better revenue in some cases.

So for MasterClass, even as revenue is rising, it’s not business as usual for the company. What has that been like?

We closed a strong round with a nice balance sheet (Editor’s note: The company raised $100 million in Series E funding announced in May). But it doesn’t mean they’re going to go out and spend all that money right now. The company is growing really well through a pandemic. On the flipside, production for any sort of content right now is pretty tight in the U.S., [and it’s hard to] find places to shoot classes. So we have to balance out the scenario: If we were looking to produce x number of classes this year, that might actually be 50% of that now. And what does that mean for our business? It’s really hard to predict what that means over the next six months. So you have to always be ready to jump on the opportunity to shoot a class or bring out a new instructor. 

[In terms of conserving cash]: Every single company is a little bit different. But I think you want to be capitalized because ultimately that is going to be the best leverage for a company if you go out for fundraising. 

Overall, I think people are going to be more conservative on how they spend on things. So typically our venture-backed businesses spend ahead of where they think they are going to be, given their growth curve, and in some cases you are not able to do that. So it’s about how we build flexibility into our businesses and how we build flexibility into our spending models to make sure we can adjust to things. If things recover faster than we’d thought, we’d love to allocate those resources quicker. If things don’t, we want to make sure we’re not overburdened with costs.

There seems to be a disconnect between the unemployment rate and what we’re hearing among consumer tech startups. What is happening?

I do think there is a disconnect there, and we do think there is a little bit of a lag there in terms of the real economic impact. From an economic standpoint, we haven’t really seen what the real effects are given the federal and local and governmental stimulus. We don’t know what it will be, but we are taking a pretty cautious view of it, and so we want to make sure our companies are thinking about it and we are planning pretty conservatively.

What are some of the consumer-facing investor trends you’ve been thinking about more with the coronavirus?

One of the trends we are seeing accelerating is the rise of the side hustle. Previously, the side hustle was a complement in some cases. Now it is becoming a main source of income. So now we think about what are those things that pop up that can sustain someone’s livelihood when they may have lost a job as part of the pandemic. 

Traditionally, you think of companies like Uber. But they’ve taken a big hit from a ridesharing perspective with COVID-19. So then we think of delivery and last-mile services such as Instacart, Uber Eats, and DoorDash.

We’re also finding ways to invest in the rise of the creator class. There’s always been a huge tailwind, especially among younger demographics who want to be creators, and that is almost a viable career path now. And I think what we see is that there is a huge rise in the creative class where you can reasonably be a creator without being super famous, but you can monetize through different platforms like Patreon, Substack, Instagram or TikTok. So I think that is something that is really interesting and ties into this idea of, maybe instead of taking a summer to work a retail job, maybe spending a summer and trying to sell some short stories or get some patrons on Patreon. It’s the modern lemonade stand. 

We’re looking at that whole stack to find ways of investing, from social platforms to creator tools, and I’ve been spending a lot of time in fintech to understand the benefits and payments flows. Those are some of the things that we think about.

Connect Ventures’ first investment was in Spire Animation Studios. What was the thinking behind investing in a company like that at a time when there is huge disruption in Hollywood productions?

The Spire investment is coming together at a time when there are a ton of new companies spending on content. And historically, animated content, which is very popular, has also been very tedious and costly to produce. But there’s been an evolution in the tech infrastructure for creating that content: To do it in a more efficient and high-velocity way, you can borrow from existing pipelines for animation studios, with what is happening in the visual effects world and gaming and game engines—and if you combine all that together, you can build something quite interesting when it comes to building full-featured animation films with the same story and emotion but that pulls from existing successful folks.

Then combine that with a third accelerating trend specific to this pandemic: There are a lot of kids and families that want to consume content. 

We made the investment in Spire before COVID-19 hit, but all of these trends were already happening. And the team really liked that NEA was thinking about how we make things more efficient and how we scale software and tech. The team also really liked CAA’s work in the entertainment space and with distributing content.

The investing process is already changing as a result of the coronavirus. How has due diligence changed, especially after something like WeWork?

There have been a number of high profile cases, with WeWork and Theranos being among these. There are certainly a lot of cautionary tales—especially now when you’ve potentially never met in person and you don’t get to visit an office and see what the vibe is like. There’s certainly more scrutiny placed on due diligence. 

[In terms of due diligence in the coronavirus]: It’s a lot of Zooms. We always do reference checks, but now it’s even more reference checks and finding as many backchannels as you can on people, and trying not to get bullied into timelines for funding rounds because it is still a competitive market out there. 

It’s not just because of WeWork or Theranos. The world is a little bit of a different place with cancel culture and with so much being online—you want to do as much homework as you can.

Lucinda Shen

Twitter: @shenlucinda

Email: lucinda.shen@fortune.com

Anne Sraders curated today’s Term Sheet.

VENTURE DEALS

-AUTO1 Group, a Berlin-based online used car marketplace, raised €255 million ($303 million) in funding via convertible notes. Farallon Capital Management and the Baupost Group led the round, and were joined by investors including the Softbank Group. Read more. 

