Venture Capitalists and COVID-19

Abstract

We survey over one thousand institutional and corporate venture capitalists (VCs) on how the COVID-19 pandemic has affected their decisions and investments. Although individual funds and portfolio companies have been dramatically impacted, VCs expect aggregate returns to be largely unchanged because winners have offset losers. This suggests the primary impact of COVID-19 has been an increase in volatility and uncertainty. Consistent with that, VCs report initially delaying investment due to a difficulty evaluating deals and an expectation that future financings will offer investors more downside protections. We find only moderate evidence of disruption to VC capital flows, with investment expected to be down less than one-fifth, and only one-sixth of VCs reporting any pressure from limited partners to conserve capital. Despite the historical importance of in-person meetings, VCs do not report difficulty finding quality entrepreneurs. We also find little change in how VC allocate their time in the pandemic compared to before the pandemic. Finally, our outcome measures are not correlated with local COVID-19 impact.

Keywords: venture capital, entrepreneurship, COVID-19, coronavirus, pandemic

JEL Classification: G24