- Globally, VC backed companies raised almost $62.9 Bn funds across 4,502 deals for Q2 2020.
- It is expected that many VC investors will remain highly focused on their existing portfolio companies.
- An uptick in investor interest is expected towards the companies which will be responding to “new normal”.
KPMG Private Enterprise recently shared its Venture Pulse Q2 2020 report. The report provides a great insight into the global and local venture capital industry. In this article, we have provided a super-condensed and summarized version of the major trends, challenges and opportunities in the global venture capital market for Q2 2020. You can read the KPMG report here.
Globally, venture capital-backed companies raised almost $62.9 Billion funds across 4,502 deals for Q2 2020.
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Covid-19 and Venture Capital Market
The ongoing global pandemic affected every sector and every industry in the world. Challenges associated with Q2 2020 remained as – travel restrictions, increased unemployment rate, lockdown across major cities, economic slowdowns and full with economic uncertainties.
The number of global venture capital deals for Q2 2020 was 4,502, which drastically less as compared to the previous period. However, the good part remained that almost $62.9 Bn got invested across VC funding spectrum.
VC funding remained majorly concentrated in the late-stage business opportunities that were more stable and mature operations with visible cash flows. Even the Limited Partners were more comfortable in committing to proven managers and/or existing relationships in the current climate. Later stage deals saw better pre-money valuations as compared to seed-stage deals.
Early-stage VC deals saw a significant decline in Q2 2020, which is expected to continue in the near future. Due to pandemic and the US presidential elections in November 2020, VC investors that supposed to have exits via Initial Public Offerings in 2020 have delayed the plans to 2021.
Cautiously Optimistic VC Investors
By H1 2020, the global fundraising activity remained well ahead of last year’s numbers. Experienced investors focused on the better long-term risk-adjusted returns as compared to short-term blips of economic slowdown and Covid-19.
Geographically, the US and Europe have shown more resilience in Venture Capital investment as compared to broader economic trends. For Q2 2020, Asia remained relatively softer in VC investment.
As compared to IPO, Merger & Acquisition played a better role in the exiting process of venture-backed businesses and achieving liquidity.
Opportunities in Local Market
For H2 2020, Venture Capital investments remained somewhat buffered as the completion of VC deals usually consists of long lead time. Probably, the true picture of resilience of the VC market will be shown in the deal/investment numbers going forward in Q3 2020.
Over the next few quarters, many VC investors are likely to focus more on local market opportunities due to international travel challenges and pandemic uncertainties. It will negatively impact the countries that depend on international VC funding.
It is expected that many VC investors will remain highly focused on their existing portfolio companies, assessing the impact of current uncertainties and making sure to make liquidity adjustments for follow-on funding rounds and probable delayed exit plans.
VC investor community is expected to see an uptick in investor interest towards the companies which will be responding to “new normal” such as remote working, e-commerce, and health and biotech.