KPMG has published its Venture Pulse Q2’20 report, tracking venture capital (VC) activity around the globe. Findings show that Ireland recorded one of its strongest quarters on record for VC investment, with $317 million invested in 30 deals involving Irish companies – more than double the level of investment from Q1 figures of $151.3 million, and far ahead of the same period last year, where $125.8 was invested.
The record investment, against a global backdrop of economic uncertainty in light of the global COVID-19 pandemic, was predominantly made in Irish healthcare and software companies.
Globally, venture capital investment showed continued resilience in Q2’20, reaching $62.9 billion across 4,502 deals - almost equalling total investment from the first quarter of the year and only slightly off the pace seen in 2019’s second quarter, which registered $69.8 billion invested.
The top 5 deals closed in Ireland:
Other sectors attracting investment included renewable energy, with solar investment platform providers Amarenco securing $16.3 million and consumer products and services, with Drop Kitchen and Buymie raising $13.2 million and $8.9 million respectively.
Commenting on VC activity in Ireland during Q2’20, Anna Scally, Partner and Fintech Lead at KPMG in Ireland said: “Ireland has seen very robust investment this quarter, with a number of Irish companies showing a real relevance to investors in this ‘new normal’. Some companies are making a significant difference in the current crisis, like medical health testing platform LetsGetChecked, while others like Glofox gym management solutions have been able to pivot to offer solutions that helped keep their clients operational online. Other Irish companies like SoapBox Labs, which raised $6.3 million, are helping to accelerate children’s literacy with digital speech recognition technology, Evervault, which raised $16 million capitalised on increased cyber concerns with its privacy interface for sensitive data, and AI and automation software developer, Keelvar, which raised $17.9 million to fund its expansion in Europe and the US because of accelerated demand for its services.”
“Timing is everything however and the strength of investment in Q2 is likely because many deals were already in the offing when the global pandemic hit, and also because the types of companies getting backing were ripe for investment due to the nature of their products and services. I would have a much more cautious outlook for the remainder of the year, when the real impact of the COVID-19 crisis will likely be seen.”
Venture capital investment remained strong in Europe for the second consecutive quarter, reaching $10.1 billion across 1,062 deals. The global pandemic has shifted consumer behaviors sharply in Europe —accelerating a number of digital trends, including the use of online food delivery, e-commerce, contactless payments, and digital payments. This is resonating in the VC market. European venture fundraising also surged in the first half of the year, with 80 funds amassing $8.9 billion in commitments by July 1 – well ahead of last year’s pace.
On a country by country basis, the UK led total VC investment with over $3 billion, followed by strong performances by Germany, France and Israel. The UK accounted for 5 of the top 10 deals in Europe this quarter, including Deliveroo ($575 million), Cazoo ($156.1 million), Checkout.com ($150 million), Starling Bank ($123.1 million) and Freeline ($120 million). Other top 10 deals included Germany’s N26 ($570 million) and Lilium ($275 million), Switzerland-based Arvelle Therapeutics ($207.8 million), France’s ContentSquare ($189.1 million) and Israel’s BioCatch ($145 million).
Overall, VC investment in the Americas remained steady in Q2’20 – reaching $35.6 billion over 2,354 deals. The 10 largest deals in the region all took place in the US, including a $3 billion raise by Waymo, a $850 million raise by Stripe, a $700 million raise by Samsara, and a $500 million raise by Palantir Technologies. Investments in the US spanned numerous sectors, including automotive, fintech, agriculture, drug discovery, biotech and application software.
While many VC investors in the US focused on managing the needs of companies within their existing portfolios during Q2’20, they also showed interest in companies with highly relevant, scalable business models aligned to meeting the needs of consumers and businesses within the ‘new normal’ —particularly companies focused on B2B productivity, cybersecurity, digital services, and e-commerce.
Life sciences and biotech solutions garnered significant attention from VC investors in the US during Q2’20, led by cancer screening company Grail’s $390 million raise and drug developer Erasca’s $200 million deal. While these sectors had already been on the radar of VC investors in recent quarters, the pandemic has focused attention of the need for healthcare disruption
VC investment in Asia remained steady quarter-over-quarter at $16.9 billion across 1,011 deals in Q2’20, led by three Chinese deals: a $1 billion Series B round by MGI Tech, a $1 billion early-stage raise by Didi Bike and a $750 million Series E raise by Zuoyebang.
Several sectors continued to thrive due to their applicability in the current business environment, including digital platform businesses focused on meeting consumer needs — such as edtech, home delivery, and online gaming — and healthtechs. With the employees of many corporations in Asia working from home, B2B digital solutions enabling employees to work remotely also attracted substantial investor attention.
While some countries and territories are opening up their economies, there will likely continue to be challenges with international travel and deal-making for some time. This is causing many VC investors to focus more on opportunities in their local markets —which could have a negative impact on growth stage companies in less mature jurisdictions that highly depend on international investment.
Anna Scally concluded saying: “There is still a significant amount of uncertainty around the world heading into Q3’20. While VC investment was buffered somewhat in Q1’20 and Q2’20, Q3’20 will likely show whether VC investment will withstand the full brunt of the pandemic’s impact. Here in Ireland, the next two quarters could be a rocky road for VC investment given our reliance on international investors. The adaptability of Irish businesses to pivot in order to better address the new and changing needs of their clients will be critical for them to remain relevant.”