VENTURE CAPITAL

Low-value Deals Continued To Dominate VC Funding Activity In AI space, While Big-ticket Deals Registered Growth In 2020

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By Godson Umejiego, Correspondent USA

Low-value venture capital (VC) funding deals (investments less than or equal to US$10m) volume shrank as overall VC funding activity in the artificial intelligence (AI) space declined during the COVID-hit 2020. The share of low-value deals as a proportion of total deal volume also declined, however, it still continued to account for a dominant share. Meanwhile, high-value deals (investments worth greater than or equal to US$100m) registered growth in volume as well as share, according to GlobalData.

A total of 2,176 VC funding deals (with disclosed funding value) were announced in the AI tech space during 2020. This was a decline from 2,333 VC funding deals (with disclosed funding value) in 2019.

The number of low-value deals also declined from 1,669 in 2019 to 1,434 in 2020. Despite the decline, low-value deals continued to dominate the VC funding landscape in the AI space – though its share of total deal volume decreased from 71.54 per cent in 2019 to 65.9 per cent in 2020.

On the other hand, the number of deals valued more than US$10m increased from 664 in 2019 to 742 in 2020, and the corresponding share as a proportion of the total deal volume also increased from 28.46 per cent in 2019 to 34.1 per cent in 2020. The number of high-value deals also increased from 50 in 2019 to 76 in 2020 and the corresponding share as a proportion of the total deal volume increased from 2.14 per cent in 2019 to 3.49 per cent in 2020.

Lead Analyst at GlobalData, Aurojyoti Bose comments: “VC investors are more cautious now due to volatile market conditions amid the COVID-19 pandemic, yet they continue to show interest in companies working in the AI space. VC investors are not shying away from committing to big-ticket financing deals in companies at the scaling stage.”

Interestingly, 2019 failed to witness any billion-dollar deals, while 2020 managed to see two billion-dollar deals despite the COVID-19 outbreak. These deals included US$1.9bn secured by the US-based SpaceX and US$1.7bn raised by China-based Manbang Group.

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