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44 CERTIFIED MANAGEMENT ACCOUNTANT

directed toward many innovations and formal research has been conducted for and the impact on venture capital
methodologies in the capital market and this study. The author used descriptive investment due to the continuing
digitalization of the business that will analysis to identify and re-assess critical uncertainty of the future .
benefit both the investors and issuers. analysis from different dimensions
SMEs can reduce inequality among of VC. The outcome of the study can 5. The New Dimension
the society and enhance the economic enlighten the existing literature review
growth of the country (Lambert, 2017). in VC and SMEs. in the Venture Capital
The investors and entrepreneurs shall Investment
align together in the best interests of the 4. Changes in the
VC market. Venture capital investment has been
Venture Capital reduced in the global market, whereas
The top brand companies such as investment in the domestic market
Amazon, Apple, Facebook, Google, Investment Activity has increased due to funds diverting
Intel and Microsoft started with the from foreign market to the local
support of VC in the early stages of The COVID-19 pandemic has impacted market. Due diligence engagement
their businesses. All the companies are the entire operation of the world, has also been affected due to the
developed with innovative ideas on including venture capital investment. reduction of face-to-face discussions.
the market (Gompers, Gornall, Kaplan, The venture capital investors have not The seed venture capital investment
& Steven, et al. 2021). VC shall be a key assessed the real impacts of the global has continuously declined due to the
element for economic value, and is pandemic. COVID-19 has created less investors looking for well-established
considered as a viable financial model momentum in the investment pool and and matured companies for their
with the proficiency of escalating access extra risk aversion (Sabadell, 2020). investments. However, the new investor
to finance for the growth of SMEs. VC is The venture capital investment activity is more concerned about the portfolio
an alternative source of financing and has been reduced on a global scale. valuations when the valuation of the
equity, and fulfills the gap generated The small and medium businesses matured company is declining due
in the financial market by conventional have been halted in the second half to COVID-19. The Initial Public Offers
lending institutions. of the year 2020, and most of the
businesses have been liquidated due (IPO), mergers and acquisitions are also
VC assists in financing the innovation to the COVID-19 impacts. Investors delayed in the global market. The cross-
and creativity of businesses, the overcome this by extensive monitoring border venture capital investment
academics, and practitioners which and control procedures (Kaplan and has declined in the second and third
has drawn more attention. The impact Stromberg, 2001). In this context, VCs quarters of 2020 (Sabadell, 2020).
of the COVID-19 in VC on SMEs is three have increased their monitoring and Global travel restrictions have created
times higher than the global financial are more concerned with portfolio re- a vacuum in venture capital investment
crisis (Block and Sandner, 2009). VCs evaluation due to COVID-19 impacts. for SMEs. Therefore, venture capital
have described “COVID-19 as the Black During shocks and crisis in events, levels investment has increased in the
Swan of 2020 and the global VC market of uncertainty escalate at such velocity domestic market.
was completely locked up”. In this that their impacts become highly
context, the pandemic has changed VC debilitating for entrepreneurs and 6. Venture Capital
perception and attitude in the global entrepreneurial actors such as banks
business environment. and investors (Block and Sandner, Investment Activities
2009; Conti et al, 2019; McMullen and for SMEs under
3. Methodology and Shepherd, 2006; Packard et al., 2017). COVID-19
More
investors
distressed-oriented
Research Methods can enter the market and create an
unhealthy business environment due SMEs are looking for prospective
The research objective is on the impact to the downward valuation with less investors and VCs can perform the
of the COVID-19 on VC in SMEs from traditional investors in the VC market. following activities under COVID-19
a critical perspective. The empirical COVID-19 has created more negotiable context.
study will confirm the existing literature power for VCs due to the low flow
review of VC in SMEs based on proper of investment to SMEs.VC has been 6.1 Startups and Supportive
explanation of the research findings. A changed in the paradigm from offline VC is requested to start up businesses
critical perspective of VC in SMEs in the to online globally. VCs are positioned and most are ready to invest in it.
COVID-19 context is based on secondary in the digital ecosystem. VC is mainly Nevertheless, on this premature period,
data such as published journals, books, from foreign investment, and it has it is difficult to forecast the achievement
website searches, and articles. The been decreased due to the closure of of the business. Liquid cash and seed
author of this study has been working international borders. capital are requested at the early stage
in Papua New Guinea for the last 13 of the business. Therefore, the risk of
years and has used his knowledge Starting up of business of the SMEs have investment to be written off due to the
and experience widely on the subject been delayed due to the unfavorable uncertainty of the COVID-19 impacts is
matters to write this research. No situation existing in the business world higher.
www.cma-srilanka.org | Volume 06 - No. 2 - September 2021