Q3’20 Venture Capital Investment

Q3’20 Venture Capital Investment

As countries re-opened their economies, in Q3’20 both VC investors and companies have adapted to new ways of doing business.  In Europe, sectors have seen high potential despite or because of COVID-19 attracted significant investors’ attention, including transportation and logistics, health and biotech, and fintech. Most VCs have adapted to new, remote ways of doing business, and capital invested continued at a strong pace in the third quarter.

A new report from Pitchbook highlighted the venture capital investment situation in Q’3 20. The $37.8 billion invested in Q3 was relatively on par with Q3 2019, thanks largely to late-stage investments. The startup ecosystem appears to be responding admirably to the grave challenges currently facing the US. Startups and entrepreneurs look to be moving aggressively to address the major challenges of our time: climate change, healthcare, COVID-19, and more.

There is a rise in sustainable startups in CEE – changing the world towards sustainability. The CEE region continues to evolve and compete to be at the forefront of the European tech startup scene. Startups are crucial elements of fostering knowledge-intensive and sustainable growth. While some sectors have struggled during the pandemic, the adoption of many new startup technologies accelerated and underpinned investment in those spaces

Among the top sustainable companies in Europe, first on the list is Denmark’s Ørsted A/S. The company claims the top of the leaderboard in 2020. Within a decade, the company has completely transformed its business model—shifting away from the Danish Oil and Natural Gas (DONG) company into a pure-play renewable energy company.

Moving forward, we may see significant long-term changes in consumer and business behaviour that prove fundamental to the creation of new, large firms that emerge from this turbulent time.

However, not all trends in the ecosystem have been positive. The number of seed and early-stage VC investments has rapidly declined, and we have seen an even steeper reduction in the number of first financings for startups, which reached a 10-year low in Q3. Ecosystem concerns also include worries over a retraction on gender-diversity progress given decreased investment into female-founded startups in Q3, and in 2020 overall. We’ve seen the number of women in venture capital firms with two or more female partners doubled last year to 14%.

Source: Chart from @Sifted

Trends to watch for in Europe

As Europe continues to adjust to a new reality, VC investors in Europe are expected to remain highly focused on areas such as health and biotech, fintech, and the future of work. In fact, 2020 is the largest funding year ever for digital health. The $4.0B invested in US-based digital health startups through Q3 brings the year’s running total to $9.4B. Notably, 19 of the 25 largest early-stage VC deals in Q3 were in healthcare.

Pharma and biotech startups also accounted for four out of the five largest exits in the third quarter of the year, representing a combined value of €5.3bn. That’s on track to beat the annual exit values from software startups for the second consecutive year, according to the report from Pitchbook.

GDP levels in the euro area and EU

The COVID-19 pandemic also had a strong impact on GDP levels. Based on seasonally adjusted figures, GDP
volumes were significantly lower than the highest levels of the fourth quarter of 2019, according to data from the EU Commission.

The number of employed persons decreased by 2.9% in the euro area and by 2.7% in the EU in the second
a quarter of 2020, compared with the previous quarter.

These were the sharpest declines observed since the time series started in 1995. In the first quarter of 2020, employment had decreased by 0.3% in the euro area and by 0.2% in the EU.


Venture Capital Investment Q3

Global venture capital investment continued to be very strong in Q3’20, opposing concerns of a potential drop-off in investment due to the challenges associated with getting deals completed during a pandemic. While the number of VC deals dropped for a sixth straight quarter, the level of investment remained high, as VC investors continued to focus on late-stage companies. Three $1 billion+ mega-deals helped to propel the global investment total in Q3’20, including raises by WM Motor in China, SpaceX in the US, and Flipkart in India. The US accounted for the largest amount of VC investment globally during Q3’20 at $37.8 billion raised, although both Asia and Europe also saw increases compared to the previous quarter.

Following a record high in Q2’20, Europe continued to see robust VC investment this quarter. Fintech and health tech were among the hottest areas of investment this quarter. Venture capital investment is expected to remain steady in Q4’20, although the US presidential election and the possibility of a hard Brexit on December 31, 2020, could cause some investor concern. COVID-19 is expected to remain a key driver of both investor caution and investment heading into Q4’20. Therefore, it is safe to say, that investors will keep their focus on health care and fintech as key areas of investment,  in addition to B2B solutions and edtech.

