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The very fact that MedCity INVEST – a conference typically held in a high-end hotel – is taking place entirely online in 2020 illustrates the extent to which the Covid-19 pandemic has made so much of daily life virtual. VCs

But just as social distancing generally has reminded everyone of the importance of real contact with real people in daily life, it has done the same with regard to the kinds of delicate work venture capital investors must do when deciding where to send their cash.

A panel discussion Thursday during INVEST, “Trends and Investment Strategies During Covid-19,” assembled Maverick Ventures Managing Director Ambar Bhattacharyya; Flare Capital Partners Partner Dan Gebremedhin; Dipa Mehta, vice president for corporate ventures and innovation at Advocate Aurora Health vice president for corporate ventures and innovation Dipa Mehta; and Elise Miller Hoffman, principal for Life Sciences Funds I and II at Cultivation Capital. Dennis Depenbusch, director of new ventures initiative at Blue Cross Blue Shield of Kansas, served as moderator.

One important aspect of venture capital investment that the pandemic as affected is due diligence, in particular by making in-person meetings all but impossible. On the one hand, Gebremedhin said the transition to working from home and remote diligence had been “fairly seamless,” and Bhattacharyya agreed, noting that his firm had already made multiple “Zoom-only” investments.

“The process at first seemed like a huge first step,” Bhattacharyya said, referring to the challenge of figuring out how to perform due diligence without meeting entrepreneurs in person. The hardest parts, he said, included the inability to get a sense of a company’s culture over Zoom. “That gave us some differentiated insight – what’s in the copy room and what’s not, what happens at the town halls,” he said.

He added, “Trust is the coin of the realm in the investor-entrepreneur relationship.”

Perhaps surprisingly, that relationship taking place entirely online has also led to increased interaction. Where Maverick had once made bi-weekly checks on companies, they were now taking place weekly.

Along with changing the approach to diligence, the pandemic has also driven rapid adoption of technologies that previously had not received as much attention, notably telehealth.

“I’m of the opinion that the coronavirus and the pandemic didn’t necessarily create new opportunities per se; it just catalyzed the things that were already there,” Gebremedhin said. He noted that telehealth had already been around for a couple of decades, but had seen low levels of utilization. Now, with many patients unable to visit brick-and-mortar medical offices, along with regulatory changes, telehealth’s usage has increased drastically, he said.

But just as the shift to video-only interaction in due diligence has caused new limitations and challenges to arise, the transition to telehealth has had the same effect.

“How do you have tough conversations over telehealth,” Mehta asked, pointing to the importance of providers developing their “telehealth bedside manner” and being “able to get the same effectiveness they would get in that in-person care and do it over telehealth too.”

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Source: How are VCs performing due diligence when they can’t meet startups in person?

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