The second quarter of 2020 was the first full quarter in which entrepreneurs were trying to raise venture capital amidst the economic uncertainty caused by the Covid-19 pandemic.
Despite these difficult conditions, the U.S. didn’t experience the VC apocalypse that some predicted when the virus first arrived.
A report from PitchBook found that after a couple months of startup triage and stabilization, VC investing began to pick up in May. While some industries have been hit hard by the pandemic, PitchBook found that many software companies, especially those in the health care sector, have fared well.
This was especially evident in Minnesota, where health-tech companies led the way for VC deals in Q2.
Overall, VC deal count lagged in the U.S. but deal value remained strong. So far this year, 5,058 companies have raised just under $70 billion so far in 2020, according to PitchBook’s report.
Late-stage VC deal count uncharacteristically outpaced the early-stage in Q2 as investors looked to protect their largest and best investments. First-time financings have fallen sharply.
In Minnesota, the number of deals in Q2 declined from 2019. According to PitchBook, 21 startups received VC deals in Q2 2020 compared with 33 deals in Q2 2019. During Q2 2019, Minnesota companies brought in just over $170 million in venture capital funding. In Q2 2020, this number dropped around 11% to $152 million.
Deal value also dropped across the Great Lakes region, which PitchBook defines as Minnesota, Wisconsin, Michigan, Illinois, Indiana and Ohio. Great Lakes startups accounted for 2.5% of national deal value the last quarter, compared to 3.5% the same time last year.
Deal count, however, increased slightly for the Great Lakes. The region represented 8% of U.S. deals last quarter. In 2019, this number was 7.2%.
Despite difficult economic conditions, a handful of Minnesota companies managed to raise rounds of funding last quarter. CVRx, a medical device company based in Brooklyn Park, raised $50 million to support the commercialization and continued development of Barostim Neo, a heart failure device.
And Histosonics, a medical technology company creating a non-invasive device that destroys cancerous tissue, closed on $40 million in an oversubscribed Series C round of funding.
Although we began to see several positive trends at the end of the second quarter, PitchBook anticipates that uncertainty will persist among VCs for the remainder of 2020.
“There are still dark clouds looming on the horizon; whether they fade away or collect into a new storm could determine how the rest of 2020 unfurls for the entrepreneurial ecosystem,” PitchBook said.
