Are financings and M&A slowing down during the pandemic? (Update through July, 2020)

Back in April of this year I wrote “Are financings and M&A slowing down during the pandemic?” with the goal of sharing the Techstars view of how things have been changing over the events of the first half of 2020. Here’s an update to that data through the end of June, 2020. Remember, the graphs show when the activity starts (comes across our virtual “desk” at Techstars for the first time). I’ll continue to try to update and share it as we get more information.

The M&A data implies that the market “flinched” in April 2020. The one data point we saw in April 2020 was near the end of that month. Almost nobody was starting new M&A transactions in April. But, as the stock market came back so did the acquirers, just as quickly. My take on this is that the experienced acquirers are now deal hunting or doing business as usual. Those that are less experienced are still on the sidelines. Now, in July, M&A is really up but most of this activity is in smaller deals. As some startups have realized that they can’t raise a new round and continue to go it on their own in some cases, perhaps acquirers are being more opportunistic?

For financings, the data shows that there’s still no change in the activity level in general. Last July was a bit of an outlier for Techstars, with 71 financings starting that month. This was a high for the year (2019) up to that point. In 2020, we’re seeing financings continue on relatively the same pace as last year, adjusted up slightly for the size of our portfolio growing at about 500 companies per year which is about 20% over 2019 data. Takeaway: VCs have capital and they’re deploying it. Sure, maybe valuations have adjusted downward slightly, but the pace feels unchanged.

For next months update, I’m hoping to dig up and share some data on how valuations have changed in financings at Techstars in 2020 vs 2019. Since we generally see around 500-600 financings a year in our portfolio, this feels like it could be helpful and interesting. If I get it sooner, I’ll post it on the blog.

file under: Startups