We examine possible reallocation effects on venture capital (VC) investment due to the spread of COVID-19 around the globe. Exploiting the staggered nature of the pandemic and transaction-level data, we empirically document a shift of venture capital towards deals in pandemic-related categories. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such categories. We further highlight several heterogenous effects related to the experience of VC investors, their organizational form, and country of origin. Our results underscore the link between the spread of the pandemic and the functioning of the VC market around the world.
The reallocation effects of COVID-19: evidence from venture capital investments around the world
BELLUCCI A;
2020-01-01
Abstract
We examine possible reallocation effects on venture capital (VC) investment due to the spread of COVID-19 around the globe. Exploiting the staggered nature of the pandemic and transaction-level data, we empirically document a shift of venture capital towards deals in pandemic-related categories. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such categories. We further highlight several heterogenous effects related to the experience of VC investors, their organizational form, and country of origin. Our results underscore the link between the spread of the pandemic and the functioning of the VC market around the world.
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BBFZ (2020) The Reallocation Effect of COVID19. CEPR CovidEconomics55.pdf
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