Though external economic headwinds due to the coronavirus pandemic persisted in the third quarter, venture capital (VC) exits saw a major uptick, achieving the second-highest exit values on record, according to the PitchBook-NVCA Venture Monitor.
Following a tepid first half of the year for exit activity, the third quarter saw $103.9 billion raised across 185 exits, representing a quarter-on-quarter increase of 292.5% and 7.6%, respectively.
VC dealmaking remained resilient throughout the pandemic with $37.8 billion invested across 2,288 deals in the third quarter. The seed market, however, continued its sluggish pace in Q3.
North Carolina and the Southeast, like the rest of the nation, saw fund-raising headwinds caused by the pandemic, but also shows signs of recovery, according to the quarterly report.
The state as a whole saw $455.5 million invested in 53 deals. In the Southeast, $1.43 billion was invested in 180 deals.
- The Raleigh/Cary MSA raised just over $68 million in 14 deals.
- The Charlotte/Gastonia MSA racked up $192.8 million via 9 deals.
- The Winston-Salem MSA raised $11.6 million in 4 deals.
- One deal in Wilmington’s MSA raised $200,000.
- Greenville saw five deals raise $5.74 million.
- Southeast funds raised $1,137 billion for 18 firms.
Newcomers looking for their first VC investment, first-time fundraisers, founders from diverse backgrounds, or those between the coasts, have faced challenges, the report says.
One sector that could help solve many of these challenges, life sciences, had a very busy and productive quarter. The COVID-19 pandemic significantly increased investments, especially in those companies focused on discovery, development, and production of vaccines, antivirals, and antibacterials, areas that had previously been underfunded for many years.
Positive momentum from stock market
The positive momentum from the stock market in recent months, and the performance of new listings, encouraged companies to move forward with IPOs if they were prepared.
Investors continued to consolidate capital into their most valuable and mature businesses leading to a consistently high volume of VC mega-deals. The explosion of this slice of the VC ecosystem has been one of the most drastic changes over the last 10 years and has actually ramped up throughout the COVID-19 pandemic.
Fundraising remained strong
Fundraising activity remained strong in the third quarter, putting 2020 on track to set a record high for total capital raised.
Bobby Franklin, president & CEO of NVCA said in a statement,“The consolidation of capital continues toward larger, later-stage companies and established VC funds. While both of these trends are potential signs of concern for the long-term health of the VC lifecycle, overall the ecosystem has shown strong resiliency in the past six months.”
Deal sizes higher
The late-stage continued its resilience with 662 deals closed totaling $26.6 billion, bringing the yearly total to $78.2 billion. Amid uncertainty this year, investors have consolidated capital in their portfolio companies at the late stage, resulting in the ongoing trend driving deal sizes higher.
News Models of working
Patricia Nakache, general partner at Trinity Ventures, said, “The data from Q3 is consistent with what we’ve seen on the ground—the remarkable resiliency of the startup ecosystem. The COVID-19 pandemic has accelerated the adoption of startup innovations in Fintech, Edtech, and telemedicine. This increased usage of new technologies could ultimately result in permanent new models of working, learning and teaching, and receiving healthcare.”