Strong Quarter Defies Expectations as Venture Capital Invested Rises Despite Six-Quarter Decline in Deal Volume, Says KPMG Private Enterprise

Q3�20 sees global VC investment of over US$73.2 billion, including record quarterly high of $12.1 billion in Europe.

Pharma and biotech sector booming, with $31 billion in investment so far in 2020.

TORONTO–(BUSINESS WIRE)–In the face of concerns related to COVID-19, geopolitical tensions, the upcoming US presidential election, and a potential hard Brexit, global VC investment actually rose for the second straight quarter – reaching $73.2 billion in Q3’20, according to the Q3’20 edition of Venture Pulse – a quarterly report published by KPMG Private Enterprise on global VC trends.

The strong level of investment was buoyed by a significant number of large, late stage funding rounds in different jurisdictions, including three $1 billion+ megadeals: US-based aerospace company SpaceX ($1.9 billion), China-based automotive company Weltmeister ($1.5 billion), and India-based online retailer Flipkart ($1.3 billion).

The Americas attracted $40 billion in investment, with the US accounting for the vast majority ($37.8 billion). VC investment in the Asia-Pacific region continued to rebound, with the region attracting $21.1 billion in Q3’20 – up from $17.2 billion in Q2’20. VC investment in Europe reached a new record high of $12.1 billion.

VC-backed exit activity in 2020 has surged to almost $250 billion – with Q3’20 alone driving $155.7 billion, close to the previous record set during Q2’19 ($171 billion), driven by successful IPOs, including Snowflake, JFrog, and Unity Software.

“After several quiet quarters, the IPO market for VC-backed companies rocketed into high gear in Q3’20, with a number of high-profile unicorns making successful exits,” said Conor Moore, Co-Leader, KPMG Private Enterprise Emerging Giants Network KPMG International. “Given the recent filings by several other unicorns, coupled with the explosion of SPAC transactions, Q4’20 looks on-track to continue the record-setting pace.”

Key Highlights – Q3’20

• Global VC investment rose from $70 billion across 5,674 deals in Q2’20 to $73.2 billion across 4,861 deals in Q3’20.
• The number of individual VC deals, however, dropped for the sixth straight quarter, dropping to the lowest volume seen since Q4’13.
• VC investment in Europe reached a new record of $12.1 billion across 1,024 deals in Q3’20 – up from $11.5 billion across 1,513 deals in Q2’20.
• VC investment in the Americas remained relatively steady quarter-over-quarter, with $40 billion invested across 2,477 deals. The US accounted for $37.8 billion of this investment and 2,285 of the deals.
• The Asia-Pacific region saw $21.1 billion in investment across 1,285 deals in Q3’20 – up from $17.2 billion across 1,207 deals in Q2’20.
• Global corporate VC investment held steady for a third straight quarter, accounting for $33.6 billion across 1,148 deals in Q3’20.
• VC-backed exit activity rose to $156 billion during Q3’20 – up from just $49.2 billion in Q2’20 and nearing the record high of $171 billion set in Q2’19.
• The number of global angel/seed stage deals in Q3’20 (1,650) was the lowest seen since Q4’2012, while the number of global early stage deals (1,716) was the lowest seen since Q2’2014.

Pharma and biotech very hot in Q3’20

VC investment in pharma and biotech remained very hot in Q3’20, led by a $600 million raise by Germany-based CureVac; at the end of the quarter, total year-to-date investment in the sector was $31 billion – already well above the total of $27.1 billion seen during all of 2019.

Heading into final quarter of 2020, VC investment expected to hold steady

VC investment is expected to remain quite steady heading into Q4’20. Late stage deals are expected to remain a top priority for VC investors, which will likely continue to make it difficult for early stage companies to attract investment. On a sector basis, fintech, business productivity, edtech, healthtech and biotech are all expected to remain very attractive.

“While overall VC investment has remained surprisingly resilient given the number of diverse challenges being faced around the globe, the extended decline in funding for early stage companies causes some concern,” said Kevin Smith, Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International. “With many seed and early stage companies finding it difficult to attract funding, there could be a serious longer-term impact, on the VC pipeline, slowing advances and innovation into new ideas and areas of the economy.”

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Contacts

Melany Eli

Managing Director, Strategy, Marketing and Communications,

KPMG Private Enterprise,

KPMG International

Email:  melanyeli@kpmg.ca