The times they are a‐changin’: how venture capital firms change their investment practices under the COVID-19 pandemic

Matteo Ambrois (), Vincenzo Butticè (), Annalisa Croce (), Luca Grilli () and Elisa Ughetto ()
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Matteo Ambrois: Politecnico Di Milano
Vincenzo Butticè: Politecnico Di Milano
Annalisa Croce: Politecnico Di Milano
Luca Grilli: Politecnico Di Milano
Elisa Ughetto: Politecnico Di Torino, Corso Duca Degli Abruzzi

Small Business Economics, 2025, vol. 65, issue 2, No 8, 893 pages

Abstract: Abstract This study examines how venture capital (VC) firms have modified their short-term investment practices in response to the COVID-19 crisis. We categorise VCs’ investment practices according to their level of visibility to external parties and hypothesise that unobservable investment practices are more likely modified than observable ones, since VC firms must comply with the objectives stated in their contracts with limited partners (LPs), and deviations may be viewed negatively by investors. Changing investment practices may have a negative impact on a VC firm’s reputation, but this potential reputational damage could vary along with the reputational capital already possessed by the VC firm and its degree of exposure in a VCs’ network. An empirical analysis based on a global survey of VC firms confirms these theoretical presumptions, shedding light on how the industry operates and responds to unique crises such as the COVID-19 pandemic. Specifically, younger and smaller VC firms are found to be more reluctant than larger and older ones to modify observable investment practices. Similarly, VC firms that are more central in a network of investors are also found to be more hesitant to modify observable investment practices.

Keywords: Venture capital; COVID-19; Start-ups; Investment; Investment practices (search for similar items in EconPapers)
JEL-codes: G01 G24 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11187-025-01010-9

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