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20 May, 2020 - 11:22 By Tony Quested

Venture investors retain appetite despite impact of COVID-19

UK venture investors appear to still be open for business, signalling a positive message to startup and scale-up businesses seeking investment.  

PwC Raise, which supports high growth potential businesses looking for VC cash through an investor readiness programme, surveyed 84 leading UK venture and venture debt providers on their perceived impact of COVID-19 on future investment activity. 

The survey respondents comprised a mix of VC investors, Corporate Venture, Family Office, VCT/EIS funds and venture debt providers.   

The results indicate that UK venture investors, despite their focus on shoring up their existing portfolios, appear still to be open for business, albeit processes are likely to take longer, investment sizes to be smaller and valuations to be lower. 

Glen Waters, head of Raise at PwC, says: “COVID-19 is predicted to impact deal pipeline: 90 per cent of investors believe there will be some form of impact on investment activity as a result of the virus, however, only 23 per cent currently believe this impact will be significant. 

“Overall venture deal volumes are predicted to be down in 2020 compared to 2019, with 72 per cent of investors believing volumes will be highly or significantly down.”   

The survey found that average investment ticket sizes are likely to be reduced in 2020, with most investors believing COVID-19 will have a high (43 per cent) or significant (14 per cent) impact. There does however seem to be a more diverse opinion around this with 42 per cent believing a minimal to medium impact will be seen. 

With volatility in the public markets, this is likely to be a catalyst for lower valuations in the private markets: 90 per cent of respondents believe there will be a 20 per cent+ haircut to valuations on pre-COVID-19 levels, with nearly a quarter of respondents believing the downward correction will be 30 per cent+.     

In terms of priority sectors, investors believe companies in the Health (79 per cent) and EdTech (77 per cent) sectors represent the biggest opportunities as a result of COVID-19. 

John Dow of PwC in Cambridge says: “The sectors flagged as the most attractive very much play to the strengths of the Cambridge and wider East of England market. 

“Hopefully there will be the continuation of investment into the region and particularly the life sciences sector but perhaps, in the short term, not at the significant levels of the recent period. 

“It is notable that social impact based investments is the next biggest area of interest with the effects of COVID-19 further accelerating the growing focus of investors and entrepreneurs in creating impact and purpose led businesses and solutions.”

• To find out more about the survey or discuss opportunities to raise investment, you canjohn.d.dow [at] pwc.com ( email John Dow)

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