Investors are turning to remote-only meetings to combat COVID-19, which was officially declared a pandemic yesterday.
The novel coronavirus is already spreading via community contact in the Bay Area; an employee of South Park Cafe, a popular hub for techies and venture capitalists run by the credit card startup Brex, tested positive this week. The spot is a few hundred feet from a number of high-profile venture capital firms, including Kleiner Perkins.
But for many remote-friendly venture capitalists, making deals remotely is business as usual. We caught up with a few investors to learn how they make virtual dealmaking work for them, including its impact on their deal flow and portfolio diversity.
Founding partner of the W Fund Kate Brodock warned investors to not “devalue the process.”
“In-person is always ideal, but video still allows you to get a close-to-complete sense of the person in front of you — everything from facial expressions to body language to how they organize their desk,” Brodock said. “Making meaningful and informative connections through video is entirely possible.”
Turner Novak, a general partner at Gelt VC, has opted for a remote-friendly investment cadence since day one. He invests out of Ann Arbor, Mich.
When Novak was just starting out as a venture capitalist, he said he “had a lot of pushback from VCs that you can’t be remote, you have to meet people in-person and have boots on the ground.” Out of 14 investments he has led, Novak said 12 were completed before ever meeting the company in person.
Novak said he thinks remote investing may have disparate impacts on companies of different stages.
“I invest at a pretty early stage, so those companies it is typically okay to not spend a ton of time meeting people as there’s not as much to go on,” he said. “The further you are in a company lifecycle, there’s way more moving parts.”
Late-stage companies require a heavier lift from investors, due to the sheer amount of due diligence required. It’s a different process when evaluating a startup with two co-founders and a beta product, versus a robust company that’s looking to raise its Series D.
Novak said 66% of the capital he has deployed has gone to female founders and 45% has gone to non-white founders. These statistics are higher than most venture capital firms, and he credits his success in part to working remotely.
“It helps you find people outside your existing network,” Novak said. “It’s not like I go to an event and I meet with people in my network. It’s more like, I saw a really cool post on ProductHunt and it doesn’t matter who did it, I just want to talk to the person who built it.”
Sharon Vosmek, managing director of the Astia Fund, also mentioned the benefits of videoconferencing on portfolio diversity. As Astia reviews companies, it turns the video camera off for the first three meetings.
“Think of it as a little like ‘The Voice,’ ” Vosmek said, referring to the televised singing competition that uses blind auditions to find talent. “It’s a perfect example of what we’re trying to do…we don’t want you to know gender, race, size, physical component. We do, however, want you to hear thoughtfully what the company is pursuing in the form of the market,” she said. Astia has done more than 120 investments to date.
Vosmek and Novak are two of the many investors who have gone remote from the start, which means for some venture capital firms their workflow is remaining largely unchanged through the outbreak.
“We have almost exclusively done Zoom pitches since the beginning of this fund, because 70% of our portfolio companies are outside of the Bay Area,” said Elizabeth Yin, a partner at pre-seed VC firm Hustle Fund. She added that her firm wanted to be “consistent in how we invest in companies,” so it sticks to video-conferencing pitches for all potential portfolio companies.
Not all investors are moving to remote just yet, however.
Kleiner Perkins is monitoring the outbreak and advising folks to go remote as much as possible, but has not yet made it mandatory to work from home, the firm told TechCrunch. In the past, KP says it has done at least one smaller early-stage investment virtually, but it isn’t the norm.
Contrasting to the investors above, Geoff Lewis, the founder and managing partner of Bedrock, disagreed with the sentiment that remote investing works well.
As time goes on, we’ll continue to track this shift and what new techniques emerge for investors to best make deals. Cindy Bi, an early-stage investor since 2011, said that even if the virus is contained, investors should slowly try to adopt remote-friendly practices.
“They cannot hold off because they don’t know how long this can last,” she said. “Coronavirus is the trigger. Even with this trigger, remote-only is the future.”