A new Silicon Valley venture report shocks — because of how little the pandemic has impacted dealmaking
The law firm Fenwick& West has published some new data to highlight how Covid-1 9 has impacted the world of risk capital in Silicon Valley. The biggest surprise? It’s how little wallop the world pandemic seems to have had on dealmaking this spring.
Consider first that valuations in April were actually higher than in March, and that despite big layoffs in the tech sector, so-called up-rounds only declined modestly, from 72% in March to 70% in April.
In fact, though you’d see the massive disruptions prompted by virus would intensify things wildly, it seems more like the steady continuation of a trend that began last year, when 83% of financings appreciated fellowships receive higher valuations.
Our guess is this shift really happened around the time of WeWork’s plucked IPO last twilight, which seemingly reminded investors that what goes up — and up — sometimes comes down fast, extremely. But it does sidestep the question: what about down rounds? Surely, there were a lot of these the following spring( you are able to imagine ), including startups in the travel industry or that count the travel industry as a customer.
Yet again, Fenwick’s data, at least, tells another story. The number of administers that were marked down by investors accounted for just 12% of all distribute magnitude in April; that’s even lower than in March, when 16% of companies known down rounds.
It does make sense, considering that the data is specific to April alone, peculiarly when accounting for the many startups that ought to have thrown a longer lifeline by their investors in the form of postponements to earlier rounds that were closed earlier this year or late last year. Investors don’t like determine their transactions marked down by new investors. The meditating, very, is just to get the companies through this bumpy patch, then figure out what’s what.( Relatedly, there was a sizable expanded in flat rounds: 18% in April, compared to 13% in March and 9% last year .)
More astonishing was the sheer speed of investing into startups in Silicon Valley. Though there was talk about investors needing to stop and assess the health of their portfolio firms from mid-March to early April, it seems now that VCs never genuinely stepped off the gas. Harmonizing to Fenwick, the number of spates actually increased from 54 in March to 64 in April; that virtually parallels the 65 deals per month that were completed last year, when the world wasn’t grappling with an epidemic.
For what it’s worth, many of these were later-stage treats. Fenwick’s data shows the percentage of Series D and E+ copes increased to 38% of all financings in April, up from 21% in March and the highest that figure has been since August 2018, when Series D/ E+ considers mixed for 42% of all financings.
In short-lived, VCs were plowing more fund into what they see as sure things — and into management squads they weren’t meeting for the first time over Zoom.
Still, the disconnect between what’s happening in the world and the tempo of endeavour investment is a little jarring.
Asked about the numbers, one of the report’s authors — longtime advocate Barry Kramer — memorandum over email that norms” can obliterate” the inequalities in how fellowships are being affected right now, with some take advantage of the stay-, work-, and learn-at-home shift, with others, including biotech investigate, manufacturing and equipment business, being hurt by it.
But no matter the recent headlines, he too added that for now at least,” we aren’t seeing massive agitation or panic in the industry .” VCs are instead “adjusting to the current situation.”