The reallocation effects of COVID-19: Evidence from Venture Capital Investments around The World

We examine the 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 aggregated at country and sector level, we empirically document a shift of venture capital towards pandemic-related deals. A difference-in-differences analysis estimates significant increases in invested amounts, number of deals, and proportion of funded deals in such categories. We highlight heterogeneous 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.