Venture Capital: What COVID-19 Did To VC Investing in the U.S. (Report)
An analysis by Itay Sagie, lecturer, and strategic adviser to startups and investors.
An article by Itay Sagie, co-founder of VCforU.com, which helps over 17,000 startups, uses Crunchbase data for the period March 18-June 17, 2020, to assess how the pandemic changed the venture capital investment landscape in the U.S. (Crunchbase)
VC rounds crashed 44%
An analysis of the number of funded rounds for the stages from seed to Series B found 541 VC deals in March to June 2020 compared to 964 in the same period in 2019. That’s a rather sharp decline of 44%, and attributable to COVID.
The worst sufferers were startups in the seed stage, accounting for a 57% fall in the number of deals.
Check sizes remained about the same
Stagewise, comparing 2020 with 2019, average check size fell 3% in seed, fell 4% in Series A, but rose 1% in Series B.
However, there were wide variations in check sizes within different industries, with travel tech being particularly hard-hit by COVID. Average VC funding via Series A check sizes in the sector has dropped 84 percent, from $14.68 million in 2019 to $2.3 million in 2020.
Notably, between 2020 and 2019, funding in Series B rounds fell substantially for the data, AI, and travel tech industries. In contrast, Series B funding in healthcare was up marginally in 2020.
“This can be explained by the fact that health companies need more late-stage capital before reaching sales, while tech companies reach the market earlier,” said Sagie. “I also believe that investors today are more conservative and wish to see the later-stage companies being less reliant on investors and more sales-driven; focusing on good unit economics and sustainable growth.”
Undeniably, COVID-19 has affected everybody on a massive global scale. A new normal will prevail once we have a vaccine, probably within a year.
Entrepreneurs, as well as VC investors, have both to identify the new trends arising from the pandemic. These could be remote work, remote health, e-commerce, automation, and data privacy trends.
“Those who will innovate and adapt themselves to the new norm will succeed despite and even thanks to the pandemic,” observes Sagie.
Image credit: Flickr
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