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We asked over 150 VCs if they are doing remote deals. Here’s what they said.

If you’re a founder or a fellow VC, chances are you’ll be asking your self, “Are VCs really open for business?” As a notoriously networked trade, startups and VCs haven’t been spared the challenges of going distant. VC-founder relationships are sometimes multi-year endeavors, and getting the connection fallacious can have excessive stakes for each events. While many people within the VC world have come to the belief {that a} massive portion of our jobs will be achieved remotely — together with pitches, diligence, networking and occasions — difficulties proceed to come up in fostering new deep relationships over video, and understanding crew and office dynamics.

In June 2020, three months into the pandemic, we got down to learn the way VCs are working in a distant world. We surveyed over 150 VC companies, spanning the US, Canada, the UK, and Europe. We additionally checked out completely different phases (pre-seed to progress) and funding types (lead vs. comply with). The survey was utterly nameless and was despatched on to particular person buyers by members of our crew. We got down to reply the next questions:

  • Will VCs do absolutely distant offers, and beneath what circumstances?
  • What sorts of VCs are main the way in which on distant offers?
  • Has the funding course of modified, and if that’s the case, how?
  • How has dealflow been impacted by COVID-19?
  • Have VCs modified the way in which they’re spending their time?

As we proceed to grapple with COVID-19, it’s doubtless that VCs would require some adaptation in the way in which we work for the foreseeable future. As such, we’re sharing our findings to contribute to the collective studying in our trade and to assist us all adapt to the “new normal.”

Here are a few of our findings, consolidated throughout all geographies and deal phases. But maintain scrolling down for extra key findings.

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(You can discover breakdowns for the above questions by stage, geography, and agency sort here.)

More key findings

Over the span of a full quarter, over 50% of VC companies didn’t do a distant deal. While this might recommend total Q2 2020 VC funding could be dramatically decrease than earlier years, the info is prone to be messy. There was inevitably excessive deal exercise regarding offers already in progress previous to COVID-19, follow-on financings in portfolio firms, unannounced offers, or financings in firms that companies have beforehand met in individual. Given the time lag from preliminary dialogue to deal being achieved, we’ll look to Q3 and This autumn as the actual indicator of the impression of lockdown.

Many VCs are nonetheless attempting to determine what a distant deal will appear like for them — however it looks like most are searching for familiarity. It was shocking that VCs haven’t reported altering their funding methods as a lot as we’d have thought, resembling writing smaller checks, and investing at completely different phases, however as an alternative are specializing in supplementing their distant diligence with their community from pre-COVID. The knowledge suggests that almost all VCs are opting to favor firms they’ve beforehand met in individual, doing extra reference calls, and having pleasant VCs already on the cap desk.

We have been shocked to see that greater than 20% of companies have reported a rise in deal exercise. But most of those VCs are comply with companies, indicating that rounds could also be having problem closing/filling the subscription quantity.

The reality that almost all of VCs reported some stage of decline in deal circulate (between 25–50%) would recommend there’s a dwindling provide of firms formally going to market — as many firms opted to increase runway, bridge to their subsequent financing, or strategy VCs the place they’ve an current relationship.

Overall, VCs are spending their time otherwise. Diligence is prone to take longer, as most companies have applied three or extra processes with a view to do distant offers. “Portfolio triage” is way from over; VCs are unanimously spending extra time on portfolio firms, particularly at later phases.

Other attention-grabbing takeaways embody:

  • 40% of companies confirmed they’ve already achieved a totally distant deal because of restrictions put in place attributable to COVID-19.
  • Early-stage companies are 11% extra prone to have already closed a distant deal than later stage companies, with 47% already having achieved a totally distant deal.
  • US companies have been 18% extra doubtless than Canadian, and seven% extra doubtless than European companies, to have closed a distant deal.
  • 49% of companies say their pipeline has held regular or elevated for the reason that begin of the pandemic.
  • However, deal circulate begins to differ on the subject of lead versus follow-on buyers. In reality, greater than half (56%) of lead buyers reported some stage of decline in deal circulate.
  • US companies have been 11% extra doubtless than European or Canadian companies to have seen a rise in offers for the reason that begin of the pandemic.
  • 42% of those that plan to do distant offers agree that it’ll require modifications to their current course of.
  • New processes applied for distant offers embody incorporating extra reference calls, giving choice to founders and groups they’ve already met in-person previous to the pandemic, spending extra time on diligence, prioritizing offers which have recognized companies already on the cap desk, and setting a better bar on traction/metrics.
  • “Portfolio triage” shouldn’t be over, with over 64% of VCs reporting spending extra time on their portfolio firms. As properly, given the extra processes, many VCs admit to be spending extra time on diligence

Note: We classed early-stage companies as Pre-seed, Seed and Series A, whereas later-stage companies are Series B, C, and D+.

Alyssa Spagnolo is an Associate at OMERS Ventures.

This story initially appeared on Medium.com. Copyright 2020

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