In this article Bryan Ciambella (Partner) and Bijon Keswani (Sr. Associate) break down trends across the US venture landscape as well as specific areas that we are actively sourcing and deploying capital into.
Global Venture Spend
According to Crunchbase, an astounding $1.5 trillion was invested in venture capital deals over the last decade, globally. In 2019 alone, nearly $300 billion was invested in nearly 32,800 deals across various stages, representing the most deals secured in any year in history. The total global venture dollars¹ for 2020 track at $129 billion for the first half of the year. Skewed by the funding towards Reliance Jio, the second quarter looks vastly different — funding would be down by 9 percent quarter over quarter and 23 percent year over year. However, close to $2 billion was invested at the seed stage this quarter.
Interest in E-sports has steadily trended upwards and is now reaching a level of maturity where industry operators are viable targets for venture and acquisitions. Areas of focus still include community platforms and analytical tools. According to NfX, APAC accounted for 47% of the industry in 2019; NA and EMEA accounted for 26% and 23% of the market respectively. Console gaming is expected to generate close to $75B in 2020 and is estimated to grow at 13% y-o-y², while the traditional segmentation may not be applicable due to the cross-platform availability of most games.
The pandemic accelerated the momentum of the industry’s growth. According to gaming technology provider, Unity, daily “in-app” payments for mobile games jumped 24% since the pandemic began; player spending in mobile games reached $19.3B in Q2 2020 (up 27% y-o-y). Market researchers NPD estimate U.S spending on console games — including downloads and physical purchases — jumped to US$ 662M in April 2020, up 55% from the previous year. Verizon’s published changes to its overall network usage in April stands as further evidence of the industry’s growth; gaming-related traffic saw a 213% increase versus baseline recorded data, only behind traffic of work-related collaboration tools (e.g. Zoom).³
According to App Annie, mobile game spend will outpace desktop and console spending by 2.8x and 3.1x, respectively, and reach almost $100B in total mobile gaming revenues by year’s-end. COVID-19 propelled E-sports into the mainstream in an unprecedented way, but since the start of the outbreak, NewZoo’s revised 2020 revenue estimates downward twice — from $1.1B to $974M — due to event cancellation, postponement, and the ultimate shift to a fully digital gaming environment. This lack of tournaments pushed merchandise and ticket sales to drop 28% and publisher fees to drop 12%. The global E-sports fan base totaled 380m in 2018, with 37% male consumers and 16% female consumers between the ages of 21–35 years.⁴ In the US, 61% of E-sports viewers earn more than $50k per year. This fan base continues to grow and divert attention from traditional media.
Antler’s Perspective on E-Gaming
Our focus is on the tools (picks and shovels) helping massive incumbent online viewing platforms monetize. We are also heavily focused on US and Asian real money gaming platforms for E-sports.
According to Dell Technologies, venture capital driven DevOps⁵ deals have expanded at a 27% compounded rate over the past decade, with volume increasing 11%. Increasing investor interest is explained by the development of cloud migration, automation, and developer productivity. The value of the top five public cloud companies increased by an estimated 44x from 2008 to 2020.⁶ While traditional cloud faculties are facing the impact of a recession, public markets indicate resiliency within the industry. The Wall Street Journal recently reported: “The 52 stocks on the BVP Nasdaq Emerging Cloud index have averaged a gain of 15% this year compared with the S&P 500’s 11% drop.” The remote future of work outlook indicates continued further dependence on cloud and enterprise system development.
According to Gartner, revenue from cloud-based enterprise apps will grow 6.8% in 2020, however, global enterprise application software spending will reach $196B in 2020, a 4.7% drop from 2019. Despite COVID-19 driving an economic downturn, software spending on cloud-based enterprise apps will increase by 6.8%. This is the future. In comparison, on- premises software spending will decline.
