Results also examine investor sentiment towards emerging tech, and offer a look at investing in a post-COVID world
SEATTLE, June 25, 2020 -- PitchBook, the premier data provider for private and public equity markets, today released the findings from a new survey conducted in partnership with Collision from Home, a Web Summit event uniting more than 32,000 founders, innovators, and investors. The survey, PitchBook-Collision Venture Investor Survey, examines activity of venture capital (VC) investors during the coronavirus pandemic, as well as overall sentiment towards technology and the future of investing after COVID-19. According to the findings, venture investors managing funds of all sizes are reporting mixed coronavirus impacts to their investing strategies and portfolio companies.
The survey was administered to 110 venture investors attending the virtual Collision from Home conference. Investors in attendance were from all over the world, and fund sizes under the respondent’s management spanned US$1 million to $31 billion. PitchBook also partnered with Web Summit on a similar survey at the company’s flagship event in Lisbon in November 2019. Comparing results with those from the earlier survey, the new PitchBook-Collision Venture Investor Survey shows how investor sentiment has shifted in just over six months.
“The mixed responses from investors provides an interesting look at the venture ecosystem during the pandemic. We’re starting to see a shift in sentiment begin, as 11 percent of respondents reported pulling back or halting investments completely,” said Cameron Stanfill, VC analyst at PitchBook. “As difficulties related to the crisis progress, this pullback in investment seems primed to continue. There are still a lot of uncertainties as to what the next few quarters will hold as we continue navigating the pandemic and its full effects on VC.”
“It’s interesting to see how each event report captures different moments in time in the VC world. During 2020, investors have shifted away from vanity growth metrics such as valuations, company size and exotic office locations. COVID-19 has encouraged investors to double down on the fundamentals of successful company building, paying attention to those startups that have a clear path or framework towards profitability,” says Alex Mackenzie, head of investors at Web Summit and Collision.
To download the data graphic and learn more about the key findings below, click here.
Investing during the COVID-19 pandemic
It appears the pandemic has not significantly impacted investment activity, with two thirds of respondents reporting they have not made any changes or are investing at near-normal levels. Only 11 percent of investors surveyed reported significantly pulling back on investments or stopping investment completely over the past few months. Of the respondents still investing at 100 percent compared to pre-COVID levels, 61.6 percent manage a fund under $250 million. Although a mere 2 percent of investors said they have stopped investing completely, 18 percent reported making no investments since March 1, 2020. When asked whether or not the inability to meet face-to-face with investment targets impacted their ability to make investments, two-thirds of VC investors said they are unaffected. However, 20 percent identify the inability or difficulty to host face-to-face meetings as preventing their firm from making investments. Digging into the types of investments being made, it’s not just about portfolio companies. Although 30 percent of respondents reported all investments went to portfolio companies, 70 percent reported at least a quarter of their activity since March 1 was first-time investments in companies. When it comes to portfolio companies, almost half of VC investors are planning to retain at least 25 percent of capital to support portfolio companies. Interestingly, more than one-third of respondents reported that over 50 percent of their portfolio companies have needed to turn to government assistance, such as PPP loans, during this time.
Investor sentiment towards technology
VC investors still see some importance in VC-backed technology startups prioritizing growth over profit. In November 2019, 72 percent of investors surveyed (PitchBook-Web Summit Investor Survey, November 2019) agreed or strongly agreed with this statement, compared to 65 percent of respondents today. One major area of change was investors’ opinion on which emerging technology categories have the potential to be the most disruptive in the next five to 10 years. At the end of 2019, investors selected AI/machine learning as the clear leader to be the most disruptive (28 percent of respondents). Now, just over six months later, the healthtech vertical has skyrocketed to tie with the AI/machine learning category. Supply chain also saw a major shift, jumping from last place at 2 percent to fourth place with 11 percent. Interestingly, 11 percent of investors surveyed in November thought blockchain had the potential to be the most disruptive, but now 0% of respondents feel the same. PitchBook analysts see the potential for healthtech as well, stating that the coronavirus crisis could catalyze longer-term growth in telehealth as adoption grows, providers encourage its use, and customers become more familiar with the technology. Additionally, according to the latest PitchBook research on pandemic-induced supply chain disruption, the current crisis could catalyze long-term investment into emerging supply chain technologies as companies seek to diversify their value chains and mitigate the risk of future supply chain shocks.
How opportunities could change in a post-pandemic world
Although COVID introduced unprecedented turmoil and uncertainty into the VC ecosystem, nearly half of VC investors reported seeing more promising technology investment opportunities born out of the pandemic. This is on top of an already rosy technology outlook. Prior to the coronavirus pandemic, only 31 percent of VC investors felt there was a lack of promising investment opportunities in new technologies (PitchBook-Web Summit Investor Survey, November 2019). Understandably, investor focus has shifted away from the calibre of the founding and executive team to shine a brighter light on the business model and path to profitability. This shift was already in the works late last year, before the coronavirus breakout, as some deals were renegotiated given a new investing climate and public market declines. While the very nature of VC means there will always be somewhat of an emphasis on growth, the state of uncertainty brought on by COVID-19 has led investors to be even more focused on business models with a clear path to profitability.
Download the infographic here.
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About Collision from Home:
Collision from Home is redefining conferences with a “pretty big experiment”, according to the Sunday Times. Collision from Home is bringing 30,000 people who are reshaping the world online to make meaningful connections, explore and learn through software, all while it’s harder than ever to meet new people. Collision will return to Toronto as a physical event for the second year from June 21-24, 2021, at the Enercare Centre.