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Illustration: Aïda Amer/Axios

The venture capital industry successfully adjusted to the new normal, and even thrived, after an initial period of pandemic paralysis.

Why it matters: Many feared the crisis would wreck large swaths of startups. Instead, 2020 birthed a new cohort of companies shaping how we live and work in entirely new ways — especially since they matured during a period of societal shifts.

Flashback: On March 5 of last year, VC firm Sequoia Capital sent a memo predicting that COVID-19 "is the black swan of 2020" and that companies need to brace themselves and "question every assumption."

  • The firm didn’t necessarily recommend drastic moves or layoffs, but did issue a strong nudge to "reassess," according to partner Roelof Botha.
  • "It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained," Sequoia wrote. "It will take even longer for the global economy to recover its footing."

Reality check: The black swan swam on by.

  • "I think what couldn’t have been predicted is the swiftness and extent of the government response," Botha tells Axios.
  • "Consumer pocketbooks were lined way better than we assumed. ... People have money so we see it in the [Square] Cash app and we see it in the [Square] seller business," adds Botha, who's on the fintech company's board.

By the numbers: Venture capital investing had a record year (more than $130 billion), besting even the height of the dot-com boom, per the MoneyTree report.

  • However, the number of deals (6,305) didn't reach the exuberance of 2000's 8,803 venture investments.

The new reality: VCs are continuing a lot of their pandemic-era "Zoom investing."

  • "Despite all the hoopla, I remain surprised by how normal deals felt after just a month or two of settling into remote processes," explains Inspired Capital principal Chris Brown.
  • Another byproduct has been deal-making velocity. Costanoa Ventures principal Amy Cheetham says that routinely, if she meets a company on a Thursday, she’s expected to make a decision by Monday.

Yes, but: The in-person element isn’t going away entirely — whether for due diligence or among VC firm colleagues.

  • "Being willing/able to travel to meet folks during the past few months (including internationally) was also a nice way to stand out on competitive deals," says Full In Partners managing director Elodie Dupuy. "Building a close relationship with entrepreneurs is the best way to win deals, and meeting them in person is the best way to do that."
  • Sequoia's team is still allowed to largely work from home, but Botha points out that the firm still values in-person brainstorming sessions. In fact, its "black swan memo" was born during one of them, he adds.

The bottom line: Venture capital braced for the worst, but instead got the best.

Go deeper

Dan Primack, author of Pro Rata
Jul 29, 2021 - Economy & Business

The mental health deal boom

Illustration: Sarah Grillo/Axios

The positive social media response to Simone Biles withdrawing from Olympic competition highlights how the artificial line between health care and mental health care is finally beginning to dissolve. And startup investors have taken notice.

By the numbers: Venture capital investments in mental health startups rose 72.6% between Q1 2020 and Q1 2021, per CB Insights.

Tina Reed, author of Vitals
4 hours ago - Health

FDA panel endorses shot of J&J booster for adults

Photo: Wolfgang Kumm/picture alliance via Getty Images)

Members of the Food and Drug Administration's vaccine expert panel on Friday unanimously endorsed a booster shot for adult recipients of Johnson & Johnson's COVID-19 vaccine at least two months after the initial dose.

Why it matters: The advisory committee raised concerns about a dearth of data to support their decision but ultimately decided to support an additional shot for those over 18.

Capitol Police officer indicted for obstructing Jan. 6 investigation

Trump supporters clash with police and security forces as people try to storm the Capitol on Jan. 6. Photo: Brent Stirton/Getty Images

A U.S. Capitol Police officer has been indicted on obstruction of justice charges for allegedly helping hide evidence of a participant's involvement in the Jan. 6 riot.

Driving the news: Officer Michael A. Riley, 50, is accused of telling the unidentified participant, referred to as "Person 1," in the Jan. 6 riot to delete posts from Facebook, which showed them in the Capitol during the attack.