Deal-making depends on people, connections, collaboration, sentiment, and confidence. All of these factors have been altered by the COVID-19 pandemic and inevitable lockdowns. In such an environment, VCs (venture capitalists) have half-heartedly embraced remote deals.
But remote deal-making is something all VCs need to become accustomed to. Many VCs have either had to cut off all deals or put them on a pause. Smart VCs, however, are cutting checks remotely and taking steps towards making remote deals work for them.
VCs are adjusting to remote deals
Social media giant, Facebook, is among the list of VCs that have successfully implemented remote deals with the coming of the coronavirus pandemic. Setting a new benchmark in dealmaking, Facebook’s $5.7 billion investment in Reliance Industries’ Jio Platforms saw a bulk of the active dialogue, including due diligence and agreement negotiations, happening remotely.
Traditionally, deals of this magnitude, especially cross-border ones, involve extensive travel and physical visits to offices and facilities by top executives.
Just like ANC Stock Investment Ltd, the ANC Demo was a nightmare for participating startups. The VC firm has had to embrace remote deal-making as it embarks on building its investment portfolio.
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Today, ANC’s momentum for the ANC Startup Accelerator program 2020 is on the rise as it sets the ground for the ANC Pitch Day with high expectations from both national and international stakeholders.
But it’s not all that rosy for remote deals
Most businesses have become accustomed to doing more electronically without the safety blanket of physical documents with red pen mark-ups, flagged and well-thumbed textbooks or policies strewn around their offices, and an adept personal assistant to rely on.
Meanwhile, any investor working on a significant deal during COVID-19 knows that ‘Zoom-fatigue’ is not fake news. The mental pressure of focusing on human faces on a screen, particularly amid a detailed technical discussion, is non-trivial.
For VCs, two widescreen monitors at home are now almost a ‘strict’ requirement. One, to view the speaker or what they are presenting and the other, to see the gallery.
Most VC firms have yet to actually execute a remote deal. And, there’s some indication that overall deal volume could be slowing.
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When COVID-19 began to shut down vast swaths of economies around the world, startups jumped into cost-cutting models to stay afloat the crisis. As expectations rose, a lot of startups had much believed to get their funding from venture capital firms but as the COVID-19 crisis intensified, it became clear that raising startup funds was never going to be a ride in the park.
Startups in the tech sector, in particular, are now finding it harder to attract new funds from investors.
Finance moves the economy
With the outbreak of COVID-19, lockdowns became the new normal. The stock market sold off and unemployment rose. Now, more than ever before, VCs are not only trimming the number of deals they make but also, the amount of money they are willing to put into each deal. So, startups should expect to see a decline in the amount of venture capital funding.
That, notwithstanding, investors would need to rethink their processes and do deals remotely if they must stay in the investment business.
COVID-19 has obliged investment banks and financial institutions to adopt new working practices. Those that have already taken steps towards digitalization have a distinct advantage.
Will deal-making look different?
The landscape may just look very different in the near future. Deal terms will undergo a revolution. More importantly, remote deal-making will be as popular as hand sanitizers and face masks.
This is what the future of deal-making looks like. The key, however, is being able to unlock the positive results of the work-from-home experience while managing the downsides it poses.
