In our last quarterly report (VC/M&A Tech Trends – France Q1-20), we wondered about a possible V-curve recovery of the global economy – and thus of VC/M&A Tech Trends – following an astonishing bull stock market end of March: 1 month only after the market crash.
Q2-20 data for France shows that the most optimistic economic agent of the Tech ecosystem seems to be VC investors with a clear rebound in the number of investments in May and June and a total value of more than €1.1bn.
On the other hand, M&A deals have plummeted (€176m total exit value), emphasizing the fact that most acquirers (mainly Corporates) remain rather cautious about the still unclear outcome of the crisis.
So now, what can we foresee for the rest of the year?
With the closing in H1-20 of a dozen 2020 vintage funds (Cathay Innovation II, 360 Capital V, Alter Equity II, Kurma Biofund III, Partech Entrepreneur III, PSL/Elaia, Sofinnova Telethon I, etc.), the unprecedented level of dry powder, and H1-20 at €2.5bn, 2020 will most certainly equal 2019 around €5bn total VC investments, which was the previous all-time record year in France.
In this highly competitive intensity, it is very unlikely that valuations will decrease: the top 10% of Tech companies will still be massively funded at very high valuations and for the remaining 90%, the funding game will stay as hard as before.
More concerns can rise about Tech M&A deals, which show no sign of recovery yet. The recent surge of new clusters, new city lockdowns in Europe and in the rest of the world makes a potential relapse this autumn not unlikely, which will have for direct effect to keep on paralyzing Corporates decisions to make M&A deals.
With a +51% YTD increase on the BVP Nasdaq Emerging Cloud Index, it seems global investors are more than ever convinced about the transforming power of Tech on our lives.
Arthur Porré, Co-Founder and Managing Partner, Jul. 27th, 2020