There will undoubtedly be aspects of the current pandemic crisis that mirror those of prior crises such as the dot-com bubble and the 2008 financial crisis. The downturn in public markets globally will naturally result in an adjustment to private markets, leading to lower valuations for fund raising, reduced deal flow and VCs focussing more on their existing portfolio companies, particularly those that may have short-term cash needs. Exits will obviously be more challenging leading to longer hold periods.
However, VC activity has not completely stopped. Some of this is driven by specific circumstances which can exist at any time - distressed sales, deals already committed or which are close to being finalised. For early stage companies, investment now may still make sense as even a relatively prolonged slow down could coincide with that company's product development phase.
The underlying nature, cause and impact of the current crisis is also very different to those aforementioned crises, and it remains to be seen whether, despite the very significant reduction in global economic activity, the unprecedented measures taken by governments around the world will stabilise public markets and adequately support vulnerable businesses. Much will depend on when the markets feel they have sufficient visibility on the current crisis to call the bottom and whether the recovery is expected to be much faster (or slower) than in 2008 when the entire financial system was thought to be at risk. All of these factors will shape the course of action that VCs will take in the short term and could result in a different deployment strategy relative to previous crises.
In addition, certain VC activity may actually be driven by opportunities driven by the current crisis. There may, for example, be chances to deploy capital to rapidly scale businesses that are positively impacted by the pandemic, such as health-tech and digital infrastructure.
So whilst there will inevitably be near-term caution, there remain a lot of VCs with capital and founders looking for funds to build their businesses.
Deals are still happening (more so where there are pre-existing relationships). This contrasts prior crises (July 1997, Spring 2000, September 2001, August/September 2008) when the venture markets ground to a halt as people recalibrated.