Q3’20 sees global VC investment of over US$73.2 billion, including record quarterly high of $12.1 billion in Europe.
Pharma and biotech sector booming, with $31 billion in investment so far in 2020.
In the face of concerns related to COVID-19, geopolitical tensions, the upcoming US presidential election, and a potential hard Brexit, global VC investment actually rose for the second straight quarter - reaching $73.2 billion in Q3'20, according to the Q3'20 edition of Venture Pulse - a quarterly report published by KPMG Private Enterprise on global VC trends.
The strong level of investment was buoyed by a significant number of large, late stage funding rounds in different jurisdictions, including three $1 billion+ megadeals: US-based aerospace company SpaceX ($1.9 billion), China-based automotive company Weltmeister ($1.5 billion), and India-based online retailer Flipkart ($1.3 billion).
The Americas attracted $40 billion in investment, with the US accounting for the vast majority ($37.8 billion). VC investment in the Asia-Pacific region continued to rebound, with the region attracting $21.1 billion in Q3'20 - up from $17.2 billion in Q2'20. VC investment in Europe reached a new record high of $12.1 billion.
VC-backed exit activity in 2020 has surged to almost $250 billion - with Q3'20 alone driving $155.7 billion, close to the previous record set during Q2'19 ($171 billion), driven by successful IPOs, including Snowflake, JFrog, and Unity Software.
“After several quiet quarters, the IPO market for VC-backed companies rocketed into high gear in Q3'20, with a number of high-profile unicorns making successful exits,” said Conor Moore, Co-Leader, KPMG Private Enterprise Emerging Giants Network KPMG International . “Given the recent filings by several other unicorns, coupled with the explosion of SPAC transactions, Q4'20 looks on-track to continue the record-setting pace.”
VC investment in the Americas held relatively steady at $40 billion in Q3'20, led by a $1.9 billion raise by SpaceX and two $600m+ deals by fintech Robinhood. Fintech was a very hot sector of investment in the Americas this quarter. In addition to Robinhood's $1.2 billion, alternative payments model company Affirm raised $500 million, and digital bank Chime raised $485 million. In Latin America, Brazil-based digital bank Neon raised $300 million.
VC investment in Europe reached a new record high of $12.1 billion across 1,024 deals in Q3'20, led by a $650 million raise by Sweden-based Klarna, a $633 million raise by Germany-based CureVac, a $600 million raise by Northvolt in Sweden, and a $580 million raise by Revolut in the UK.
The Nordic region ($2.2 billion), Germany ($2 billion), and Israel ($1.5 billion) all saw record levels of VC investment this quarter. Despite a quarter-over-quarter decline from $3.8 billion in Q2'20 to $3 billion in Q3'20, the UK continued to account for the largest share of VC investment in Europe.
VC investment in Asia continued to recover - reaching $21.1 billion in Q3'20 - up from $17.2 billion during Q2'20.
Increasing investment in China helped drive recovery in the region. During Q3'20, China accounted for $14.9 billion in VC investment, including eight of the Asia-Pacific region's largest deals in Q3'20, including the $1.5 billion raise by Shanghai-based automotive company Weltmeister, an $830 million raise by JD Health, and a $500 million raise by automotive company Xpeng.
VC investment in India also rose significantly quarter-over quarter - from $1.5 billion in Q2'20 to $3.6 billion in Q3'20. At a sector level, edtech was very strong in India during Q3'20, with numerous deals, including Byju ($500 million), Unacademy ($150 million), Eruditus Executive Education ($113 million), and Vedantu ($100 million).
VC investment in pharma and biotech remained very hot in Q3'20, led by a $600 million raise by Germany-based CureVac; at the end of the quarter, total year-to-date investment in the sector was $31 billion - already well above the total of $27.1 billion seen during all of 2019.
VC investment is expected to remain quite steady heading into Q4'20. Late stage deals are expected to remain a top priority for VC investors, which will likely continue to make it difficult for early stage companies to attract investment. On a sector basis, fintech, business productivity, edtech, healthtech and biotech are all expected to remain very attractive.
“While overall VC investment has remained surprisingly resilient given the number of diverse challenges being faced around the globe, the extended decline in funding for early stage companies causes some concern,” said Kevin Smith, Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International. “With many seed and early stage companies finding it difficult to attract funding, there could be a serious longer-term impact, on the VC pipeline, slowing advances and innovation into new ideas and areas of the economy.”
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