Despite uncertainties related to the global pandemic, the November US presidential election, Brexit, and the ongoing trade tensions between China and the US, VC investment remained very strong in Q4’20. The significant amount of dry powder in the market, combined with a continued focus on late stage deals helped to keep VC investment high globally despite an ongoing decline in the number of VC deals.

VC investors focused on tech-driven solutions

During 2020, COVID-19 created numerous challenges for governments, businesses, and consumers. It also created significant opportunities, particularly for tech-driven companies with solutions able to help businesses quickly respond to the shifting needs of their workforce and their customers. During Q4’20, VC investors across jurisdictions continued to focus on companies with strong value propositions given the ongoing pandemic, including companies in logistics and delivery, health and biotech, fintech, and business productivity.

Global venture financing 2013-Q4'20

IPO market continues to surge

During Q4’20, the IPO market continued to surge, particularly in the US where three unicorns went public over a two-day period in early December; delivery company DoorDash raised over $3.3 billion in its IPO, AI-driven enterprise SaaS firm raised $651 million2,3, and vacation rental marketplace Airbnb raised $3.5 billion4. Special Purpose Acquisition Company (SPAC) IPOs also continued to explode during the quarter, helping to make 2020 the biggest year for SPAC IPOs in decades

Health and biotech well positioned for continued growth

In Q4’20, health and biotech continued to be a very hot area of VC investment in all regions of the world, with a number of companies raising $100 million+ funding rounds, including US-based Resilience ($725 million) and Tempus Labs ($450 million), UK-based LumiraDX ($389 million), China-based LianBio ($310 million) and RecBio ($224 million), and Germany-based ATAI Life Sciences ($125 million). During the quarter, China-based JD Health also held the largest healthcare IPO seen in Asia, raising $3.5 billion on the HKSE5.

While the approval of a number of COVID-19 vaccines during Q4’20 suggests the world will be able to move beyond the pandemic in 2021, VC investments in healthcare and biotech are expected to remain high across jurisdictions for the foreseeable future given the increasing awareness of the need to modernize many aspects of the healthcare system and the potential applicability of technologies like AI to improve drug discovery processes.

A permanent shift in consumer behaviors

Over the past year, consumers around the world had little choice but to embrace digital technologies across many aspects of their lives. Consumers that once clung to in-person service channels have grown accustomed to using technology for a whole host of activities, from conducting their day-to-day banking activities to ordering groceries and other household items for delivery. The convenience of many of these activities is expected to outlast the pandemic, driving a permanent shift in consumer behaviours and their uptake and interest in digital channels.

The shift in consumer behaviours and the ongoing acceleration of digital trends is expected to continue to drive VC investment, particularly from corporates looking to respond to the shifting needs of their customers. At the same time, the increasing focus on digital channels is expected to drive increased investment in complementary activities, including cybersecurity and customer authentication.

Trends to watch for globally:

Looking ahead to Q1’21, global VC investment is expected to remain quite high given the low interest rate environment in many regions of the world and the vast amount of dry powder in the market. IPO activity is also expected to remain strong given the pipeline of unicorns and other mature technology companies looking to exit.

Venture Pulse Q4 2020 - Jonathan Lavender - quote