Venture capital

According to Crunchbase (a platform for finding business
information about private and public companies), venture capital
deal volume hit an all-time high in Q3 2019. This growth was largely
driven by a large uptick in seed-stage deals, as well as ongoing
development and maturation of international start-up markets.
According to statistics, £58bn was invested across 9,100 venture
capital deals in Q3 2019. KPMG reports that global venture capital
investments in 2019 is well on pace to match 2018’s record and is
expected to exceed levels seen in all years prior to 2018. Spurred on
by high levels of seed-stage activity, worldwide venture deal volume
is projected to reach new post-dot com heights.

The diversity of companies attracting funding was
also substantial.

The diversity of innovation hubs across the region continued to play
a key role in the strength of Europe’s venture capital market — with
Germany, the UK, Sweden, Israel and Belgium all attracting significant
funding rounds. The diversity of companies attracting funding was
also substantial, with venture capital investors in Europe embracing
opportunities across financial services, healthcare, transportation,
mobility, pharma and biotech, and B2B services.

What became abundantly clear in 2019 is that investors are more
sceptical of companies that are not profitable or that do not have
strong business models and a very clear path to achieving profitability.
In future, it is very likely that venture investors, particularly when
making large late-stage deals, will place more of an emphasis on
profitability, governance, and other business model characteristics
than they may have in the past.

While there continues to be a significant amount of liquidity in the
global venture capital market, it is expected that investors will be
more cautious when making investments over 2020, putting greater
emphasis on company business models and expectations related
to profitability.

Fintech, transportation, mobility, healthtech, and biotech are all
expected to be hot areas of venture capital investment on a global
level, with artificial intelligence continuing to be a critical focus
at a technology level. B2B solutions, productivity solutions, and
solutions with real world impacts are also expected to grow on
the radar of investors.

Global economic and geopolitical uncertainty is expected to remain relatively high in the beginning of 2020.

Global economic and geopolitical uncertainty is expected to remain
relatively high in the beginning of 2020 given the rapidly approaching
Brexit deadline, no signs of a break in the US-China trade war, and the
US presidential election slated for late 2020.

In 2019, we launched our Private Investment Club aimed at
professional and high net worth clients. The Club aims to invest
in high-growth ventures across sectors and geographies. Dolfin
generally participates in series A to C fundraising rounds and
the target return is between 3x to 10x over two to five years. The
minimum investment threshold is £100,000 per investment. Clients
may choose to invest into offered investment opportunities as a
stand along service or to have a portion of their portfolio allocated
in venture-like investments.

We are concentrated on companies going through a growth stage.
According to Crunchbase estimates, about £21bn was invested
across 2,572 early-stage deals in Q3 2019. Including Series A
and Series B rounds, plus transactions from a selection of other
round types, the global venture market can attribute roughly
28 per cent of its deal volume and roughly 37 per cent of volume
to early-stage start-ups.

This article is an extract from our Q1 2020 investment outlook which looks back at the performance of our model portfolios in the preceding quarter, shares how we expect markets to react in the months ahead, and puts a spotlight on some investment themes and ideas with great potential. To download your complementary copy, visit this page.