Despite the early effects of COVID-19 in the region, D.C. area startups received more venture capital and closed more deals in Q1 of 2020 compared to the previous quarter.
Venture capital activity in the D.C. area — which includes cities spanning from Northern Virginia to Baltimore — for the first quarter of 2020 totaled $384 million into 40 deals, according to data shared in a recent PwC/CB Insights MoneyTree report. (Disclaimer: This report is often updated after publishing so the numbers may vary by the quarter.)
This is an increase of 5.3% in dollars and 2.5% in number of deals compared to the fourth quarter of 2019, which totaled $365 million invested in 39 deals. For Q1, the D.C. metro was the sixth best market for funding nationally behind the Bay Area, Boston, New York, LA and Seattle.
For companies in D.C. proper, $39.8 million went into six deals, which accounted for 10.4% of the funding and 15% of the total deals in the region. When ranked against the 50 states, the District was ranked #24 both in number of deals and in number of dollars raised.
Brad Phillips, a director in PwC’s Emerging Company Services practice, told Technical.ly that VC funding for startups in the region are already “on a better pace than last year.” Despite the strong start, he said we should keep in mind that the effects of the coronavirus on venture capital may be different in the second half of the year.
“Q1 was a decent quarter for the region after the dip in funding in 2019, particularly since the quarter was likely negatively affected by the COVID-19 pandemic,” Phillips explained. “Looking at years 2015 to 2019, there is a clear pattern of increased deal activity in Weeks 11 and 12 as Q1 comes to a close. For 2020, deal activity dropped off precipitously starting at Week 10 likely due to COVID-19.”
Last year, the region saw an average of 42 deals per quarter and Q1 of 2020 was fairly close to meeting that mark. With the exception of Q2 of 2019, this first quarter of 2020 was higher in funding than every other quarter last year. But on another hand, there were no mega rounds — deals valued at $100 million or more — in Q1 of 2020, continuing the D.C. area’s fifth quarter without a deal of that magnitude.
Some of the area’s top tech deals in the quarter include D.C.-based reviews platform creator Clutch’s $18 million Series A, Arlington, Virginia-based healthcare provider Advantia Health’s $45 million investment, a $20 million Series B raise from Rosslyn, Virginia-based HUNGRY and Wharf-based healthcare analytics startup Socially Determined’s $11.1 million Series A.
“The DC Metro region often sees higher levels of funding in the second half of the year, so having a nice Q1 is encouraging. We’ll see if the current economic headwinds alter that,” Phillips said. “This is a historically unprecedented economic slowdown so the truth is that no one can predict when we will pull out. We do expect that there will be some effect on venture funding in Q2.”
Nationally, there was roughly $26 billion invested into 1,271 deals, which is a drop of 9% in the number of deals and 13.5% in the amount of dollars compared to Q4 of last year. Venture capital deal flow has fallen for the third quarter in a row. California, Massachusetts and New York raised 80% of the overall funding in Q1.
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