Global VC investment in Q1'20 dip quarter-over-quarter with US$61 billion raised, according to Q1'20 edition of the KPMG Private Enterprise Venture Pulse.
However, uncertainty caused by the pandemic and its effect on the next few quarters raises concerns across the sector, the firm added.
“A very strong deal pipeline in most regions of the world limited the impact of COVID-19 on the VC market globally in Q1'20,” said Conor Moore, Co-Leader, KPMG Private Enterprise Emerging Giants Network. “But given the sharp decline of VC deal volume in Asia, as compared to the many economies that only started to shut down near the end of the quarter, Q2'20 is expected to be a rough quarter for VC investment in every jurisdiction.”
VC investment in Asia shrank significantly
VC investment in Asia dropped significantly - to a twelve-quarter low of $16.5 billion - despite 3 deals at, or over US$1 billion: a $3 billion raise by Indonesia-based Gojek, a $3 billion raise by China-based Kauishou, and a $1 billion raise by China-based Yuanfudao, according to KPMG.
As the first country to deal with COVID-19, it was not surprising that both VC investment and deals volume in China plummeted in Q1'20 - to $8.9 billion across 481 deals, KPMG pointed out.
At the same time, the $1 billion raise by edtech company, Yuanfudao, at the end of the quarter highlighted the potential of companies in certain industries to buck the downward trend due to their sudden applicability, the firm noted.
Other highlights in Asia
- After a record-breaking $6 billion in Q4'19, VC investment in India tumbled to just $2.2 billion in Q1’20.
- During Q1'20, both Indonesia-based Gojek and its primary regional competitor Singapore-based Grab raised large funding rounds - $3 billion and $886 million respectively.
The pandemic’s impact on VC investment in Q2’20
With restrictions on the movement of people and economic shutdown expected to last well into Q2'20 at a minimum, the VC market outlook for the next quarter is expected to be very grim in most regions of the world, KPMG said.
Many investors are expected to sit on the fence until the impacts of the pandemic are better understood, the firm added.
“Given mobility constraints, deal-making processes globally are expected to slow considerably in Q2'20. VC deals that do occur will likely focus on follow-on funding to companies within a VC investor's current portfolio - and on companies that speak to a specific need in the current situation - such as productivity solutions, edtech, and logistics and delivery,” said Kevin Smith Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International
“We also expect an increase in philanthropic investing focused on companies working on a vaccine, on treatment options, or on understanding and mitigating the spread of COVID-19," he noted.