Venture Capitalists Spot Six New Investment Trends During COVID-19 Downturn
Despite a significant drop in dealmaking, venture capitalists see a major opportunity to invest during the economic nadir of the COVID-19 pandemic. Massive reserves of dry powder remain ready for deployment into resilient early-stage startups.
Venture capital dealmaking drops significantly as the COVID-19 pandemic causes widespread economic uncertainty, but investors see immense opportunity in the downturn. Data shows that deal closures fall well below previous averages, though many of these transactions actually begin before the crisis hits. Historical evidence from the 2008 recession proves that the best-performing investment vintages emerge when firms invest at the lowest point of a market crash and into the early stages of recovery.
Early-stage investing shows remarkable resilience during this challenging period, much like it did during the last major recession. Venture capital funds hold a massive $276 billion in dry powder, giving them plenty of capital to deploy into promising startups. The top categories attracting funding right now include enterprise SaaS, fintech, life sciences, healthcare IT, edtech, and cybersecurity, setting the foundation for a new post-pandemic economic order.
One major investment trend taking shape centers entirely on the future of work as remote operations become a permanent fixture for many companies. While current video conferencing tools help people stay connected, they often serve as inferior substitutes for in-person collaboration and limit serendipitous moments. Investors actively seek out new technologies, such as augmented and virtual reality, that promise to promote intimacy and trust among distributed workforces.