Market Analysis South East Europe

Market Analysis South East Europe

During covid-19 pandemic, over 16,000 people tested positive in South East Europe. However, market analysis for South East Europe shows a slowdown in the SEE economies. Those heavily rely on trade with investments from European countries, especially Germany and Italy. Unemployment in the SEE economies may rise again and labour market conditions may deteriorate further, as a significant share of the workforce lives abroad (between 20-25% of the population).

Moreover, within the domestic markets SMEs, manufacturing and tourism sectors will be among the most affected. Some SEE governments have already introduced stimulus packages. As an example, the government in Croatia raised support from HRK 3 250 per worker to HRK 4 000.

All SEE economies have closed their borders crossings to the movement of people while allowing the flow of goods and medical equipment. Due to the lockdown measures, educational systems in the SEE region have started conducting classes remotely. The lockdown also affected cafes, restaurants, and retail store, as well as large-scale cultural events. These measures have triggered a rapid expansion of e-commerce services in the SEE. That triggered many firms to seek new ways to conduct business during the crisis.

Furthermore, a covid-19 pandemic is taking a heavy toll on the economy which will affect South East Eruope. In this market analysis, South East Europe is leading to much lower economic growth compared to other European countries.

Economic impact: Market analysis South East Europe


First and far most affected due to the covid-19 pandemic will be domestic supply. Although macroeconomic policies can aid the recovery of demand, they can not completely offset the economic consequences.

Summer season for tourism is not looking good either. Albania and Montenegro tourism revenues exceed 20% of GDP.

Third, exports across the region will fall due to depressed demand, as well as disruptions in value chains. Moreover, the manufacturing sectors contribute most to their economies in terms of value-added and employment.

Source: World Bank Data from the OECD report


The contributions of foreign direct investment (FDI) to the Western Balkan economies were relatively sizeable over the last years. With FDI investments over the past years, we could see more economic growth and job creation. See the chart below-showing investments for South East Europe region. Romania shows growth in FDI investments with a net flow of over 7 billion US$ in 2018.

Source: World Development Indicators


The economic slowdown will also come at a bad time for Albania and Croatia, as both economies have been recently hit by earthquakes. No argue that this will add an additional burden to already stretched budgets to counter the coronavirus outbreak.

Unemployment in SEE region


In South East Europe there is a constant outflow of human capital. According to available data from the United Nations, in 2019 there were almost 4.6 million people living abroad from the five Western Balkan economies. In particular, young, skilled workers seek job opportunities outside the region. Also, many health professionals leave for Western EU countries and Switzerland.

Moreover, in the context of current covid-19 crisis, two thirds of people have no prior experience with teleworking. On average, only about one third of individuals aged 25 to 64 with high formal education have at least once worked from home in 2018.

All Western Balkan economies have taken measures to limit physical interaction, and the workplace was the first focus of those measures. Existing regulations have already been relaxed and new options for teleworking have been introduced.

What to expect for SMEs?


In the Western Balkans, over 99% of all firms make up SMEs, which generate around 65% of total business sector value-added. SME’s account for 73% of total business sector employment according to OECD.

There are only few implications on how covid-19 could impact on financial losses for SMEs. However, we can only assume that the reduced customer demand will lead to cash -flow problems.

The economic impact of covid-19 in Croatia

The economic impact of covid-19 in Croatia

The covid-19 in Croatia according to assessment of the health system is tackling the health issue. As of 4 May, the infection curve seems to be flattening. With a decrease in new cases compared to previous weeks. The Government has stated that the epidemiologic situation is under control. Data in this report is gathered from the OECD Croatia covid-19 report and official resources.

Croatia’s unemployment rate edged down to 8.6 percent in March of 2020 from 8.9 percent in the March of 2019. The number of unemployed people decreased by 2.340 thousand to 143,461. In February, the jobless rate was lower at 8.3 percent. See the chart below of unemployment in Croatia.


