Despite external economic headwinds, venture capital (VC) fundraising activity exhibited strength in Q2 2020 while exit and dealmaking activity slowed due to the impacts of the coronavirus pandemic, according to the PitchBook-NVCA Venture Monitor, the authoritative quarterly report on venture capital activity in the entrepreneurial ecosystem jointly produced by PitchBook and the National Venture Capital Association (NVCA), with support from Silicon Valley Bank and Certent. The ten largest funds raised in the first half of the year made up over half of all VC fundraising value so far. Many of these funds likely began fundraising before the uncertainty of the coronavirus pandemic affected the markets, but closing such massive vehicles remains an impressive feat. Exit activity continued its pandemic-induced struggle during the second quarter, with exit count in 2020 tracking to be the lowest since 2011. With this significant reduction in the number of companies achieving liquidity for investors, there could be serious implications for the rest of the VC ecosystem in the coming years. On the dealmaking side, activity has decelerated rather significantly when looking at figures for the broader industry. However, late-stage financings have outpaced early-stage financings as companies took advantage of high capital availability and investors looked to protect their largest and best investments. While this phenomenon may simply be a COVID-related anomaly in the long term, the high activity at the late-stage is the culmination of many of the recent trends within the US VC industry.
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“The massive disruptions roiling across the country have forced venture investors and startups to be agile and adaptable in order to sustain operations, with many difficult decisions being made amid the global pandemic and its economic ramifications,” said Bobby Franklin, President and CEO of NVCA. “Layoffs and shutdowns have been an unfortunate reality for some companies, but we’ve also seen the resilience of the ecosystem, thanks to a combination of fiscal stimulus, monetary easing, robust VC support of portfolio companies, and the rise of startup sectors meeting the country’s growing healthcare, edtech, consumer services, and other needs brought about by COVID-19. Uncertainty still looms large as we enter the second half of the year, but a strong VC industry along with many startup sectors seeing significant growth offer hope for the country’s path to economic recovery.”
