Friday Letter: OMERS Ventures peeks under ‘Open for Business’ hood

The venture arm of the Ontario Municipal Employees Retirement System reveals in a survey of 150 worldwide investors how dealmaking has changed as a result of covid-19.

Alastair Goldfisher

When the covid-19 pandemic forced lockdowns and shelter in place orders in March, I began talking and emailing with investors to see how they were getting along.

A common refrain I heard and continue to hear is that even though everyone is working from home, they are all “open for business.”

Despite the positive attitudes of the GPs and LPs I chatted with, anecdotally it seemed to me that the pace of new deals has slowed. No doubt, as Q2 data starts coming out this month, we should get a clearer indication of how venture activity worldwide has responded to the coronavirus and the economic slowdown.

Meanwhile, OMERS Ventures decided to put that notion to the test. How open for business are venture firms?

Last month, OMERS Ventures surveyed more than 150 venture firms in North America, the UK and Europe to glean how dealmaking has changed as a result of covid-19 and the shift in working from home that has taken place in the past few months.

Among the takeaways in its Remote VC report, OMERS Ventures found:

  • Deal activity in North America and Europe continues to maintain momentum, with nearly half of the firms saying their pipeline has held steady or increased since the start of the pandemic.
  • More than two-thirds (69 percent) of respondents said they are giving fully remote deals the green light, with 40 percent of firms confirming they have already done a fully remote deal as a result of restrictions put in place due to covid-19.
  • The current portfolios are getting more attention as 64 percent of VCs said they were spending additional time with their current investments than they normally would have.
  • Dealflow starts to vary when it comes to lead versus follow-on investors. In fact, more than half (56 percent) of lead investors reported some level of decline in dealflow.

More information on the study is available from a Medium blog post by OMERS Ventures.

It was interesting to note how the firms were getting by and their approach to remote dealmaking.

Overall, 40 percent of respondents said they have done a remote deal in recent months, with 56 percent saying they have not. Among the other 4 percent, some surveyed VCs said that they did deals with companies or entrepreneurs who they met prior to the pandemic or who the lead investor had previously met in person, so they didn’t count them as fully remote deals.

Also, the early-stage investors were more likely than their late-stage counterparts to have done a remote deal. And US firms are more likely than the other countries surveyed to have done a remote deal, thanks in large part to investors in New York who are ahead of folks from Silicon Valley when it comes to remote dealmaking, according to the survey.

I bring this up because I hear from US firms that no one is in a rush to re-open their offices. So the working-from-home situations currently in place will likely continue at least through the end of the year for most of the venture community.

Last month, I spoke with Michael Yang. When OMERS Ventures opened an office in Palo Alto 18 months ago, Yang came over from Comcast Ventures to lead the US operations as a managing partner.

Yang told me that the firm had done five deals since early last year and was closing in on a sixth. He also said they were looking at plenty of opportunities in proptech, healthtech, insurance and the future of work, and he was hoping to make two more investments the rest of the year.

When I asked Yang how he was developing relationships in a remote world over teleconferencing, he brought up social distance meetings and said he was due to have one. The OMERS Ventures study found that 22 percent of the respondents are finding a way to meet with potential deals in real life.

“It has to be done deftly and safely to minimize the risks,” he said. “And I’m seeing more of it take place.”

Let me know what you think. What are your thoughts on how working from home and covid-19 has impacted venture activity at your firm or at large. If you have news or views you’d like to share with me, I’d love to hear from you. You can reach me at agoldfisher@buyoutsinsider.com and I’m open to voice and video calls.