Venture capital funding hit $73.2 billion worldwide even as COVID-19, the U.S. presidential election and a possible hard Brexit continue to generate tension around the globe. “Fintech was a very hot sector of investment in the Americas this quarter,” according to KPMG. The quarterly Venture Pulse report from KPMG Private Enterprise also notes that the fintech, edtech, healthtech, business productivity and biotech sectors are expected to “remain very attractive.”
However, the fintech space is not without challenges. The report notes young companies hoping to enter the fray may be facing an uphill battle. Per the report, the total number of angel/seed stage deals in during Q3 was 1,650, the lowest since 2012’s final quarter. Similarly, early stage deals were down to 1,716, the lowest total since Q2 of 2014.
“While overall VC investment has remained surprisingly resilient given the number of diverse challenges being faced around the globe, the extended decline in funding for early stage companies causes some concern,” said Kevin Smith, Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International. “With many seed and early stage companies finding it difficult to attract funding, there could be a serious longer-term impact, on the VC pipeline, slowing advances and innovation into new ideas and areas of the economy.”
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According to the report, VC investment in the U.S. was “robust” as SpaceX raised $1.9 billion and Robinhood twice hauled in more than $600 million. Separately, Affirm, an alt-pay model company, raised $500 million and was among several other companies in the Americas to make multi-million-dollar deals.
Andrew Reed, a partner at Sequoia Capital, which led one of Robinhood’s investment rounds, pointed to the platform’s disruptive nature as a reason the company infused the funding. “Robinhood has made the financial markets accessible to the masses, and in turn, revolutionized the decades-old brokerage industry,” Reed said in a statement. “We’re excited to further our relationship with Robinhood, which we believe is at the beginning of its opportunity.”
Among some of Robinhood's other backers are NEA, 9Yards Capital, Ribbit Capital, Unusual Ventures, IVP and TSG Consumer Partners.
Further, the KPMG report also shows VC-backed exit activity, particularly in Q3, has surged. According to the report, 2020 enjoyed close to $250 billion in exit activity. This was driven largely due to successful initial public offerings for Snowflake, Unity Software and JFrog.
“After several quiet quarters, the [initial public offering] market for VC-backed companies rocketed into high gear in Q3’20, with a number of high-profile unicorns making successful exits,” said Conor Moore, co-leader of KPMG Private Enterprise Emerging Giants Network, KPMG International. “Given the recent filings by several other unicorns, coupled with the explosion of SPAC transactions, Q4’20 looks on-track to continue the record-setting pace.”
