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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.

Pelosi announces bid for re-election ahead of 2022 midterms

House Speaker Nancy Pelosi (D-Calif.) announced her bid for re-election Tuesday, amid a deluge of other safe-seat Democrats announcing their retirements.

Why it matters: Pelosi’s announcement follows months of speculation — despite her denials — that she was preparing to leave Congress.

Scoop: Qatar emir to visit White House on Monday

The emir of Qatar, Tamim bin Hamad Al Thani, leaves the White House after meeting President Trump in 2019. Photo: Nicholas Kamm/AFP via Getty Images

The emir of Qatar will meet with President Biden at the White House on Monday to discuss Afghanistan as well as contingency plans to provide natural gas to Europe in the event of a Russian invasion of Ukraine, Axios has learned.

Why it matters: Europe's reliance on Russia for 40% of its natural gas is undermining Biden's attempts to coordinate "massive" sanctions to be imposed from both sides of the Atlantic if Russia invades. The White House wants Qatar to help ensure European countries can enforce tough sanctions without risking an energy crisis.