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Second-quarter VC investing totals appear lackluster

If you subtract Reliance Jio, that is

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The second quarter’s venture capital results are coming into focus.

The Exchange will have more notes on Q2’s venture results this week, but this morning we’re digging into our first dataset concerning what happened in the world of private capital from April through June.

Crunchbase News — a place I used to work, it feels fair to note — ran its usual dig through the quarter’s venture results, effectively coming up with two answers to the question of what happened in Q2 VC. As it turns out, a single company’s fundraising made the quarter’s results look far better than they really were. Once we strip out that firm’s nonventure funding rounds, a clearer picture emerges.


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If you discount Reliance Jio’s epicand continuing — ability to attract billions of dollars, the private investment market was slack in the second quarter. Per Crunchbase News, including the Reliance Jio deals, “Crunchbase recorded $69.5 billion invested across all funding stages for the second quarter specifically. This is up 17% quarter-over-quarter and down 2% year-over-year.” (Crunchbase has moved away from making projections, notably, and now discloses reported data in its quarterly results).

A gain of about one-sixth from Q1 2020 results was probably not what you expected, given the quarter’s nearly comical turbulence. But, with Reliance Jio’s fundraising bacchanal stripped out, results are much worse.

Let’s talk about whether it’s fair to lean more on Reliance Jio-free data, and dig into what the data means for startups around the globe. We’ll also look at a few other megarounds from the period to see if there are any other distortive funding events lurking in the data.

The bad news

Final global Q2 data exclusive of Reliance Jio’s Q2 deals, per Crunchbase data, shows investment declines in the period of -9% compared to Q1 2020, and -23% compared to the year-ago quarter. While some of that will be due to reporting lag — the thing that projections were initially built to countermand — the dips are still stark.

Global Q2 VC does not look strong from this perspective.

Digging into stages, the data is desultory. Global seed and angel deals, per the same data set, were down from 4,256 rounds in Q2 2019 worth $3.7 billion to 1,791 rounds worth just $2.3 billion in Q2 2020. In percentage terms, the drops work out to 58% and 38%, respectively. Again, there’s lag in that data, but it’s still an awful result. (Venture deals lag reality, as they are reported generally weeks or months after they are closed.)

Early-stage dealmaking was down, as well, from 1,945 rounds worth $24.9 billion in Q2 2019 to 1,144 rounds worth $19.6 billion in Q2 2020, or 41% and 21%. Late-stage investing fell as well, from 566 rounds worth $39.1 billion to 405 rounds worth $35.7 billion over the same time period. Those declines work out to about 28.5% and 9%, respectively.

Crunchbase and Crunchbase News categorize nonventure rounds made into companies that have previously raised venture capital as “Technology Growth,” which is where the Reliance Jio’s deals wound up. So, the above data is nonadjusted for the Indian telecom’s own results.

Summing: Yuck.

We all know that China’s VC market is quiet — something that EQT Ventures’ Ali Mitchell loosely confirmed to me a few weeks ago — and, yes, the U.S. is still stuck at home, but the above data is still worse than I anticipated. More reporting will clarify the global picture; once we get CB Insights and PitchBook data we’ll add to our coverage.

But even with that expected round of sharpenings, the early look is worse than lackluster. Seeing seed/angel, early-stage and late-stage all post declines in concert is worrying. The pace at which startups may graduate will slow, and many startups could get “caught” in the middle somewhere, unable to raise more capital and keep the growth flowing.

Perhaps Q3 will be better.

Why discount Reliance Jio?

What we really want to understand is how startups are doing. Watching megacorps pour capital into the huge subsidiary of a public company isn’t the same thing. So, discounting the Reliance Jio deals makes good sense if we want to know how startup financing is itself performing.

Digging into the super-late-stage data a bit more, once you strip out nonequity rounds and post-IPO events and the like, there were just 10 global investments — per Crunchbase data — in Q2 2020 worth more than $1 billion.

Five of those went to Reliance Jio. The Abu Dhabi National Oil Company deal is probably worth adding to our discount pile, meaning that we’re down to just four mega-rounds left, including one for an American grocery store, one that went to a European airline, and Airbnb deal’s to raise $1 billion from private equity in April.

In fact, then, the super-late stage world was really just Airbnb, a subsidiary of Didi, and Airbnb, once you take Jio and other cruft away. Perhaps then there wasn’t too much distortive megafunding in the quarter past what we’ve already discounted. Put more simply, the above data should be pretty clean on a reported basis, at least as far as Crunchbase data can take us. We’ll compare and contrast as more information comes in.

The Q2 venture picture presented then remains as it was: Down, and to the right.

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