Croatia unemployment rate

Source: Trading Economics


Official data suggests an increase in registered unemployment for the first time since 2013. Due to market instability, the HRK/EUR exchange rate depreciated. As of 27 April, the Croatian Kuna has regained some of its lost value.

Source: European Central Bank


Investor panic did damage to the Croatian financial market, as the Zagreb Stock Exchange’s indicator, Crobex, lost over 32% of its value from 19 February to 19 March. The Crobex resumed growth the following two weeks, possibly due to investor confidence in Government measures and their ability to limit economic damage.

Government measures during covid-19 in Croatia


Croatia as part of many European countries introduced to the public measures due to the covid-19. Moreover, on 16 March, the Government closed all educational institutions. Distance learning for primary education is delivered through public service broadcasts. Primary education is expected to partially resume as of 11 May.

The covid-19 in Croatia will leave an impact on how people will act in the new normal. Further on, Croatia announced new restriction measures to the public on 24 March and introduced a ban on travel between cities.

As of 20 April, restrictions on movement inside individual counties have been lifted for most counties. The government plans to begin easing the restrictions in three phases. As of 27 April, businesses selling goods and services may reopen as long as they are not inside shopping malls.

As of 4 May, service industries may reopen, including those that involve close human contact. Country-wide public transportation and domestic air traffic are expected to reopen on 11 May.

In addition to supporting measures, on 20 March, the Croatian National Bank (CNB) adjusted its regulatory framework and monitoring activities in order to support the liquidity of financial institutions.

Monetary and fiscal measures for the covid-19 in Croatia


On 17 March, the Government announced measures of a combined worth of over HRK 30 billion (around EUR 3.9 billion) to support the economy is coping with the effects of the pandemic.

Also, the Government has promised interest-free loans to local organs and other public bodies whose revenue will be affected by the delay in payments.

The Government set up dedicated accounts for the collection of donations and the start of a campaign to assist with relief efforts related to the Zagreb earthquake (Together for Zagreb), and the COVID-19 pandemic (Croatia Against Coronavirus).

One additional fiscal measure to support firms, Employment Agency has made available special subsidies to employers. These include salaries of full-time and part-time workers in accommodation, food and beverage,
transportation and storage and other sectors in which workers are prevented from attending work due to confinement measures.

The Government increased this support from HRK 3 250 per worker to HRK 4 000.

Within the April package, the Government announced an exemption on payment of income tax and contributions for entrepreneurs with an annual income of less than HRK 7.5 million (representing 93% of firms).

The overview


Prior to covid-19 in Croatia, GDP growth was accelerating, with a growth rate of 2.9 in 2019 (after a slight slowdown from 2017 to 2018). Unemployment was low, registering at 6.1% in January 2020. At the end of 2019, the Government budget ran a surplus of 0.9% GDP.

Croatia’s economy strongly relies on the tourism sector, which represents around 20% of GDP. This could bring economic difficulties as the tourism industry is suffering worldwide as a result of the pandemic. Efforts to support both firms and employees in the sector Government recently announced. Difficulties related to reduced export of goods are also expected.

The economic impact on e-commerce

The economic impact on e-commerce

As the COVID-19 changes buying behaviour, the economic impact on e-commerce could be longlasting. As people come to terms with their new living situations, their buying behaviour has adapted to suit their needs. While panic buying may have slowed in some countries, consumers continue to stock up on supplies, or “pandemic pantry products”.

Although grocery shopping has received higher demand, the Adobe digital economy index data shows that electronics, home and gardening are also influential due to the online economy. See the charts below.

Source: Adobe Digital Economy Index

Demand for groceries has been increasing slightly in recent years, driving online price up by 4.6%. Moreover, plunging TV prices and wider 4K availability have boosted online purchase power over past years. As for the home and gardening, prices have been steadily deflating, but they still rise in early summer as demand increases for outdoor furnishing.

Meanwhile, consumers are experiencing out of stock pages as the supply chains are impacted. The products that receive higher demand due to the COVID-19 impact from January to March, include:

1. Virus protection category products like hand sanitizers, gloves, masks, and anti-bacterial sprays surged 807%

2. Over-the-counter drug purchases increased by 217% for cold, flu, and pain relievers

3. Toilet paper online sales spiked by 231%

4. Non-perishable, canned goods and other shelf-stable food sales increased by 87%

Looking ahead, the economic impact on e-commerce caused changes in shopping and buying behaviour.

