We are in uncharted territories given the impact of the Pandemic at many levels ranging from our physical health to the mental challenges brought to bear on each of us to the significant impact on our economy.
In the first quarter of 2020, companies in the region raised 227 million in venture capital, according to the PwC/CB Insights MoneyTree Report. This funding went to 21 companies over this period and over $50 million higher than the quarterly average from 2019. Zerofox raised $74 million, which was the third-largest round secured by a cyber company in this country.
There was over $121 billion in dry powder amongst the Venture Funds in 2019, and they continue to fund, but many are being more conservative in their approach. I spoke to Chuck Cullen at Grotech Ventures about their philosophy last week – they have two investments they were focused on. One was just funded the other was put on hold in the near term. Speaking with numerous funds, their focus has primarily turned to their existing portfolio companies, ensuring companies have enough cash runway and stressing efficiency. New deals are still happening, but most of these had already been in the pipeline prior to the onset of the Pandemic. The investment pace will surely slowdown in the near term. One Venture Fund I spoke to was working through new deal screening protocols. How do you connect with the founding teams before making an investment? The old axiom is that you invest in an “A” management team is still quite true. They were trying to derive a technology solution to measure management teams while travel has all but ceased.
Valuations may not have retreated much yet, but indications from Venture community and startups alike suggest that valuations are likely to be challenged in the coming quarters. Late-stage valuations may see valuations impacted more so after reaching record highs in 2019. Historically, investor early-stage deal values tend to be more range-bound and may be affected less.
Private Equity [Read more…]