Venture capital investing got off to a strong start in the Tampa-St. Petersburg metro area in the first quarter of 2020.
Then Covid-19 knocked venture investing and the economy for a loop.
There were 12 venture capital deals, with a total value of $53.83 million, between Jan. 1 and March 31, according to the Q1 2020 PitchBook-NVCA Venture Monitor, released Tuesday morning. But nine of those deals occurred in January, before the outbreak was declared a pandemic and deal volume locally slowed to a trickle. There was just one local deal in February and two in March.
One of those March deals, an investment in Temple Terrace software company Mize that Venture Monitor said was valued at $20 million, was the largest local deal in Q1.
“The topline numbers from the venture industry in Q1 2020 might not reflect a major disruption in the startup ecosystem, since the Covid-19 chaos came into full effect in March when venture deals were already in progress. However, the global pandemic is having a massive impact on startups and VC investors, just as with the rest of the US economy,” Venture Monitor said. “The shelter-in-place orders across the country have forced most employees to work from home, disrupted sales and marketing, and affected operations and product and project timelines. All companies are looking to extend their cash runway, examining their burn rates and cutting costs during this period of deep uncertainty. Many have experienced major hits to revenue and significant layoffs or furloughs of their workforce. Some VC-backed startups have had to shut down operations altogether, while others are maintaining their operations without too much disruption.”
Venture investors have not stopped investing, but are more conservative in their approach, the report said.
The focus primarily has been on existing portfolio companies, ensuring they have cash runway and stressing efficiency. That echoes the comments of Tom Wallace, managing partner of Florida Funders, in a March interview with the St. Pete Catalyst.
New deals are still happening, but most were in the pipeline prior to the onset of the pandemic, Venture Monitor said. For instance, the Catalyst reported in late March on a $100,000 investment by SeedFundersOrlando and SeedFunders in St. Petersburg in ViewStub, an Orlando startup with event streaming and ticketing technology. Discussions on that deal began in late 2019.
What’s ahead for venture deals?
“Investment pace will likely slow down if shelter-in-place orders are still in effect once deals that were already in progress or in the pipeline are completed, since VC is a business that revolves around in-person meetings with founding teams before making an investment,” Venture Monitor said, adding that valuations will likely be challenged and some deals may be renegotiated.
Here are the top deals in the Tampa-St. Petersburg area in Q1 2020, according to Venture Monitor:
• Mize, a software company in Temple Terrace, received $20 million in a Series A deal that closed on March 3.
• Abacode, a Tampa cybersecurity firm, $5 million in a Series A funding in January.
• Cell Detect, an IT company in New Port Richey, $5 million in early stage venture capital funding in January.
• Fresh Kitchen, a Tampa consumer products company, $4 million from an angel investor in January.
• Disruption Labs, a Tampa healthcare firm, $4 million in a seed round in February.
• ProCredX, a Tampa IT firm, $4 million in a seed round in March.
• VuEssence, a biotechnology firm in Odessa, $1 million from an angel investor in January.
• Nickelytics, a Tampa consumer products firm, $1 million from an angel investor in January.
• Emerald Dunes of Clearwater, described as a business products firm, $1 million from an angel investor in January.
Click here to see the full PitchBook-NVCA Venture Monitor.
A separate report, MoneyTree report from PwC and CB Insights, said venture capital deals in the United States fell for the third consecutive quarter in Q1 2020. Deal activity was down 9 percent quarter-over-quarter and 16 percent year-over-year, although funding rose 14 percent quarter-over-quarter on the back of larger deals, MoneyTree said.
In March, U.S. venture capital deals decreased 22 percent year-over-year, with some of the decline likely attributable to Covid-19, the report said.
MoneyTree did not provide a detailed list of local deals, but said there were 25 deals in Florida in Q1 2020, with a total deal value of $208 million.
See the full MoneyTree report here.