Recently, private equity data provider Pitchbook released their Q2 2020 state of the venture capital (VC) / private equity (PE) markets. The report provides an interesting glimpse into the state of PE and VC leading up to and over the course of the coronavirus pandemic.
Spoiler alert: The PE and VC universe is not as bad as some might think – people still need financing and business still happens during a pandemic.
Deal Value Still Strong
Heading into the shutdown, one might have expected deal value to suffer as in-person interaction takes a backseat to concerns about the potential health effects of the coronavirus.
Interestingly, deal value continued strong through the first half of 2020. As of June 30, 2018, total deal value reached $69.1 billion, slightly above things stood in the prior year (the chart for the prior year’s shows the figures for the full year). Deal count hasn’t kept up as well, but still healthy at 5,058. For the full 2019 year, the total number of deals reached 12,211.
The effect of the coronavirus shows up more clearly in the quarterly figures, where deal count took at dip in the second quarter of 2020. Perhaps unsurprisingly, Angel & Seed investments experienced the largest drop in deal count, followed by Early VC and Late VC.
Mega-deals Ask: What Coronavirus?
Perhaps one of the more interesting findings from Pitchbook’s update is the mega-deal picture. Mega-deals continued to flourish in the first half of 2020, reaching $32 billion in value across 131 deals as of June 30, 2020. For the entire 2019, the number of deals reached 234 and capturing $54.4 billion in value. Low interest rates are undoubtedly a boon to profitable PE and VC investment.
Initial Investments Cool Off
One place where the effects of the coronavirus clearly had a cooling effect was with initial investments. Total deal value for initial investments dropped to $4.6 billion across 1,194 deals. For the entire 2019 year, the total amount of deals reached $13.7 billion across 3,228 deals. It seems highly unlikely that 2020 will reach this high of level.
A Couple of Other Views of the State of PE/VC
Two other interesting views on the state of PE/VC are captured in the following two graphics. The first is the median size of deals. In a completely surprising result, and speaking broadly, median deal size has held up fine, with the median deal size for angel investments at $0.6 million, and median deal sizes for the other investment classes at $2.2 million (seed), $6.0 million (early VC), and $8.8 million (late VC).
The view is even more interesting when looking at the time companies are staying private. According to Pitchbook, companies continue to stay private longer. For angel deals, the median years since founding is 3.4 years, the highest on record. For the other deal types, the private staying power is also transparent.
Conclusion
Overall, the PE and VC world seems to have experienced only a slight hiccup due to the coronavirus and the picture looks bright for the coming months ahead.
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