The number and value of global VC investments in tech in the first half of 2020 have been significantly down compared to 2019. Investors continue to focus on protecting portfolio companies through the crisis and are approaching the market with caution, waiting to see how events unfold. While sectors such as digital infrastructure are considered clear winners with the surge in demand for digital services, there remains considerable uncertainty as to how quickly other sectors might recover.

Where there is this uncertainty, investors are likely to have considerably more leverage to negotiate favourable funding terms and valuations. Down-rounds have started to appear and, as reported in Bloomberg, Traveloka seems likely to become one of the first unicorns in in South East Asia to raise funds at a lower valuation than the previous funding round. Understandably the travel sector has been hit hard by the crisis and the ensuing lockdowns and it remains to be seen how quickly it can recover despite the recent increase in domestic travel in some countries (e.g. Vietnam).

We are also seeing investors seeking to exert more control over their strategic tech investments through control deals or investments with options to control. For example, on a recent deal, a strategic investor heavily negotiated down the drag-along floor price to make it easier to drag minority shareholders when it seeks to acquire the company at a later date.

That said, while in the short term, fundraising will be challenging, we are seeing tech companies with good fundamentals that ride the slipstream of strong macro trends successfully raise funds in the current environment.