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Global venture capital deal counts took a dip in Q2, after several quarters of a plateau as both Europe and Asia investments slowed during the quarter, Pitchbook said. Global exits were the lowest since the first quarter of 2018.
Europe and Asia activity slowed during the quarter, pressuring the total figure downward. The value of completed deals has plateaued now for a few quarters, well below the highs of a couple years ago.
Without large investors (crossover investors, private equity firms, and sovereign wealth funds) actively participating in venture, the outsized deals that pushed deal value to records aren’t able to get done, according to a first look of a Q2 report by Pitchbook.
Exit activity continues at subdued levels, and the $51 billion of global exit value was the second lowest since Q1 2018. Public market opportunities are low, and the more active antitrust scrutiny has kept large acquisitions sidelined as well, Pitchbook said. Global inflation and heightened geo-political tensions amongst key venture markets have also put pressure on exits.
The global venture capital market declined further in the second quarter of this year, according to data compiled by research provider Pitchbook.
The report, which looked at venture capital activity across the world, showed that the number of deals worldwide and the amount of money invested in these deals have both decreased significantly.
The total number of venture capital deals worldwide in the second quarter of 2020 was 2,286, a drop of 29% from the first quarter, and the lowest quarterly figure since Q3 2012. The report also found that the total amount of money invested this quarter was US$35 billion, a decline of 40% compared to the previous quarter and the lowest fourth-quarter level since 2013.
The report noted that the effects of the coronavirus pandemic are being felt across the global venture capital market, with investments in all major sectors – such as healthcare, enterprise software and the digital media and entertainment industry – declining since the start of the year.
The research found that the largest deals this quarter were mostly focused on healthcare and enterprise software, with seven companies raising US$366 million and US$318 million respectively. These included Next Ventures (US$200 million) and Cloudinary (US$150 million).
The decline in global venture capital activity has been compounded by the fact that previous deals struck this year have not matured as quickly as usual. The report found that nearly half of all investments in the second quarter were of venture rounds, meaning that investors are only now beginning to feel the effects of the pandemic on their portfolios.
Despite this, the report noted that there have been some encouraging signs in recent months, with venture capital activity increasing in the US and China in particular. Activity in China was up 28% in the second quarter compared to the previous three months and a rise of 26% in the US.
Overall, the data from Pitchbook indicates that while the global venture capital market has taken a substantial hit due to the pandemic, there are still opportunities for investors to make strategic investments in promising start-ups.
