Invest Local or Remote? The Effects of COVID-19 Lockdowns on Venture Capital Investment Around the World

We find the “death of distance” in venture capital (VC) investment caused by the COVID-19 pandemic: VCs invest in more distant startups during the COVID-19 lockdowns, and such effects continue after the economy reopens. The death of distance is more pronounced when there is better internet infrastructure, lower information asymmetry between VCs and entrepreneurs, and smaller deal size. The pandemic-spurred advancement and adoption of remote communication technology contribute to the documented observations. The death of distance in VC investment implies more vibrant entry of outside VCs into geographically localized markets, intensified competition among VCs, and mitigated regional inequality of entrepreneurial access to VC financing. This paper was accepted by Will Cong, finance. Funding: P. Han acknowledges financial support from the National Natural Science Foundation of China [Grant 72103003]. C. Liu acknowledges financial support from the National Natural Science Foundation of China [Grant 72202034]. X. Tian acknowledges financial support from the National Natural Science Foundation of China National Funds for Distinguished Young Scientists [Grant 72425002]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.04374 .