Are VCs Still Investing?

The state of fundraising in the spring of 2020, in 12 simple charts

Christoph Janz
Jun 3 · 5 min read

At last week’s virtual SaaStr Summit I did a presentation about “Fundraising During a Pandemic”. If you’ve missed it and you’re interested in the topic, here’s a recording:

Given that we have a global pandemic and are likely heading into the deepest recession since World War II, it’s obviously not a great time to fundraise. At the same time, tech companies are better off than any other industry, and, to answer the question posed in the headline, VCs are still investing (we’re one of them). To try to get a better sense for the state of fundraising I went to Crunchbase, pulled some data on financing rounds of the two months, and compared the numbers to the same period in 2019.

As a caveat, the data in Crunchbase isn’t perfect. More importantly, there can be significant and varying delays between the closing and the announcement of a financing round. If we add the time it takes to get from signing a Term Sheet to closing a round we can assume that the Crunchbase data is lagging VC activity by at least a couple of weeks. But enough ado, let’s look at the data.

Image for post
Image for post
Image for post
Image for post
Data source for these and all other charts of this post: Crunchbase

Looking at these two charts only, it looks like the worst is behind us already. The number of deals dropped by almost 53% from April 2019 to April 2020 and continued to decrease in May 2020, but on a y/y basis, May 2020 looks much better than April 2020. What’s more, the US$ amount raised in May 2020 was larger than in May 2019! Apart from potential issues regarding data quality and reporting lag, it’s important to keep in mind that these charts show all deals, including what Crunchbase calls “corporate rounds”, debt financings, secondary transactions, as well as private equity financings, so the US$ amounts might be driven by some large PE deals.

If you’re reading this, you’re probably more interested in earlier-stage funding, so let’s look at that subset, starting with pre-seed/angel/seed investments:

Image for post
Image for post
Image for post
Image for post

What you can see here is that the number of pre-seed/angel/seed investments has fallen off a cliff:

  • In April 2020 seed/pre-seed deals were down more than 56% compared to April 2019.

If you look at the US$ amounts instead of the number of deals, the drop is significantly less pronounced, though. So interestingly, the average round size went up substantially. If we take a quick look at the median numbers we can see that the averages are not driven by a few outliers:

Image for post
Image for post

As you can see, the median seed round went up from April/May 2019 to April/May 2020. One possible interpretation is that only the strongest companies were willing and able to raise in the last two months and that these companies tend to raise bigger than average rounds, but I’m curious if there are other explanations for this finding.

Let’s look at what’s been happening at the Series A and Series B stage:

Image for post
Image for post
Image for post
Image for post

As you can see it’s a similar trend, but compared to pre-seed/angel/seed, the drops at Series A/B are somewhat smaller across the board. In particular, the y/y drop in the May 2020 deal count isn’t nearly as steep as for Series A/B as it is for pre-seed/angel/seed.

Let’s take a quick look at the median round sizes for Series As and Bs as well.

Image for post
Image for post

A similar picture again — with the exception of Series Bs in April, the y/y numbers are all up.

Let’s drill down even further and take a look at early-stage SaaS deals (tagged “SaaS” or “Cloud” in Crunchbase):

Image for post
Image for post
Image for post
Image for post
Image for post
Image for post
Image for post
Image for post

A few things that stand out here:

  • The amount of pre-seed/seed financing raised by SaaS startups has more than doubled from May 2019 to May 2020. I didn’t expect that.

Last but not least, let’s try to find out if there are any major differences between SaaS and the rest of the industry that aren’t easy to see in the charts above. The visualization below shows the y/y change of the number of deals and the US$ amounts raised, for SaaS and for non-SaaS, at pre-seed/seed and Series A/B, for April and May:

Image for post
Image for post
Image for post
Image for post

As a SaaS aficionado like me, you might look at these lines and conclude that SaaS companies are leading the recovery, but given that the picture isn’t super clear and that there are various issues around data quality and sample size, you didn’t hear that from me. ;-)

Point Nine Land

Stories from the P9 team & portfolio companies

Christoph Janz

Written by

Internet entrepreneur turned angel investor turned micro VC. Managing Partner at http://t.co/5WJ3Pepbcv.

Point Nine Land

Stories from the P9 team & portfolio companies

Christoph Janz

Written by

Internet entrepreneur turned angel investor turned micro VC. Managing Partner at http://t.co/5WJ3Pepbcv.

Point Nine Land

Stories from the P9 team & portfolio companies

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store