Venture capitalists still investing in startups, despite Covid crisis
Despite the coronavirus pandemic, startups worldwide are still getting investments from venture capitalists. In the third quarter, startups worldwide raised 73 billion dollars in capital, 3 billion more than the previous quarter. In the Netherlands, startups raised 591.2 million dollars in the third quarter, more than double the 252.4 million dollars raised in the quarter before, according to a study by KPMG and additional figures the accountancy firm provided to NL Times.
Over the past few quarters, investors particularly pushed money into companies that could adapt to the coronavirus crisis and respond to consumers' changing needs prompted by things like working from home and distance learning. With the second wave of the pandemic hitting more and more countries, this will likely continue in the coming period, KPMG expects.
"With many countries facing a second wave of contagion, venture capitalists will continue to focus on solutions that meet digital needs of businesses and consumers," Mark Zuidema of KPMG said. "Here, healthtech and fintech are expected to remain important investment areas."
The accountancy firm noted that while the total amount of investments increased in the past six months, the number of investments decreased. New startups in particular drew fewer investments during the Covid-19 crisis, though this trend started to show itself before the pandemic. KPMG partly attributes this to longer buying cycles and the difficulty of concluding transactions remotely.
KPMG expects this too to continue into next year. "The decline in capital injections in early-stage startups will continue, leaving many of these companies without capital," Zuidema said. "This is likely to bring some consolidation in the market, especially in sectors most affected by the pandemic."