Bridging the Physical Gap in Entrepreneur-Venture Capitalist Dynamics in the Age of Social Distancing

Sun-Young Park, Shomit A. Ghose, Mark V. Cannice


The COVID-19 pandemic has led to a “physical gap” between startup entrepreneurs and venture capitalists (VCs) as traditional means of building relationships through in-person interactions have become more limited.To explore the venture capital process in the new environment of physically distanced communication from the perspective of entrepreneurs, we developed a survey based on foundational literature of trust building and entrepreneur-venture capitalist (E-VC) relationships and administered it in online survey of entrepreneurs actively engaged in the fundraising process. We were able to identify and assess the recurring issues expressed by 57 entrepreneurs from 11 countries who were seeking financing during the pandemic to understand the challenges they face and how they sought to surmount them. We found that while online communications have mitigated the geographical constraints in fundraising since the start of the pandemic, fundraising has becomemore difficult, and the key challenge has been building trusting relationships with VCs. To that end this research attempts to extend the literature of E-VC trust and relationship building from the in-person context to the physically distanced context. Practical implications of this research stem from our findings which suggest that to bridge the physical gap and form new relationships with VCs, entrepreneurs should increase their reliance on personal referrals to investors, emphasize their entrepreneurial team’s bona fides, and offer more detailed technical validation of their startup. Additionally, entrepreneurs should provide more frequent status updates and seek more frequent feedback to maintain existing relationships with their investors. Given that forms of virtualized business may define our new reality, the insights and strategies identified may provide guidance for entrepreneurs, their venture investors, and managers in other virtualizing industries where physical gaps must be bridged.