VC investments continue to defy expectations in Q4 2020 despite COVID-19 second wave, finds GlobalData

Despite the second wave of 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-COVID 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 US$120bn in Q4, says GlobalData, a leading data and analytics company.

Venkata Naveen, Senior Disruptive Tech Analyst at GlobalData, comments: “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% 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 US$5bn in funding. After-school edtech provider TAL raised US$3.3bn while online learning app Zuoyebang attracted US$1.4bn.

Edtech was followed by online retail with around US$2.3bn in funding. India’s Reliance Retail Ventures raised US$1.3bn in Q4, taking its total funding in the second half of 2020 to over US$2.3bn. The UAE’s Lulu Group, which runs hypermarket chains in the Middle East, secured US$1bn investment.

APAC companies, mostly from China and India, accounted for 70% 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.

Mr. Naveen concludes: “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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