How has the private equity/venture capital world held up during the pandemic? Private equity data provider Pitchbook is out with a brief view on the numbers. Overall, the picture is not as bad as some might have expected.

Venture Capital Investment

According to Pitchbook, venture capital (VC) investment is down in 2020 compared to 2019. Overall, investors put $63.2 billion into VC-backed deals, down from last year’s high $72.2 billion.

One has to remember that 2019 was a watermark year, and as such, one would have expected the market to let off some steam even if the pandemic had not happened. When comparing VC activity in 2020 to other years outside of 2019, VC-backed investing is still doing quite well.

Source: Pitchbook

Deal Flow

Shifting to deal flow, the picture is less positive. In 2019 at this point, there were 6,357 deals. In 2020, that figure dropped to 4,675. Unsurprisingly, deal flow slowed more sharply because of the mandatory stay-at-home orders, mask wearing, and other social distancing measures. The question remains to be answered is whether the pent-up investment demand shows up in the third quarter of 2020.

Source: Pitchbook


A very positive bright spot in the VC/PE picture through 2020 is mega-rounds, which are deals with valuations of $100 million or more. Interestingly, through June, there’s been approximately $29 billion worth of mega-deals. If this trend continues, 2020 will actually surpass 2019 in mega-deal volume. The 2019 mega-round volume of $55 billion was the second most on record, suggesting that 2020 could potentially be the second (or even the highest) mega-round volume ever.

Source: Pitchbook

Seed Capital

One down spot on the generally positive VC/PE investing view is seed capital. Seed capital deals dropped 45% in the first half of 2020 compared to 2019, from 1,447 to 803. Additionally, invested capital dropped from a healthy $3.3 billion in 2019 to $2.2 billion in 2020. As one would expect, when times get less certain, investors pull money away from the riskiest of bets, and that’s exactly what has happened so far with seed capital.

Source: Pitchbook
Source: Pitchbook

Summing Up

Overall, according to Pitchbook, the private equity/venture capital world is holding up fairly well during the pandemic. Investment sourcing, demand, and funding is still there for the innovative movers in society.


The world is in a dangerous position. Employment is generationally weak, and in response to the weak-by-choice economy, governments and central banks have opted for massive spending, historically low interest rates, and exploded central bank balance sheets financed by printing money.

What do these things mean in the not-too-distant future? Problems.

The jobs picture

First, let’s take a look at the inflation and jobs backdrop. The jobs backdrop, depicted below by the year-over-year change in the unemployed by country from 1980 through the second quarter of 2020, looks incredibly sobering. On average, the pool of the unemployed across countries is up 67% over the prior year. In the U.S., the figure is 256%.

Source: Econometric Studios, Oxfor

It’s hard to put lipstick on this pig.

The backdrop of inflation

While the reserve pool of the unemployed is generationally high, inflation around the world is at also incredibly low. In most countries, inflation is actually deflation or disinflation.

Source: Econometric Studios, Oxford

When looking across all countries, the inflation picture is clearer than having a color for each line. On average, global inflation is close to its all-time low at 2.25% (Q2 2020). The only other time in the past 40 years when inflation was this low was Q3 2009, right before the start of the longest expansion on record.

Source: Econometric Studios, Oxford

The three problems

The question now concerns whether global economies can avoid quick rising inflation if global economies fail to rise quickly. Typically, the question is posed the other way. Usually, economists are concerned that inflation will rise quickly because economic growth is too strong. This time around, if global growth does not seriously pick up in the next couple of months (in the U.S., it’s July), then governments will be forced to pump more stimulus into this economy. Central banks will be forced to continue printing money.

Since 2008, central banks and governments have opted for this practice. And, surprisingly to some, the massive money printing and debt did not spur greater inflation. There are likely three reasons for high inflation failing to materialize: intense international competition of labor, globalization, and weak global conditions.

This time around, the story is different and for two reasons. First, political forces are moving towards less globalization, opting instead for shorter supply chains. Second, the scale of the spending and money printing operations were nowhere near as massive.

This time is different, and any respectable analyst will agree after looking at the following three charts. Due to demographic forces and politics, interest rates may never again get back to normal levels. Financial markets will also likely be unwilling to let central banks reduce their balance sheets too much. And there’s no evidence that governments want to improve their spending habits any time soon.

These three factors make for a dangerous combination of economic factors that may rear their ugly head simultaneously in the near future.

Source: Econometric Studios, Oxford
Source: Econometric Studios, Oxford
Source: Econometric Studios, Oxford


On Friday, the U.S. Bureau of Labor Statistics (BLS) shocked the world when it reported that the American economy created 2.5 million jobs in May. Economists had expected the BLS to report job losses of 8 million or more.

The surprising jobs report had market observers wondering if the economy really can jump back to where it was in February by sometime in 2021. Most of the evidence suggests that the effects of the shutdown may be short-lived.

Whether the recovery is a V-shape or a “rocket ship”, professionals working in the financial industry may wonder where the finance industry fits into all this. Based upon what has been reported to date, the picture is incredibly bright.

The Overall Jobs Picture

Before looking at an industry breakdown of the jobs picture, the following graphic looks at the overall jobs picture.

After the longest expansion on record, in March 2020 the expansion came to an abrupt halt. In March, the American economy lost 1.4 million jobs. That was followed by the worst-ever month for job losses – 20.7 million.

The 2.5 million bounce back in May still leaves more than two decades of job growth to make up. So far, though, the picture appears reasonably bright.

Source: Econometric Studios, BLS

An Industry Breakdown of the Jobs Picture

This background leaves open the question of what the future holds for the financial industry. The following graphic shows the growth in jobs by industry for the first five months of 2020.

Anything stand out? Interestingly, of the broad sectors on which the BLS reports, the Financial Activities sector has held up the best of all the employment sectors. Through May 2020, employment in the sector is down only 2.5% since the start of 2020.

This performance far outpaces other sectors of the economy. The worst of the sectors, Leisure and Hospitality, is down 41.5% while Retail Trade is down 12.8%.

Given that employment in the financial sector has outperformed other sectors, does that mean that the pending “rocket ship” recovery will best the other sectors?

The answer is probably not, but it would not be surprising to see the Financial Activities sector to post the strongest job growth of all sectors when the 2020 year comes to an end. With the greatest expansion on tap, there will be greater demand for early-stage, venture capital, private equity, and other traditional sources of financing to get the economy going again.

Source: Econometric Studios, BL

Summing Up

Overall, although the global economy still has a massive hole to climb out of, so far, the recovery looks strong. In regard to the financial industry, the picture looks even brighter than the other industries beginning the long slog of recovery.


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