Risk and resilience: pandemic-induced shifts in VC syndication

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This paper examines venture capital (VC) syndication strategies employed to mitigate the risks of the COVID-19 pandemic, particularly in strong versus weak institutional conditions. This study utilizes a comprehensive dataset of 41,008 VC deals across 74 economies between 1 January 2018 and 30 June 2022. Using a multi-level mixed-method approach, we demonstrate that during the COVID-19 pandemic VCs avoided syndication as a risk-mitigation strategy in seed and early-stage VC investments particularly in regions with strong legal frameworks where syndications were more common pre-pandemic. However, the tendency of VC investors to avoid syndication under heightened risk was moderated by founder-CEO leadership; VCs selectively embraced syndication in founder-led firms. The novel contribution of this study is that while VC investors typically avoided syndications to mitigate agency risks in high-risk settings, during the pandemic they instead rallied around founder CEOs – viewed as risk buffers – in syndicated deals, a strategy previously observed in early-stage and emerging market investments. The study also reveals that VCs avoided investment in larger deals during the COVID-19 pandemic, consistent with efforts to mitigate risk.