Over the last year, the pandemic upended many industries, prompting businesses to pivot quickly to enable a fully virtual everything, from workplace to marketplace to nearly every aspect of life. Even the legal profession, which historically has been slow to adopt technology, is now starting to catch up to other industries by embracing digital transformation. The results in the startup world have been similar to those seemingly everywhere else. In-person meetings have been scrapped in favor of virtual meetings. Travel has been replaced by videoconferencing. Paper has been replaced by bits and bytes. While the tech industry is starting to return to normal, how much the new normal will be like the old is still an open question. At the same time, increased reliance on technology is changing the trajectory of virtual deal-making.

The rapid virtualization of many business functions has had a number of unintended consequences. On the one hand, for startups and investors, virtual deal-making has become commonplace, which has changed the dynamics of raising capital and investing. One startup CEO noticed that compared to pitching in person, virtual deal-making had a heightened focus but found that “it allowed for more robust conversations and data sharing over a shorter period of time.” This pattern has been common since COVID-19 pushed so many meetings into cyberspace, but it also particularly complements high-resolution fundraising, allowing startups to connect quickly with more investors than ever before.

By driving faster connections and more pitches, these virtual meetings seem to be working well for the industry. Despite the pandemic, 2020 was a banner year for venture capitalists, with a record-setting $130 billion invested in over 6000 deals.

But on the other hand, virtual deal-making has some significant drawbacks.  Many people across all industries are tired of videoconferencing.  We even have a genericized term for that now: “Zoom fatigue.” As Stanford University noted, virtual meetings face significant challenges compared to in-person meetings, specifically relating to cognitive load, a lack of movement, and too much screen time.

Where will the industry go from here? As businesses open up more and travel becomes more normalized again, in-person deal-making will probably stage a staggered return. Many people prefer them, so they will always be good fits for some. But given the changes in the past year and the benefits that many saw from faster pitch cadences, startups and investors will probably continue making deals virtually, almost certainly more than they did back in 2019 and prior, which leaves a big question about addressing the challenges of virtual meetings.

Companies have delivered annual and quarterly financial returns with a largely steady topline and bottom line benefiting from elimination of the travel and entertainment budget. With the economy returning to work, spending on travel and entertainment will return, but at what pace and in what quantum? Will cost savings be retained when growing the topline with a workforce back at full capacity?

I’ll end with one possible (and admittedly speculative) solution, at least in part.  For many years, dating back at least to the 1990s and the early days of stereoscopic video games, virtual reality (VR) has been touted as the next big thing.  And yet, even the 3D-television craze several years ago and the rampant interest in VR headsets has not led to significant adoption. While we may see VR find a place in high-level business meetings, augmented reality (AR) appears better positioned to make significant inroads.

New augmented reality technologies that enable meeting participants to not only see each other and share documents, but immersively view, manipulate and interpret data together in an augmented, three-dimensional or phygital world, could be a game changer. For a sneak view of what an augmented reality, augmented data analytical world would look like, check out what our friends at Flow Immersive are building here, or the “phygital” worlds built for clients of Double-A Labs.

AR could enable virtual meetings while also providing more natural interactions than staring at a screen would allow. Maybe bridging the gap between the virtual and real worlds would be enough to address the fatigue that so many feel with virtual meetings.

The ability to have more natural interactions with clients, business partners, investors, and lawyers without the cost (or risk) of travel could be a major deciding factor to pushing AR meetings into the mainstream. A number of companies are working on related technologies, so the question is who will make it work first. Maybe someone will come up with an entirely different and vastly superior solution. Time will tell.

Louis Lehot is an emerging growth company, venture capital and M&A lawyer at Foley & Lardner in Silicon Valley.  Louis spends his time providing entrepreneurs, innovative companies, and investors with practical and commercial legal strategies and solutions at all stages of growth, from garage to global. He focuses his efforts on technology, digital health, life science and clean energy innovation. Louis’s clients are public and private companies, financial sponsors, venture capitalists, investors and investment banks, and he has helped hundreds of companies at formation, obtaining financing, solving governing challenges, going public and buying and selling. Louis is praised by clients, colleagues and industry guides for his business acumen, legal expertise and leadership in Silicon Valley.