There are several indicators that we are looking at an exciting year in the Venture Capital (VC) industry. The activities during the first quarter of 2021 show promising signs of recovery, and beyond!
Promising start
On the downside 2020 turned out to be a challenging year in many ways for businesses globally, but if we instead choose to focus on the positive, we find that the Venture Capital industry reached the highest record of total deals since 2010 when the books closed at the end of last year.
2021 has gotten a flying start with investment, exit, and fundraising activity that is already exceeding the results from last year’s first quarter. Last year, investors deployed around $166 billion, that being an increase from 2019 with 18% which seemed astonishing at the time. But comparing the Q1 activity of 2020 to the one of 2021 shows an incredible increase of more than 92% which correlates to investor deployment in VC-backed companies.
Angle/seed and early-stage investments kept their positions, although late-stage was the most common preference at the start of the year. In contrast, a drop in total investment was noticed. Still, if the indicators we have seen during Q1 are in fact precise, we may very well be looking at a total of $300 billion invested throughout the next quarters.
Median and average deal sizes for early-, late-stage and angel/seed investments have in general turned out higher with respect to the outcomes of 2020. This implies that we will continue to see a trend of VC deals growing in size.
Sector activity
It comes as no surprise that the booming life science sector continues to maintain its undebated record high thanks to the revived interest in antivirals and vaccines.
The tech sector is also experiencing an upswing where new needs have emerged, and the collective cry from many companies after faster digitalization has worked as one of the stepping-stones in this industry. COVID-19 has also changed our behavior and the migration in working arrangements to remote working models will have its impact, not only in the tech sector.
An up-starter that well defines the current climate on the VC scene is represented by nontraditional investments. As much as 75% of the $166 billion invested during 2020 came from nontraditional participators, and that ratio continues to improve.
But not everything has been sunshine and blue skies. It is unfortunate to see the previously positive trend curve of deal count and volume among female-founded businesses continue its way downwards. The annual deal value had experienced a slow but positive progression during at least 8 years before it started to dip down during 2019. According to an article published by the McKinsey Global Institute, women’s jobs are 1.8 times more vulnerable to crisis compared to men and they account for an estimated 54 percent of overall job losses.
The future of SPACs (special-purpose acquisition companies) is also a bit of a question mark when it comes to the impact on VC, despite a vibrant start in 2021. Several indicators such as investment return, and regulatory scrutiny will determine the success of this market in the longer run.
As you can see, there are many opportunities for both businesses and investors to be expected during this year. Some sectors might be more ‘in’ than others, but in the end, it’s really about finding the right fit for you.
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That is where Greca comes in, personalized support throughout the whole process. With our approach, only well-selected and thoroughly evaluated companies are introduced to investors. We want to assure that the best possible match will be made, eliminating common frustration over the loss of valuable time from the equation.
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