VC investments continue to defy expectations in Q4 2020

Despite the second wave of the Covid-19 pandemic and slow economic recovery, global venture capital (VC) investments during the fourth quarter (Q4) of 2020 remained robust and were nearly at pre-pandemic levels. 

Albeit, the number of VC deals witnessed a continuous decline for the seventh straight quarter, there was an increase in the number of megadeals that helped to drive the overall investment value to nearly USD120 billion in Q4, says GlobalData, a leading data and analytics company.

Venkata Naveen, Senior Disruptive Tech Analyst at GlobalData, says: “The Covid-19 pandemic has changed the game of how companies across industries operate, driving a significant acceleration towards digital strategies. The Q4 2020 saw VC investors shift their focus on startups that were poised to offer tech-driven solutions in line with the new normal, such as enabling remote working, edtech, online retail and those offering increased access to customers via digital channels.”

The quarterly report ‘VentureView: Disruptor Investment Activity Q4 2020’ of GlobalData’s Disruptor Intelligence Center reveals that e-commerce accounted for more than 40 per cent of the top 10 VC deals in Q4 2020, with significant contributions from the education and retail sectors.

China’s edtech companies have raked in nearly USD5 billion in funding. After-school edtech provider TAL raised USD3.3 billion while online learning app Zuoyebang attracted USD1.4 billion.

Edtech was followed by online retail with around USD2.3 billion in funding. India’s Reliance Retail Ventures raised USD1.3 billion in Q4, taking its total funding in the second half of 2020 to over USD2.3 billion. The UAE’s Lulu Group, which runs hypermarket chains in the Middle East, secured USD1 billion investment.

APAC companies, mostly from China and India, accounted for 70 per cent of the top VC deals, as the region saw better than expected economic recovery from the Covid-19 pandemic compared to the US and Europe.

Interestingly, the pandemic has failed to dampen the rise of unicorns in Q4. At 47, the number of uniforms reached pre-Covid levels, representing the highest quarterly increase in the last two years. An increased number of fintech, e-commerce and enterprise application startups have achieved unicorn status during the quarter.

Naveen says: “The Covid-19 crisis will be a key driver of VC investments in early 2021. With many countries now experiencing a second wave of the pandemic and governments working towards the mass distribution of vaccines, startups helping enterprises to adapt to the new normal may gain traction from VC firms. E-commerce healthtech, fintech and edtech can remain investment hotbeds for VC in addition to tech infrastructure providers supporting the digital shift.”

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