“Quick turnaround shopping happens when you think something it is going to go out of stock, like on Black Friday,”

Tamara Gaffney, VP of Decision Strategy at Quantum Metric in an interview with Retail TouchPoints

She also shared that no matter what category you look at, regardless of if you think that matters right now, is seeing online growth.

The covid-19 outbreak in France

Moreover, an interesting increase in online sales is showed in online pharmacies. The latest statistic report from Statista shows e-commerce activity development after the covid-19 outbreak in France.

Source: Statista

The statistic shows the activity of online commerce after the outbreak of the coronavirus (Covid-19) in France in March 2020, in terms of transaction and traffic rate development. Hotel websites showed a fall of about 9% in transactions and around 8% in website traffic rate between February 16 and 23, 2020. Online pharmacies had increased their traffic by 15.3% and their transaction rate by around 2%.

Demand in supply chains: impact on e-commerce

While it was easy to predict the rise in online shopping and demand for e-commerce in the supply chain, the retailers may be facing pressure. Officially the world’s largest retailer, Amazon has announced it can no longer keep up with consumer demand. As a result, it will be delaying the delivery of non-essential items, or in some cases not taking orders for non-essentials at all.

That said, the pressure that economic e-commerce demand from online shopper posed will have consequences on small retailers. Many don’t have the large supply chains that Amazon has and therefore could experience delayed in shipping.

In fact, in early March, 20% of shoppers already had had an e-Commerce delivery delayed or cancelled due to coronavirus, according to ShipStation.

No matter if you are a small or large business with well-organized supply chains, you should keep your communication transparent. If you want a good long term relationship with your customers, be honest and transparent with the possible shipping delays.

Although you can’t virtualize a warehouse worker, you can use digital communication and the process between supplier and retailer.

Change in Grocery E-commerce

Higher demand in grocery online shopping has had a meaningful impact on e-commerce. There are some implications that the changes in consumer behaviour will be lasting. Moreover, the most profound change in consumer behaviour is happening in grocery e-commerce.

Statistic of e-commerce per category
Source: Statista

The recent research from Statista shows the e-commerce share of total retail revenue in the United States as of February 2020, sorted by product category. According to the findings, food and beverage segment accounting for 3.2% of total retail sales. This is at the moment the fastest-growing e-commerce category.

Grocery e-commerce has had huge momentum behind it—even prior to much of the US population social distancing and staying home—with last year representing an obvious inflexion point. According to TABS Analytics from e-Marketer, internet users jumped from 38% in 2018 to 56% in 2019, while the percentage of those who regularly ordered groceries online spiked from 17% to 37%.

Online grocery shopping behaviours-impact on e-commerce
Source: Figure from eMarketer

While retailers are still facing the problem of higher demand and managing the logistics, the operations such as click and collect helped propel the behaviour forward. The example of Walmart’s click and collect is just one out of many groceries chains.

What started as simply making a purchase eventually progressed to buying in new categories, purchasing high-ticket items, and shopping and buying via mobile. Every time these behaviours crystallized for a new set of consumers, it permanently shifted their online buying habits. Supply chains demand had a rather positive impact on e-commerce.


Although online buyers will eventually go back to buying in stores, buying behaviour could easily for some shift to e-commerce. At least one out of five grocery online shoppers could stay online.

The economic impact on e-commerce is widely caused by impulsive buying behaviour while staying in the midset of fear on “something will be out of stock.”

Make sure to properly prepare your logistics and supply chains for higher demand in supplies. If you can not deliver, be transparent and share this information with your customers and workers.

The question that remains is will the buying behaviour change for good?

Covid-19 advice for the U.S. private equity firms

Covid-19 advice for the U.S. private equity firms

The Covid-19 crisis continues to impact the global economy in unprecedented ways. Shelter-in-place orders and non-essential business closures around the world have disrupted operations across all sectors. All of that has caused a major dislocation with the private equity firms and private equity industry. This pandemic and the ensuing economic fallout raises a mix of pressing concerns and complex legal issues for private equity sponsors and their portfolio company management teams. In addition, the Covid-19 epidemic may also present private equity sponsors with unique and urgent opportunities to deploy capital. We will provide you with a short overview of the US private equity market in this article.

