Startup Genome: Global VC funding dropped 20% since coronavirus crisis began in December

Startup Genome: Global VC funding dropped 20% since coronavirus crisis began in December

Global venture capital funding has dropped 20% since the start of the coronavirus crisis in December 2019, according to a new report by Boot genome.

The decline was even more pronounced in China, where the pandemic began. China experienced more than a 50% drop in funding compared to the rest of the world in January and February. The country rebounded in March, although with figures still below pre-crisis levels, Boot genome said.

Asian venture capital investment (excluding China) also fell sharply from January, with no rebound in March, the report said. Separately, Layoffs.ai reports that 436 startups have laid off 55,764 employees since March 11.

The United States has so far seen only relatively modest changes in the funding of startups since December: a drop of less than 10% in March. However, when Startup Genome took into account the seasonality model of previous years, with January still showing more activity than December, the slight decrease between December and the start of the year means that each month from the first quarter of 2020 to United States saw more than 15% fewer transactions compared to the same months of 2019.

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The capital invested also fell from autumn to February.

But European venture capital investments did not experience a decline in financing activity until March, making Europe the last major region to have a pronounced impact on technological agreements.

Above: How the different regions are doing when it comes to venture capital investments.

Image credit: Startup Genome

The global decline in VC funding is worrying. Four out of 10 startups worldwide are in what Startup Genome calls the “red zone”, which means they have three months of cash or less. For startups that have lifted Series A (institutional first round) or later rounds, 34% have less than six months of cash – a dangerous area in the current situation, where fundraising is difficult.

The double whammy of the drop in demand (three out of four startups saw their turnover fall) with the capital crisis makes this global drop in venture capital particularly worrying, said Startup Genome.

Above: Capital flowing into startups is declining.

Image credit: Startup Genome

Startups will be essential to economic recovery: they create most of the net new jobs in the economy, and are particularly relevant now that our society is becoming more and more digital, said Startup Genome.

As for the rest of the economy, Candor Reports 46% of the 7,000 companies hire, 21% lay off and 32% have frozen hiring.

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