-Moonbug Entertainment, a London-based children’s educational entertainment company, raised $120 million in funding. Goldman Sachs Growth Equity (GS Growth) and Fertitta Capital led the round, and were joined by investors including The Raine Group and Felix Capital. 

-LINE MAN, a Thailand-based delivery unit of Japan-based messaging app LINE Corp, raised $110 million in funding from BRV Capital Management, and also merged with Thailand-based restaurant review platform Wongnai Media. Read more. 

-Lemonaid Health, a San Francisco-based telemedicine platform, raised $33 million in Series B funding. Olive Tree Ventures led the round, and was joined by investors including Artis Ventures, Correlation Ventures, Hikma Ventures, and Sierra Ventures.

-Buildots, a U.K. and Israel-based AI construction management company, raised $16 million in funding. TLV Partners led the round, and was joined by investors including Innogy Ventures, Tidhar Construction Group, and investors Ziv Aviram, Zvika Limon, Benny Schnaider, Avigdor Willenz and Gil Geva.

-Aquicore, a Washington, D.C.-based cloud-based software provider for commercial real estate energy management, raised $14 million in funding. Keyframe Capital led the round, and was joined by investors including A/O Proptech and The Westly Group. 

-MomentFeed, a Santa Monica, Calif.-based provider of location-based mobile customer management software, raised $10 million in funding. Level Equity led the round, and was joined by investors including Signia Venture Partners, Draper Nexus, and DFJ Frontier.

-JetClosing, a Seattle-based mobile title and escrow company for home closing and refinancing, raised $9 million in Series B funding. T. Rowe Price Associates led the round, and was joined by investors including Pioneer Square Labs (PSL) and Trilogy Equity. 

-Immertec, a Tampa, Florida-based real-time virtual surgery training company that uses VR, raised $6 million in extended Series A funding from investors including Revolution’s Rise of the Rest Seed Fund, Benvolio Group and PAR. Read more. 

-Spyderbat, an Austin-based cybersecurity company, raised $4.2 million in seed funding. LiveOak Venture Partners and Benhamou Global Ventures led the round, and were joined by John McHale. Read more. 

-CAPS Medical, an Israel-based medical device company that makes non-thermal plasma devices used to treat cancer, raised $3.5 million in Series A funding. Chasing Value Asset Management and Israel Investment Fund Group (IIFG) led the round, and were joined by investors including Technion Research and Development Foundation and XACT Robotics. 

-LOOM, a Los Angeles-based online sexual and reproductive health education platform, raised $3 million in seed funding. Slow Ventures led the round, and was joined by investors including Precursor Ventures, GSV, Moxxie Ventures, General Catalyst, Maveron, and several angel investors. Read more.

-Epic CleanTec, a San Francisco-based onsite wastewater treatment and reuse company, raised $2.6 million in seed funding from investors including Elizabeth Cutler and Dr. Kathy Fields. 

-New Age Meats, a Berkeley, Calif.-based producer of lab-grown meats, raised $2 million in extended seed funding. TechU Ventures led the round, and was joined by investors including ff Venture Capital, SOSV, Sand Hill Angels, and the Losa Group.

-Autumn Adeigbo, a New York City-based women’s fashion brand, raised $1.3 million in seed funding. Fuel Capital led the round, and was joined by investors including Katrina Lake, Sonja Perkins, the Pipeline Angels, and Christopher Elliott. Read more.

PRIVATE EQUITY

-FoodChain ID, owned by Paine Schwartz Partners, acquired Nutraveris, a Brittany, France-based scientific, health and nutrition regulatory consultancy and technology provider. Financial terms were not disclosed. 

-Hivest Capital Partners acquired CRYOPDP, a France-based temperature control logistics company focused on healthcare and lifesciences, from Air Liquide. Financial terms were not disclosed. 

-Stanley Capital acquired Noden, a Dublin, Ireland-based pharmaceutical company, from PDL BioPharma for a total of up to $48.3 million in cash.  

-Corsair Capital agreed to acquire MSTS, an Overland Park, Kan.-based provider of commercial credit and payments services, from World Fuel Services Corporation. Financial terms were not disclosed. 

-Advent International agreed to acquire a controlling stake in RA Chem Pharma Limited, an India-based pharmaceutical company, from Micro Labs Limited. Financial terms were not disclosed. 

-3Cloud, backed by Gryphon Investors, acquired Applied Cloud Systems, a Pittsburgh-based Microsoft cloud technologies consultancy for customers. Financial terms were not disclosed.

-Summit Interconnect, owned by HCI Equity Partners, acquired ITL Circuits, a Toronto-based printed circuit board provider. Financial terms were not disclosed.  

OTHERS

-Nvidia is in talks to acquire Arm, a U.K.-based chip maker from SoftBank Group, Bloomberg reports citing sources. SoftBank bought Arm for $32 billion in 2016. Read more.

