How has the Covid Pandemic impacted Tech trends in 2020?

   2020 will undoubtedly be remembered as the Pandemic year. Oddly enough, the Tech industry has never been this robust, as exemplified by indicators such as the BVP Nasdaq Emerging Cloud Index, which is up +70.6% YTD, vs. the S&P500 up by only +4.4%. In France also, despite a -8.7% GDP contraction (Banque de France forecast), 2020 is emerging as a record year for French Tech. Avolta Partners expects to see a €5.5bn total investments for the period.

   Avolta Partners’ last report (VC/M&A Tech Trends – France Q2-20), highlighted the difference between VC and M&A trends, with a clear bounce in VC at the end of Q2 and, on the other hand M&A transactions hit their lowest levels ever.

   Q3 confirms the Q2 trend in VC investment with €1.35bn and landmark transactions such as Voodoo (~€400m led by Tencent), Mirakl (€255m led by Permira) and Dataiku (€85m led by Stripes). Q3 has seen the growth in M&A transactions to reach €1.65bn. Some of the more significant transactions were 2 large transactions led by the US PE fund Silverlake: for a €700m EV and Silaexpert for a €600m EV; the third largest transaction is the IPO of Nacon at a €458m EV.

   The question that now comes to mind is : ‘What next?’

   With a significant number of countries starting their second phase of lockdowns, governments may not be able to support their economies again. This fuels an ‘angst’ driven sentiment which points towards a gloomy perspective that the real crisis is still ahead of us.

   As the Q3 earnings season will shortly begin, these announcements could be decisive on the trend of tech stocks for the upcoming months. US tech stocks are currently at their highest multiple ever, a slight decrease in future growth might result in a less enthusiastic tone. Finally, Presidential elections usually have little short-term impact on the stock market. But this time around, it may be an exception to this rule

Arthur Porré, Co-Founder & Managing Partner, October 27th, 2020