Venture capital investments weather COVID-19 storm

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Despite the second wave of COVID-19 and the slow economic recovery, global venture capital (VC) investments during the fourth quarter (Q4) of 2020 remained robust and were nearly at pre-COVID levels, says market research firm GlobalData.

The GlobalData quarterly report: “VentureView: Disruptor Investment Activity Q4 2020” states there was an increase in the number of mega-deals that helped to drive the overall VC investment value to nearly $120 billion for the period under review.

Venkata Naveen, senior disruptive tech analyst at GlobalData, comments: “The COVID-19 pandemic has changed the game of how companies across industries operate, driving a significant acceleration towards digital strategies. The Q4 2020 saw VC investors shift their focus on start-ups that were poised to offer tech-driven solutions in line with the new normal, such as enabling remote working, edtech, online retail and those offering increased access to customers via digital channels.”

According to the report, e-commerce accounted for more than 40% of the top 10 VC deals in Q4 2020, with significant contributions from the education and retail sectors.

For example, China’s edtech companies raked in nearly $5 billion in funding, with India’s Reliance Retail Ventures raising $1.3 billion in Q4, taking its total funding in the second half of 2020 to over $2.3 billion.

South Africa’s VC landscape is considered to be quite robust, showing a continued upward trend in investment activity. Last year’s SAVCA 2020 Venture Capital Industry Survey, conducted by the Southern African Venture Capital and Private Equity Association, revealed the local VC landscape experienced both record investment and exit activity in 2019 compared to 2018.

The report notes that in 2019, a total of 162 new deals were reported, with an overall investment value of R1.23 billion – a notable increase of 14.8% on the deals reported in 2018.

While there were more exits in 2019 than in 2018, 50% of exit strategies were reported as profitable, with a total amount of R830.5 million returned to investors, according to the SAVCA survey.

GlobalData notes the pandemic also failed to dampen the rise of unicorns in Q4. “At 47, the number of unicorns reached pre-COVID levels, representing the highest quarterly increase in the last two years. An increased number of fintech, e-commerce and enterprise application start-ups have achieved unicorn status during the quarter.”

Naveen concludes: “The COVID-19 crisis will be a key driver of VC investments in early 2021. With many countries now experiencing a second wave of the pandemic and governments working towards the mass distribution of vaccines, start-ups helping enterprises to adapt to the new normal may gain traction from VC firms. E-commerce, healthtech, fintech and edtech can remain investment hotbeds for VC in addition to tech infrastructure providers supporting the digital shift.”

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