-Strategic Education (NASDAQ: STRA) agreed to acquire Baltimore-based educational institutions network Laureate Education’s (NASDAQ: LAUR) Australia and New Zealand businesses for $642.7 million in cash.

-Enova International agreed to acquire OnDeck, a New York City-based online small business lending platform. The deal is valued at approximately $90 million in cash and stock.  

-Sampo is exploring a bid for Hastings Group Holdings (LSE: HTSG), a U.K.-based general insurer, per Bloomberg. 

-Atlassian acquired Mindville, a Sweden-based platform to help companies track and manage assets. Financial terms were not disclosed.

BREAKUPS, HANGUPS, AND BANKRUPTCIES

-California Pizza Kitchen, a Los Angeles-based food chain backed by Golden Gate Capital, filed for bankruptcy protection. 

-Tonopah Solar Energy, a Nevada solar power plant owner, filed for bankruptcy protection. Read more.

IPOS

-Affirm, a San Francisco-based online lending platform for shoppers, may be preparing to go public at a valuation of as much as $10 billion, The Wall Street Journal reports citing sources. Read more.

-Churchill Capital Corp IV, a New York City-based blank check company and fourth of its kind founded by Michael Klein, raised $1.8 billion in an IPO. It plans to list on the NYSE as “CCIV.U.” Read more.

-Li Auto, a Chinese electric vehicle SUV manufacturer, raised $1.1 billion by offering 95 million American Depositary Shares (ADS) priced at $11.50 in an IPO. It plans to list on the Nasdaq as “LI”. Read more.

-E.Merge Technology Acquisition, a Burlingame, Calif.-based blank check company led by former Kodak CEO Jeff Clarke, raised $522 million by offering 52.2 million shares at $10, 2.2 million more than expected, in an IPO. It is targeting investments in software and technology. It plans to list on the Nasdaq as “ETACU”. Read more.

-Vasta Platform, a São Paulo, Brazil-based online educational curriculum provider for K-12, raised $353 million by offering 18.6 million shares priced at $19 in an IPO. It plans to list on the Nasdaq as "VSTA". Read more.

-AlloVir, a Cambridge, Mass.-based developer of viral disease novel cell therapies, raised $276 million by offering 16.3 million shares priced at $17 in an IPO. It plans to list on the Nasdaq as “ALVR”. Read more. 

-one, a San Francisco-based blank check company led by the co-founder of Eventbrite Kevin Hartz, plans to raise up to $200 million in an IPO. It is targeting investments in technology. It plans to list on the NYSE as “AONE.U”. Read more. 

-INSU Acquisition II, a Philadelphia-based blank check company and second of its kind formed by Cohen & Company, plans to raise up to $175 million in an IPO. It is targeting investments in the insurance industry. It plans to list on the Nasdaq as “INAQU”. Read more.

-NewHold Investment, a Houston-based blank check company formed by NewHold Enterprises, raised $150 million in an IPO. It is targeting investments in industrial technology. It plans to list on the Nasdaq as “NHICU”. Read more. 

-Nano-X Imaging, a Neve Ilan, Israel-based low-cost digital X-ray and medical imaging developer, plans to raise up to $125 million in an IPO. It plans to list on the Nasdaq as “NNOX”. Read more. 

-Fathom Holdings, a Cary, North Carolina-based virtual real estate brokerage that uses cloud-based software, raised $34 million by offering 3.4 million shares priced at $10 in an IPO. It plans to list on the Nasdaq as “FTHM”. Read more.

-1847 Goedeker, a Ballwin, Mo.-based home goods and appliances e-commerce retailer, raised $10 million by offering 1.1 million shares priced at $9 in an IPO. It plans to list on the NYSE as “GOED”. Read more. 

EXITS

-40 North Ventures acquired investments in 11 companies from General Electrics’ GE Ventures portfolio. The acquired companies are Carbon, Desktop Metal, Aras, Proterra, Volta, Enbala, Catalant, Upskill, Menlo Micro, Nexar, and Tamr. Financial terms were not disclosed.  

-Ardian acquired Finaxy, a France-based insurance broker, from Equistone Partners Europe. Financial terms were not disclosed. 

F+FS

-Preservation Capital Partners, a London-based private equity firm, raised £309 million ($405 million) for its debut fund, Preservation Capital Partners Fund I.

-United Ventures, an Italy-based venture capital firm, and TIM Ventures, an Italy-based venture capital arm of TIM, will raise €150 million ($178 million) for a new fund UV T-Growth, focused on late-stage companies in Europe. 

PEOPLE

-TZP Group added Erin O'Brien Edwards as a partner in growth equity and Justin Kulla as a partner in impact investing. Edwards was previously at North Castle Partners, and Kulla was previously at Weld North. 

-Triago added Andrew Rosato as partner and Simeon Ketchum as principal. Rosato was previously at MVision, and Ketchum was previously at Astor Place Holdings. 

-NaviMed Capital added Josh Boylan as vice president and Henry Oelsner as associate. Boylan was previously at Epsilon Health Investors, and Oelsner was at Primus Capital.