Venture Capital during an economic downturn How VC firms operate during the covid-19 crisis

University essay from Göteborgs universitet/Företagsekonomiska institutionen

Abstract: This study aims to investigate how Venture Capital firms are influenced by the economiceffects caused by the covid-19 pandemic, particularly how the screening and investingprocesses, as well as the management of the portfolio companies are affected. A qualitativeresearch methodology was applied where semi-structured interviews were conducted withVenture Capital firms situated in Sweden. A generalized outcome from the Venture Capitalfirms concludes that the screening processes are taking longer, there are fewer newinvestments and the management of the portfolio companies is more active, there is in otherwords a more frequent communication between Venture Capital firms and their portfoliocompanies.The active management of portfolio companies also consists of forming strategies to copewith the new situation, cut costs and establish new financing. Further, the study shows that afew of the VCs are well-positioned to continue investing during covid-19 and aim to makefavorable investments due to lower valuations on startups. What distinguishes these VCscompared to the rest is access to capital and forward-looking investment strategies wheresubstantial funds are allocated to follow up investments of portfolio companies.

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