Editor’s Note: This story first appeared in the Austin Business Journal [subscriber content]. We’ve republished it here in an abbreviated format.
The number of venture capital deals in the Austin metro during this year’s second quarter dropped to the lowest total since the third quarter of 2018 but total capital invested was robust — highlighting some of the contradictory trends at play in startup investing during the Covid-19 pandemic.
PitchBook and the National Venture Capital Association reported that $561.3 million was raised by companies in Travis, Bastrop, Caldwell, Hays and Williamson counties in April, May and June. That was more than what was raised in the metro in 11 of the 13 quarters stretching back to the beginning of 2017.
Those figures might be surprising, considering Austin Business Journal has chronicled a slowdown in local VC deals and others have done the same with nationwide trends.
Local startup investors had been preparing for a slow Q2.
“The amount of fundraising in the past 60 days in Austin does appear to be down materially with the few larger rounds getting funded for more established companies,” Unbundled Capital Managing Partner Peter Freeland told ABJ in June. At the same time, S3 Ventures Partner Charlie Plauche cited PitchBook data predicting the second quarter would be one of the slowest for new investments in the past decade.
That seemed to be the case nationally, as deal count in the United States dropped to 2,197, down about 30% from 2,861 in Q1 and down about 41% from 3,102 deals in Q2 2019. More and more money is being concentrated in mega-deals of $100 million or more, suggesting many investors have backed existing portfolio companies with bigger follow-on rounds.
Nationwide, PitchBook and the NVCA predict total deal flow nationwide could contract 25% to 30% this year "as VCs double down on high-performing portfolio companies and quickly cut their losses on troubled startups."
Total VC investment in the second quarter was $34.3 billion, compared with $34.8 billion in the first quarter and $36 billion in Q2 2019.
Focusing back on the Austin metro, there were 56 investment deals in Q2, according to the Venture Monitor report by PitchBook and the NVCA, which was the fewest since 55 deals in the fourth quarter of 2016.
The Venture Monitor report looks at total capital invested by quarter — a category that encompasses VC deals as well as other types of investment.
