Global VC investment set records in 2020: KPMG

Thanks to a strong fourth quarter, global venture capital (VC) investment topped US$300 billion in 2020, according to a new report from KPMG LLP.

With $80.8 billion (all figures in U.S. dollars) in fourth quarter investment, global VC funding totalled $300.5 billion for the year, which is the second highest total on record, trailing only 2018’s $329.7 billion.

KPMG said that the strong fourth quarter was “driven by a continued resurgence of investment activity in Asia, particularly in China,” but that activity also remained robust in Europe and the Americas.

Indeed, both the Americas region and Europe set full-year records for VC investment, with $164.3 billion in the Americas (including a record $156.2 billion in the U.S.) and $49 billion in Europe.

Canada registered its fifth straight drop in quarterly VC investment in the fourth quarter, KPMG noted. Yet, investment was still strong “compared to historical norms,” it said.

Looking ahead, KPMG said global VC investment is “expected to remain quite high” in the first quarter of 2021, “given the large amount of dry powder in the market, low interest rates in many regions of the world, and the increasing drive of corporates for digital transformation.”

Indeed, the continued strength in tech amid the pandemic is fuelling robust VC investment.

“We all know that Covid-19 has been an incredible challenge this year in every region of the world. But with great challenge often comes great opportunity – and the tech sector has certainly seen that this year,” said Kevin Smith, co-leader, KPMG Private Enterprise Emerging Giants Network, in a release.

“The acceleration in digitization and changes in consumer behaviour have been significant,” Smith said. “VC investment has followed suit. Heading into [the first quarter of 2021], VC investment will likely remain very robust, particularly in areas like mobility, logistics and delivery, fintech, health and biotech, and edtech.”

KPMG also reported that VC-backed exit activity reached a record high of $189 billion in the fourth quarter of 2020, led by high-profile IPOs for companies such as Airbnb and DoorDash.

“IPO and M&A activity is also expected to remain very robust as other unicorns look to exit,” it said.

“Given the very successful IPO exits of several high profile unicorns in [the fourth quarter], we can expect an increasing number of exits in 2021, especially with the booming phenomenon of SPAC transactions. 2021 is set to be very exciting,” said Conor Moore, co-leader, KPMG Private Enterprise Emerging Giants Network.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.