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Q3 Venture Funds Inch Up, Early-Stage Deals Drop

Early-stage venture Q3 2020

(Crunchbase)

16 Oct. 2020. Venture capital funding rose in the third quarter of 2020, driven in large part by investments in already established companies rather than newer enterprises. But the technology industry research company Crunchbase reports this week in preliminary data that life science and health start-ups grabbed a large chunk of the funding for early-stage companies.

The Crunchbase data, compiled from its daily tracking database of investment deals in North America, show venture capital funds invested $35.7 billion in the July to September 2020 period, an increase of nine percent over the second quarter and a two percent gain compared to the same quarter in 2019. Nearly two-thirds of those funds — $23.3 billion or 65 percent — went to companies raising their third or later venture funding rounds, in 231 deals. Both the deals and investment funds total are increases from the 220 deals and $17.4 billion invested in the second quarter of 2020.

Early-stage deals, those going to companies raising their first or second venture rounds, declined in the third quarter. Venture funds invested $9.4 billion in 547 early-stage deals, down from the $11.9 billion invested in 671 deals during the second quarter of 2020. But as Crunchbase reports, life science and health technology companies grabbed 40 percent of these early-stage funds, suggesting continuing investor confidence in this sector. Crunchbase says these preliminary numbers for early-stage investments may change, since some deals closing late in the quarter did not make it into its report.

In July, Thrive Earlier Detection, a company developing early cancer screenings with a single blood test, raised $257 million in its second venture round, the largest single early-stage deal in the quarter. Science & Enterprise reported last year on the company’s first venture financing that raised $110 million.

Seed-stage companies, those just getting started, gained $1.4 billion in 1,048 deals during the third quarter. Both the seed-stage investment dollars and number of deals have declined steadily since the beginning of 2020. Crunchbase says financial technology and services start-ups were favored by seed-stage investors, but health care and life sciences companies were also well represented.

Crunchbase also reports on exits: mergers and acquisitions, and initial public offerings or IPOs, that enable companies to graduate from venture financing. The largest single acquisition in the quarter was Illumina’s purchase last month of Grail, a cancer screening and analytics company, valued at $8 billion, also reported by Science & Enterprise. In addition, Crunchbase says 55 IPOs of venture-backed enterprises took place in the third quarter of 2020.

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