PitchBook, the premier data provider for the private and public equity markets, today released the findings from a new survey conducted in partnership with Web Summit, the world’s largest technology conference. The survey, Venture Investing Before and During Coronavirus, examines venture capital (VC) investment preferences as the COVID-19 pandemic continues, including sentiment towards untapped opportunities in tech and perceptions around diversity in VC. The survey was administered to 102 VC investors attending the virtual Web Summit conference. Investors in attendance were from all over the world.
This is the third survey PitchBook and Web Summit have partnered on, with existing results from similar polls of investors attending Web Summit in November 2019 and Collision from Home in June 2020. Where applicable, comparisons between the three surveys have been provided – an indication of how investment attitudes have continued to evolve as the global pandemic persisted.
“As we reflect on this unpredictable year, venture has been resilient. Polling investors every six months since right before the pandemic started has provided a unique look into how investors have adapted during this period of global economic uncertainty,” said Cameron Stanfill, senior VC analyst at PitchBook. “It’s encouraging to see the number of investors completing first-time deals has increased relative to the onset of the pandemic. Given the encouraging recent developments around a coronavirus vaccine, we expect to see improving confidence from both general partners and limited partners around deploying capital into the venture ecosystem.”
“Two of the private investment market’s primary criticisms are a lack of liquidity and long time horizons. However, data suggests that these same issues have contributed to sheltering the industry from the overall macro uncertainty prevalent throughout 2020,” said Alex Mackenzie, Head of Investors at Web Summit.
- Over half (52%) of respondents said they have made between 1-5 investments since the pandemic really hit in March 2020. 25.5% claim to have closed on 6-10 investments in the same timeframe.
- For additional context, 51% of all surveyed said they are currently making investments at the same rate as before the coronavirus pandemic, and only 3.9% claim to have significantly pulled back on investing during this time.
- As the pandemic continued, investors participated in more first-time deals. Back in June of this year, 29.8% of investors had made no first-time deals. Now six months later, only 8.8% of respondents have made no first-time deals. Furthermore, 30% of respondents said all investments have been first-time, which is up from 25% last June.
- Nearly half of all respondents said geopolitical events (e.g., U.S. Elections) do not impact their investment strategy at all, with a mere 2.8% claiming it affects 75-100% of their strategy.
- The number of investors whose portfolio companies have needed government assistance (e.g., PPP loans) has already halved compared to June (from 34.4% of investors to 17.2%). Nevertheless, 42.2% of investors said there is still a small portion (25%) of their portfolio seeking government aid.
- When asked what percentage of capital investors are retaining to support portfolio companies, 25.5% of respondents are not planning to retain any capital for this purpose. However, 38.2% of those surveyed are retaining 25% of capital and 32.4% of investors are retaining 50% of capital to support portfolio companies.
- Investors have adapted to the new way of operating brought about by the pandemic – 81.4% of those surveyed said the inability to meet face-to-face does not preclude the firm from making investments.
Opportunities in Venture
- When asked whether firms were taking steps to increase unrepresented and underrepresented populations within the firm and its portfolio companies, 31.4% of investors said they’ve launched programs and initiatives to increase representation, and 44% are actively exploring ways to increase representation.
- Looking at the top criterion used to evaluate investment opportunities, the pedigree of the executive team makes a comeback. Before COVID-19, investors ranked this most important (31%) but, in June, it fell to the least important (15%). Now in November 2020, it’s back on top with 38.2%. Disruption potential is second at 30.4%, while business model fell to tie with a pathway to profitability at 15.7% for each.
- Investor sentiment towards emerging tech has shifted from before the pandemic to now, but one category of technology that has held steady for having the most disruption potential is AI and machine learning (36.3%). The more notable shift was in the blockchain category, where 11% of investors saw the disruption potential in November 2019, which fell to zero in June 2020. Now, 7.8% of investors expect blockchain to be the most disruptive in the next 5-10 years.
- In light of the pandemic, some investors have found interest in investing in new technologies. Digital health and healthtech, future of work, edtech, biotech, and contactless technology, were some of the top listed answers.