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.
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.
Mega-Rounds
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.
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.
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.
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