Seed-stage deal activity picks up, while, overall impact investment volumes remain muted.
Overall impact investing equity volumes continue their downward trend. The market volumes which were 26% down Y-o-Y at the end of first half of the calendar year of 2020 continue to remain weak in the third quarter too.
The overall volumes for the calendar year are down 33% vis-à-vis the same period last year.
Education sector retains investor interest and growth
- Education is the only sector which has bucked the trend with a growth of 12% with a substantial jump in volumes during the third quarter of the present year.
- Financial Sector continue to witness risk aversion with investment volumes down by almost 50% vis a vis last year.
- Surprisingly, investments in impact health related companies has not seen much of an uptick despite the significant increase in health-related concerns and emergence of new digital backed business models.
Early-stage deal activity has picked up
While the overall invested volumes have dropped by 33%, the drop in the number of transactions is just about 20%.
Average volume per transaction has reduced from $17 Mn in 2019 to $11 Mn in 2020. An analysis of the deal size of investments made in impact enterprises revealed that about 60% of the deals this year (between January to September’20) were of a size below or equal to USD 5 Million. Though marginally lower, 2019 saw a similar trend.
As mentioned earlier and can be seen in the table above, early-stage seed deals seem to have made a comeback in the last quarter with 33 seed investments (almost 83 % more vis a vis earlier quarter). It appears that investor interest in early-stage innovative impact driven business models has not been deterred despite of the economic slowdown.
The key segments which are seeing maximum activity are agriculture and education sectors, both of which have seen substantial interest from investors. The story with the financial inclusion space continues with barely 3 seed stage deals supported in the last quarter. On a relative basis, later stage deals (Series B and above) have halved vis-à-vis Q2 2020 and same quarter last year.
Noteworthy Deals (By size) of Q3 2020
Source: IIC Research from Market sources, VCCircle, Inc42 and Venture Intelligence
Exits pick up in Quarter 3
There was one partial and four complete exits in Q3 2020. The exits took place across various sectors – clean energy, housing finance, technology for development, and education.
Source: Venture Intelligence