VC investment in the Americas fell in Q2’20; while the US managed to attract solid investment, other jurisdictions within the region saw both the number of VC deals and total VC investment drop. The VC market in Latin America was particularly hard hit given widespread travel restrictions coupled with its major reliance on international investors.
Caution was the dominant decision-making strategy for VC investors in the Americas in Q2’20.
Despite the substantial amount of dry powder at their fingertips, VC investors were hesitant to make new investments in order to ensure they have the resources to support their existing portfolio companies. When making deals, profitability and efficient operations continued to be top priorities for VC investors — a trend that began in 2019; COVID-19 only enhanced the focus of VC investors on matters like cash management, unit economics, and the ability of companies to become cash flow positive.
After a significant decline in Q1’20, VC investment in Canada dropped further in Q2’20. Many VC investors in Canada hit the pause button on potential deals in mid-March. VC deal activity started to rebound in May as VC investors began to embrace alternative mechanisms to conduct deal-making activities, such as video conferencing and digital document sharing.
The strength of Canada’s biotech industry was on display in Q2’20, with Vancouver-based antibody-focused treatment company AbCellera raising a $105 million round to help it scale operations. AbCellera.1 The large Series B round closely followed on the heels of AbCellera’s announcement that the Government of Canada’s Strategic Innovation Fund would provide up to $175 million to support its development of antibody therapies for COVID-19 and other pandemic threats.2 Montreal-based Ventus Therapeutics also raised $60 million during Q2’20.
Trends to watch for in the Americas
Looking forward, VC investment in the US is expected to remain the strongest in the region given both the diversity of US companies able to attract investment and the focus of US investors on the domestic market given the challenges related to international deal-making.
While Canada typically sees a slowdown in deals activity over the summer, the country could see an increasing number of transactions in Q3’20 as VC investors work to complete deals that were paused due to COVID-19. VC investment in Latin America is expected to remain very soft in Q3’20 given the limited access to US and other international investors and the time required to attract investors and conduct deals remotely.
Across the Americas, early-stage businesses will likely continue to struggle to attract investment over the next quarter as investors remain focused on late-stage deals. This could cause significant challenges for early-stage companies without the cash reserves to weather the COVID-19 crisis. From a sector perspective, biotech and healthtech, fintech, edtech and delivery and logistics are expected to remain key areas of investment across the Americas — along with B2B solutions.