How Investors and ESOs Can Adapt to Post-Pandemic Digitization

This blog post is a summary of the AtA 2021 panel, “Fundraising: The Future is Digital” featuring Andrea Monti (Hatch CoLab), Jim Bair (Baraka Impact Finance), and Srinivas Ramanujam (Villgro Innovations Foundation).

The recent global pandemic has accelerated the digitization of investment and entrepreneur support initiatives across the globe. Investors are scrambling to adapt to the “new normal.” They’ve switched their primary communication methods to video calls. They’ve broadened their market scope as more and more entrepreneurs become comfortable pitching ideas over the internet.

The digitization of investment has impacted three main areas of the funding process:

  • Building relationships with founders and teams
  • Analyzing data and conducting due diligence
  • Leveraging existing relationships within the investment ecosystem.

Is Digital Investing Here to Stay?

Many CEOs and leaders are wondering whether the investment ecosystem will return to “normal” once the pandemic subsides. Experts, however, predict digitization is here to stay. Expect Zoom calls to become the norm as in-person meetings are reserved for truly special occasions.

The reason for this shift isn’t simply because investors will “get used to” digital communication. Sticking with digital communication has financial and social benefits as well. For example, why should an incubator spend $20,000 flying people across the globe to determine whether they want to award a $50,000 investment? Cutting out travel also provides opportunities to small entrepreneurs who are not able to leave their families or communities for extended periods of time.

Opportunities Created by the Digitization of Investing

Investors are experiencing numerous benefits to digitization such as:

  • Investors have increased access to new startups across the globe.
  • Funding turnaround might quicken as “transactional relationships” become more commonplace.
  • Organizations can cut down on administrative and travel costs.
  • Organizations can recruit top-quality talent through remote working agreements.
  • The internet-fuelled boom in education is producing highly qualified entrepreneurs and founders who can build value for investors.

Issues Related to the Digitization of Investing

Investors should weigh both the pros and cons of digitization before adopting a new communication strategy:

  • Trust is harder to build over digital communication.
  • Due diligence may become more difficult without on-site walkthroughs and in-person product demonstrations.
  • The gap might widen between the haves and havenots in the entrepreneur space. Data has shown that during the pandemic, startups with an established product grew while startups trying to bring a product to market fell behind.
  • Investors may exhibit biases against those who don’t come from the normative cultures of major financial hubs. For example, many new entrepreneurs might not know the “New York way” of speaking or conducting business. 
  • Investors who have a presence in a local market will face more competition from global competitors.

The post-pandemic world will provide ESOs with incredible opportunities to enact social change and support global entrepreneurs. But with these opportunities come potential dangers. Adapt strategically in order to maintain competitive advantage, financial transparency, and social consciousness. 
For more resources on social investing, ESOs, and Accelerators, head to Conveners.org and our Accelerating the Accelerators resources