For most private equity sponsors and their portfolio companies, the effects of the Covid-19 shockwave became the new normal. Moreover, while many are still sorting through the everyday challenges, new strategies are emerging to help portfolio companies. During the Great Depression, the highest rate of unemployment in the United States was 24.9%. In the past few weeks, Federal Reserve Bank of St. Louis President James Bullard warned that Covid-19 could cause the US unemployment rate during the second quarter to hit 30% because of workplace shutdowns. That said, they also forecasted a 50% drop in GDP over that same period.

Some policymakers expect the pandemic to impact the US economy deep into the second quarter. Implying what the United States might expect over this period, during the first two months of 2020, China saw home sales shrink by 33%, construction drop by 25%, retail sales fall by almost 20% and factory output drop by double digits. The US economy was at the tail end of one of the longest economic expansions in its history.

The new area for Private Equity firms

In the weeks just before the coronavirus outbreak in the United States, economist Joel Naroff stated, “Going into any potential coronavirus slowdown, the economy is in good shape.” However, there is still a reason to believe that the impact in the United States of Covid-19 could be severe.

While many portfolio companies are undoubtedly at risk as the economy slows, the government had a quick response. That said, private equity firms should move ahead quickly.

Federal Relief

The federal government and many states have announced changes in tax filing and payment dates in response to the Covid-19 pandemic. That includes the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The government announced in the US Senate on March 27, 2020. Tax relief is of interest to private equity funds and their portfolio companies. A $2.2 trillion stimulus package that, among other things, expands relief options available to certain US small businesses through the Small Business Administration (the SBA).

The CARES Act also provides for a loan and loan guarantee program intended to help distressed businesses that do not qualify for small business relief. That includes a program specifically designed for mid-sized businesses with between 500 and 10,000 employees.

Eligible “small businesses” include the self-employed and any business that meets the applicable small business size standard for its industry. It also includes any other business with 500 employees or fewer, based on the company’s NAICS Code.

Bear in mind, however, that all of these funding programs remain subject to further guidance. For more information visit the SBA website.

Economic Stabilization Program

In addition to the PPP Loan and the expansion of the EID Loan Program, the CARES Act also provides for $454 billion in financing to banks and other lenders that make direct loans or guarantees to certain eligible business impacted by Covid-19. However, the CARES Act does not fully establish, the precise mechanics of applying for relief under the CESA.

Moreover, an eligible business can participate in the CESA program if it is created and organized in the US. The business should also have significant operations and a majority of its employees located in the US. Nevertheless, this program should show proven losses as a result of Covid-19.

As mentioned before, the program of the CARES Act is designed for mid-sized companies with 500-10,000 employees. However, the CARES Act requires that any such loans to mid-sized borrowers would feature annualized interest rates no higher than 2% per annum. It also requires that for the first 6 months of financing under the program, no principal or interest is due.

US employment law considerations

Any private equity sponsor or portfolio company considering layoffs or across-the-board wage reductions in response to Covid-19 should first consult with counsel. That is to understand all of its contractual and statutory obligations with respect to any such action. Those businesses retaining their workforce should consider the expansion of paid sick leave. They should also consider the FMLA under the Families First Coronavirus Response Act.

The legislation will enable employers to keep their employees on their payrolls, while at the same time ensuring that employees are not forced to choose between their paychecks and the public health measures needed to combat the virus. Generally speaking, where a company has more than 50 but less than 500 employees, it is a “covered employer” for the purposes of the FFCRA.

Employees may use their 2-week emergency paid sick leave before paid FMLA leave begins. FFCRA also prohibits covered employers from changing their paid leave policies to avoid compliance.

Private equity firms material contracts

In addition to actively managing portfolio companies cash to maximize liquidity, portfolio management teams should undertake the review. Besides, where possible, drawing on available lines of credit to build a cash position for a sustained period of disruption to normal operations. That said, it is crucial to review the complex’s material contracts. That is to better understand their current insurance coverage and potential legal exposure. Also, it is important to identify efficient breach opportunities to back out of (or delay payments under) contractual commitments to preserve their liquidity.

