Venture Capital: What COVID-19 Did To VC Investing in the U.S. (Report)

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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.”

Outlook

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.

Related Story:   Chinese Startups On The Rocks As Funds Dry Up Following Virus

Image credit: Flickr                                                

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