Uncertain outlook for VC investment

By Conor Moore

While Venture Capital (VC) investment in the U.S. remained strong during the first quarter of 2020, the sudden emergence of COVID-19 created significant economic turbulence and uncertainty in March, according to KPMG Enterprise’s Q1 2020 Venture Pulse report.

While the impact on the VC market was somewhat muffled during the quarter due to a strong pipeline of deals, the outlook for Q2 is much less promising. Already, a number of in-progress IPO’s have ground to a halt, with a number of companies planning to postpone their offerings indefinitely.

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The latest Venture Pulse report says most companies that had planned to exit in the near-term, whether through acquisition or IPO, are likely changing or delaying their plans. Depending on the financial situation of these companies, VC investors might need to use their dry powder to shore up companies so they have the resources to maintain operations until the economy rebounds. This could significantly reduce the availability of funding for early stage companies over the next quarter.

Given the unexpected turmoil, U.S.-based VC investors are poised to become even more cautious with their investments moving forward. They will likely also need to re-evaluate the needs of their existing portfolio companies given the changing business environment.

VC investment in the U.S. is expected to slow substantially in the secon quarteras deals get more difficult to complete and VC investors hold back from making major new investments in order to focus on their existing portfolios.

A small number of companies could see upticks in VC investment should their products or services be particularly conducive to the current economic situation; for example, companies in biotech, digital services, or delivery and logistics.

The sudden change to employees working at home is already having a significant impact on companies with productivity solutions. In addition to productivity-focused companies, others that could see an uptick in investment include those focused on biotech, delivery, online services, or digital entertainment.

To learn more about what’s ahead for the Venture Capital market in 2020 and beyond, please take a listen to podcast below with Conor Moore.

If you would like to set up an interview with Conor Moore to discuss the report in more detail, please contact Pete Settles @pgsettles or psettles@kpmg.com.

Media contact

Pete Settles

Pete Settles

Director, Corp. Comm., Financial Services, KPMG US

+1 201-505-6065

 

 

Conor Moore

Conor Moore

Partner, National Leader, KPMG Private Enterprise, KPMG US

+1 415-335-8401

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