PitchBook NVCA Q2 2020 Venture Monitor Report
The second quarter of 2020 was truly unprecedented for the venture capital (VC) industry, as the COVID-19 pandemic, nationwide lockdowns, stay-at-home orders, and a major economic downturn shook the entire country. The lockdowns majorly disrupted general business practices in the VC industry, as investors have traditionally relied heavily on in-person meetings before making new investments. Venture firms generally became much more conservative around deal making as the pandemic hit the US in March and early April, leading to a downturn in both VC invested and number of deals completed in Q2. Portfolio companies followed suit, adopting an understandably cautious outlook as they sought to reduce their burn rate through layoffs, cost-cutting, and curtailed expansion plans.
With all that said, the impact on aggregate VC activity was hardly apocalyptic. Much of the slowdown occurred during the early part of the quarter, when uncertainty over COVID-19’s impact on the economy was at its height. After the initial month and a half of exercising caution, triaging, and focusing primarily on stabilizing their own portfolio companies, VC investing began to pick up in May. While some sectors have been heavily affected by the pandemic, many startups, especially in the software and biotech sectors, have fared relatively well during the COVID-19 crisis, offering solutions to the healthcare, digital enterprise, and consumer services needs of the country.