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European venture capital will struggle considerably because of coronavirus, according to a new report that calls current economic conditions the toughest since the global financial crisis.
Recession fears will mean mature startups taper growth efforts and corporate venture capital arms rein in spending, according to market research firm PitchBook. After business as usual for the first two months of 2020, the rapid spread of the virus in early March had “severe implications” for startups and investors.
Read:U.K.-listed companies rush to raise equity to help steer them through the coronavirus crisis
Total venture capital activity for the quarter was worth €8.2 billion ($8.9 billion), marking the end of a decade-long bull run and the fourth-highest value on record. The largest deal of the quarter was in challenger bank Revolut, which secured €451 million ($486 million) of funding for its U.S. launch.
Health care will remain relatively attractive as firms look to fund developments in the fight against COVID-19, but it is still expected to see less activity for the rest of the year. Health-care startups brought in €1.7 billion ($1.8 billion) from investors in the quarter.
Meanwhile, investors will hold on to stakes in companies, resisting public listings or acquisitions while volatility in public markets is on the rise, the report said.
Read:Why Britain is the ‘unicorn’ capital of Europe
The U.S., thought to be behind Europe in terms of the spread of COVID-19, saw momentum in venture capital activity maintained through March but will also see a slowdown caused by the virus, an earlier report by the firm found.
“Despite these unprecedented times, the first quarter of the year saw healthy venture activity. That said, there are still uncertainties as to what the next few quarters of the year will hold as we navigate the coronavirus pandemic,” said PitchBook Chief Executive John Gabbert.
