Does Being In-Person Matter? Evidence from Venture Capital Syndication

Abstract

Using the VC industry as a laboratory, we investigate whether incidental in-person interactions between people working in close proximity facilitate their future collaboration on projects of significant economic value. Our analysis exploits urban topological features surrounding VC fund offices that generate exogenous variations in the likelihood of incidental in-person interactions. We show that such variations influence syndicate partner choice among VCs within narrowly defined (walkable) geographic zones. Working-from-home during the COVID-19 Pandemic appears to negate such effects. Weather patterns that exogenously restrict VC fund managers' outdoor activity are also shown to moderate the role played by incidental encounters. Our results cannot be explained by VCs' characteristics, prior relationships, and portfolio firms' locations. Finally, syndicated deals driven by in-person interactions do not appear to generate superior returns.

Keywords: Venture Capital, COVID-19, WFH, Lockdowns, Social Finance, Peer Effects, Syndication, Knowledge Spillovers