The percentage of new cloud-based enterprise software purchases is up from 75% in 2021 to 95%⁷. While certain categories may show a decline given the current climate, CRM remains a positive, which is estimated to grow at a CAGR of 12.15% between 2019 and 2024. Vertical software has accounted for approximately 62% of investments in the past year. Most of these rounds took place within financial services and insurance organization. Insurance is a major area of distribution for both B2B and B2C; we are betting on a second generation of tech winners.
Antler’s Perspective on Enterprise Software
Enterprise software is in the 2nd or 3rd inning of an unprecedented rise in venture and growth equity activity. Antler is actively looking to invest in SaaS companies that will enable logistics and commerce companies to scale. Other areas of focus are financial software and payment platform offerings used by SMBs.
After a record-breaking first quarter in digital health investment, the strong performance continued into the second quarter. Investors sank $4.2 billion into digital health globally, according to a report from investment firm Startup Health.⁸
Total health innovation funding hit $9.1 billion in the first half of 2020, up nearly 19% compared to the $7.7 billion invested during the same period in 2019, the firm reported. According to Fierce Healthcare, venture capital funding for telemedicine companies surged to $788 million in the first quarter of 2020.⁹
The Deloitte Center for Health Solutions reported that venture capitalists, certain private equity investors, and corporate venture funds are investing in disruptive healthcare solutions that focus on enhancing quality of care. By identifying and solving for social determinants of health, venture investments have seen an increased interest. Start-ups are focused on reducing costs, improving clinical and operational workflows, identifying system efficiencies, and integrating evidence-based solutions. Virtual care delivery and telemedicine solutions are other active areas of venture interest.
While funding for telemedicine companies increased in the first quarter, investments in the first half of 2020 were made across digital health opportunities including insurance, pharmacy, wellness, and wearables.
Investments in health-tech, specifically mental health start-ups, have more than quadrupled since 2015. In a survey conducted by the CDC in June, around four in ten Americans reported struggling with mental or behavioral health conditions. Mental health services increased during the pandemic and many platforms were made available for free. A total of $1.37 billion was invested through the third quarter, compared to $1.06B in 2019, according to Pitchbook data. We predict that number could grow 30% next quarter.
Antler’s Perspective on Health-Tech
The current environment has placed an emphasis on companies tackling different aspects of chronic disease management, from population health to provider communication tools. We are also looking at disruption in patient engagement platforms to drive adherence.
Bijon Keswani is a Venture Capital Senior Associate at Antler US, currently completing his MPA at Columbia School of International and Public Affairs.
Antler US is a global early-stage VC that invests in founders and North American companies at the pre-seed and seed-stages. At Antler US, we bring together entrepreneurs from all backgrounds to build the defining companies of tomorrow. Apply now to build your next venture with Antler US.
 Q2, Global Venture Report, Crunchbase, https://news.crunchbase.com/news/q2-2020-global-venture-report-funding-through-the-pandemic/
 The World’s 2.7 Billion Gamers Will Spend $159.3 Billion on Games in 2020, https://newzoo.com/insights/articles/newzoo-games-market-numbers-revenues-and-audience-2020-2023/
 Mapping the Gaming Landscape, https://medium.com/venture-beyond/mapping-the-gaming-and-esports-vc-landscape-eca062502dca/
 The rise of esports investments, Deloitte https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance/drfa-rise-of-esports-investments.pdf
 Venture Investment Driving Emergence of Developer-led Enterprise Software, PitchBook & Dell Technologies, https://pitchbook.com/news/articles/venture-investment-driving-emergence-of-developer-led-enterprise-software
 State of the Cloud, BVP 2020 https://www.bvp.com/assets/media/bessemer-state-of-the-cloud-2020.pdf
 Gartner’s Top 25 Enterprise Software Startups to Watch In 2020 https://www.forbes.com/sites/louiscolumbus/2020/07/05/gartners-top-25-enterprise-software-startups-to-watch-in-2020/#1ac508d17822