Invest Local or Remote? The Effects of COVID-19 Lockdowns on Venture Capital Investment around the World

115 Pages Posted: 7 Jul 2021 Last revised: 29 Jan 2023

See all articles by Pengfei Han

Pengfei Han

Peking University, Guanghua School of Management

Chunrui Liu

University of International Business and Economics (UIBE) - Business School

Xuan Tian

Tsinghua University - PBC School of Finance

Kexin Wang

Tsinghua University - PBC School of Finance

Date Written: November 14, 2022

Abstract

We find the “death of distance” in venture capital investment caused by the COVID-19 pandemic: VCs invest in more distant startups during the COVID-19 lockdowns and such effects continue and accelerate after the economy reopens. The death of distance is more pronounced when there is better internet infrastructure, lower information asymmetry between VCs and entrepreneurs, and smaller deal size. The pandemic-spurred advancement and adoption of remote communication technology contribute to the documented observations. The post-pandemic VC industry witnesses more vibrant entry of outside VCs into geographically localized markets, intensified competition among VCs, and mitigated regional inequality of VC financing.

Keywords: Venture Capital, Entrepreneurship, COVID-19, Pandemic, Lockdown

JEL Classification: G24, G23, L26

Suggested Citation

Han, Pengfei and Liu, Chunrui and Tian, Xuan and Wang, Kexin, Invest Local or Remote? The Effects of COVID-19 Lockdowns on Venture Capital Investment around the World (November 14, 2022). Available at SSRN: https://ssrn.com/abstract=3871317 or http://dx.doi.org/10.2139/ssrn.3871317

Pengfei Han (Contact Author)

Peking University, Guanghua School of Management ( email )

No 5 Yiheyuan Road, Haidian District
Beijing 100871
China

HOME PAGE: http://https://sites.google.com/view/pengfeihan/home

Chunrui Liu

University of International Business and Economics (UIBE) - Business School ( email )

Beijing
China

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Kexin Wang

Tsinghua University - PBC School of Finance ( email )

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