Coronavirus pandemic | Jet-setting VCs settle down for a more ‘grounded’ reality

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In 2019, a partner at a venture capital fund used the airline miles he had accumulated over the years to book tickets for a summer holiday in Europe for his in-laws. For 10 years, the partner travelled four days a week domestically and was abroad, mostly the US or China, once in a quarter at least.  

Such plans will be much more difficult to pull off in a world hit with the coronavirus that has restricted people’s movement and virtually put a stop to air travel in most parts of the world.

Almost every senior venture capitalist in the country is a platinum member of Inter Miles, earlier known as Jet Privilege (when Jet Airways was running), or Air India’s Flying Returns, with both memberships allowing fliers to accrue points even when travelling with partner airlines globally. 

Venture capitalists recount running into each other or startup founders at airports, discussing terms of a deal minutes before taking off. They also recall instances of “hustle”, the catchall term for being at the forefront of the hottest deals. 

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Investors are realising that while the coronavirus outbreak forced them to stop travel and work online, even if they have a choice in the future, they may not travel as much.

Productivity apps such as Slack, Zoom and Hangouts were used earlier as well but on the sidelines. Now, they have become the lifeline for companies and investors alike, and in some cases, a long-term substitute.

“Even once travel becomes safe, I suspect more meetings will be done over the video, especially portfolio updates and initial screening meetings for new investment opportunities,” said Tarun Davda, managing director at Matrix Partners, an early-stage fund.

It wasn’t uncommon for investors to be on the shuttle between flights and hotels for four days a week, catching up with investments, meeting new founders, fellow investors, backers of their own fund (limited partners) and investment bankers.

“Honestly, now I wonder why I travelled so much. I definitely won’t do that anymore,” said a partner at a top fund, requesting anonymity.

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The game of expectations

COVID-19 and the lockdown it brought have changed expectations of both, the founders and the investors, a key equation in the startup ecosystem. 

Many investors travelled on their own accord to network and strengthen contacts but it was also because an entrepreneur meeting multiple investors would not take a deal from the VC who didn’t fly down to meet him or her, or indicated, even unintentionally, a lack of interest.

“Today I can say I will travel less because the expectation has changed. The founder will not think the investor does not care, or trust him,” said an early-stage investor, who did not want to be named.

“Everyone today is realising they could reduce travel in the long term. So, the trust factor was very important to our travel plans earlier.” 

Deal-making evolves

The virus has also forced investors to innovate deal-making on the go. 

Eight investors Moneycontrol spoke to said they have to meet a founder in person at least once before investing in the company. Beyond the pitch deck and numbers, meeting a founder gives insight into their vision and personality, unmatched by other mediums of meeting, they say.

But travel restrictions have made VCs rely on reference checks more than ever along with their gut feeling. 

“Spotting verbal or non-verbal cues on a video call isn’t easy. We are looking for multiple reference checks, more than before, and the reference has to have some degree of independence. The company’s existing investor, for example, won’t likely hang a founder out to dry,” the person cited above said.

To be sure, investing is a business that will always have some amount of travel, especially because it is relationship-driven and in some cases, may need physical verification of firms and assets.

“We are in a people-centric business at the end of the day. So we will have to travel to build enough comfort to write new cheques and do due diligence,” said Davda of Matrix Partners.