2020 Venture Capital Market Overview

January 1st 2020 was greeted with great expectations and in terms of the venture capital market, most investors were looking forward to a prolonged bull market well into 2020.  8 months later and we’re reflecting on an unprecedented time in our history.  With new social norms such as social distancing, the necessity for wearing masks all year round and travel bans forging what looks like a more prolonged place in our society, both investors and start-ups alike are trying to get to grips with how the rest of this year and far beyond will look.

As history has shown time and time again, nothing lasts forever and given the peak of global investment was in 2018, at some stage we were all expecting a pull back. 

Over the past 2 years, on average 5000-7000 start-ups were funded per quarter globally.  The entire venture capital industry waited with bated breath to see how this year would fare and by all accounts, the venture capital industry has proved to be a bit more robust than many analysts had predicted.

In Q1 2020, there were a total of 4,260 deals and $61B USD of investment. Asia accounted for 837 deals and investment in software companies reached $7.1B (i.e. Asia) out of a total of $16.5B USD.

In Q2 2020, there were a total of 4502 deals and $62.9B USD globally, Asia accounting for 1,011 deals totaling $16.9B USD of investment.  Biotech companies saw a total of $3.7B USD investment in Asia.

Let’s preface this though by stating that there are clear impacts on the VC industry.  Companies that were lucky enough to get funding in late 2019 or early 2020 will most likely have the balance sheet to see this crisis through, for others though, they may have to compromise on their valuations or in many cases, miss out on funding entirely.

We should also note that because of the long lead time, due diligence and other factors that necessitate funding, Q1 and Q2 of 2020 could be regarded as somewhat of an anomaly because the deals announced now, were most likely deep in negotiation late 2019 or early 2020.

Q3 of 2020 should be a true reflection of how resilient the venture capital industry is currently.  At Waporta, we are anticipating a far greater reliance on digital solutions to facilitate funding going forward.  In addition, we are expecting investors to look more favorably at start-ups focused on digital solutions, an area which may not have been as pertinent in the past.

2020 has brought huge global upheaval, new social rules, working from home, more reliance on online ordering and payment, banking and healthcare.  When you consider the opportunity for new startups to innovate for the masses whether it be technologically, biologically or medical device related in this new COVID-19 world, the mind boggles.