In assessing their material contracts, companies should take particular note of force majeure provisions. That should also trigger other affirmative defences to non-performance such as impossibility and frustration of purpose.


Beyond the immediate challenges, the crisis poses to business and the economy. The crisis will inevitably present opportunities for private equity firms to help advance economic recovery. Unless there is a prolonged pause on economic activity, the outlook for the private equity industry remains positive. Based on industry data, private equity funds continue to sit on record levels of committed capital (estimated at $2 trillion, with over $700 billion of that in buyout funds).

Although it is too soon to predict what deal terms will look like in a post-Covid-19 world, there are early indications.  In a very short time, Covid-19-related issues have moved quickly into M&A agreements. References to pandemic-related impacts have already appeared in MAE definitions, representations and warranties.  Representations and warranties insurance providers have also moved quickly to exclude coverage for Covid-19-related matters. We can keep monitoring and analysing the latest data available to better understand future indications.

COVID-19 Leadership Advice

COVID-19 Leadership Advice

People look to leadership advice during uncertain times and a situation like covid-19. Moreover, when looking at uncertain times like this, a confident and calm leader is more appreciated now than ever before. Psychologists’ research points to several ways that leaders can improve their communication skills to maximize trust and minimize stress and anxiety. People look for a leader that can: manage stress, share information with empathy and optimism, use credibility to build trust, and be transparent.

All in all, transparent communication is the foundation of the company culture. Some of the company giants have stated in a recent article that they find optimism by helping each other. The sooner you move to a work from home environment, the better. If you have the infrastructure and technology in place, the transition will be smooth.

What’s the best thing you can do for your employees?

This is the best time for leaders to step up and do what’s right to protect employees. Every leader needs daily updates about the state of the marketplace. During the time of remote work, key players need to have online meetings and work the plan. Moreover, instill commercial urgency in the front line.

In the meantime, keep in touch with your customers. If you can help your most loyal customers with solutions that make the difference, you will become closer once the emergency is over.

During the emergency, leverage the purpose of your company and have leaders engage with staff frequently. Address your people’s panic and fear head-on. Be honest, be transparent, and convey that you share their concerns, but remind them that you will all get through this as one strong team.

Your financial strategy should be to preserve cash above all. Build reserves and postpone expensive projects.

Post-COVID-19 changes

CEOs should also start planning for the future after the outbreak. Although we know that the world will be different, we can not predict exact outcomes. However, you can create assumptions based on economic data and position your company. Europe and the US talk about “flattening the curve,” slowing the rate of infection instead of eliminating it. In the meantime, China is showing a V-shaped recovery. Will consumers return to their old behavior patterns such as retail shopping, going to events or will they stay online.

Depending on how long the outbreak lasts, and how severe its impact is, long-term changes are likely. Will B2B customers change their buying patterns to exclusively online purchasing? How will supply chains operate, and with what new safeguards? No one knows what the future holds, but companies can keep aksing critical long questions.

Our advice to you is to keep your employees safe in work from home environment. The one clear thing is that without employees, you don’t have a company. That said, keep your employees and your company safe during a covid-19 crisis.

Managing Uncertainty

The key to managing uncertainty is adequate preparation and writing a comprehensive continuity plan. The company should get ready to react quickly as the economy changes. That alone makes a big difference for growth-stage companies. Done right, a company can prosper and even emerge stronger. According to Pitchbook, the point is to ensure self-sustainability if future capital raises don’t come to fruition.

Moreover, transparency is incredibly important to your employees. Well-prepared companies can potentially thrive in a downturn. For one, they can be more aggressive in acquiring struggling assets at a lower price and applying their own successful experience to transform those businesses. The opportunity for better-prepared organizations to take market share from struggling competitors is another means of strengthening a company’s position during a downturn.

In the end, don’t wait to take the necessary steps to overcome the crisis. Once this is over, you might become stronger and more prepared for the future. True leaders will learn from this and keep working together with their employees, even after the emergency time is over.

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