A Tale of Two Crises: Venture Capital Funding During the Global Financial Crisis and Covid-19 Pandemic

We examine the drivers of venture capital financing raised by companies in 162 countries over 22 years from 2000 to 2021, using a novel combination of two venture capital databases Crunchbase and Refinitiv (previously known as VentureXpert). We show that at the firm level companies raise less funding during the 2008 global financial crisis (GFC) and more funding during the COVID-19 pandemic compared to non-crisis times. These results hold at the aggregate level but with a larger magnitude. At the firm level, we find a small 0.18% decrease in firm-level funding during the GFC compared to non-crisis periods and an increase of 4.94% during the pandemic. At an aggregated level, total funding decreases by 3.01% during the GFC compared to normal times and increased by 11.51% during COVID-19. These results document the dynamic nature of funding patterns during times of crisis. While the GFC had a relatively modest effect on firm-level funding and a moderate decrease in total funding, the COVID-19 pandemic brought about notable increases in both firm-level and aggregated funding. Our findings highlight the importance of supporting businesses during times of disruption and the potential for innovation and growth in challenging circumstances. Our research provides new evidence on how venture capital funding is allocated between late-stage, early-stage, and seed-stage firms as well as amongst different economic sectors and markets during the GFC, COVID-19 pandemic and non-crisis times.