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KPMG has published its Venture Pulse Q3’20 report, tracking venture capital (VC) activity around the globe, writes Anna Scally, Fintech Lead at KPMG in Ireland.

In Ireland, findings show a decline in VC activity in Q3’20, with $86.6 million invested in 24 deals involving Irish companies – down from the $187.6 million invested across 73 deals in the same quarter last year.  Deal volume is also down significantly compared to the same quarter last year, when 73 deals were completed, and is the lowest level of deal volume in Ireland in five years, since Q3’15, when just 22 deals were completed.

Globally, VC investment rose slightly 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.

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 Q4’12, while the number of global early stage deals (1,716) was the lowest seen since Q2’14.

Commenting on VC activity in Ireland during Q3’20, Anna Scally, Partner and Fintech Lead at KPMG in Ireland said: “It’s clear that private equity and venture capital firms are placing big bets on later stage companies, so the big concern is who is going to fund earlier stage companies, or are they going to be funded at all? In Ireland, we need to make funding programmes more accessible, because if early stage companies don’t receive funding, they will not be capable of securing follow-on investment down the road. That will have a big impact on the ecosystem here.”

“It is also clear that the uncertainty created by the COVID crisis has had a significant impact on the number of companies that successfully secured investment in Q3’20. Investors are very focussed on supporting their existing portfolio companies and I suspect many are reluctant to increase their exposure at this point. There is a real risk that this continues to be the case through Q4’20 as the impact of the pandemic continues to be felt across the economy, although I’m hopeful that Q3 was a blip as Q4 has started off strong with investments in Ireland in companies such as LearnUpon, Neuromod and Wayflyer already.”

“Government will need to review existing initiatives like debt and equity funding programmes and tax incentives to ensure there is adequate support for early-stage companies and to encourage more early-stage investment by private investors. We have seen the industry itself already taking action, with the establishment of the Alliance for an Innovation Driven Recovery, a newly formed coalition of organisations with a shared interest in the growth of the indigenous tech sector in Ireland.  The impact of this initiative will be important to watch heading into Q4’20.”

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