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Isabel Rodriguez: “Spain’s venture capital sector is recording all-time highs in terms of capital deployed”
Valuations have increased dramatically in the last year, according to King & Wood Mallesons partner, Isabel Rodriguez.
LL: What trends have you seen in terms of portfolio company valuations in the last 12 months?
Rodriguez: Valuations have increased dramatically, beginning with the last quarter of 2020 and accelerating into the third quarter of this year. In fact, valuations are picking up so much post-Covid that people are starting to get a bit worried. One thing that we are seeing is that environmental, social, and governance (ESG) issues are starting to impact valuations.
Has deal flow returned to normal yet, or is it still in the process of recovering?
Deal flow has returned to normal. The competition between general partners over portfolio companies is stiff and the rebound has been amazing. Spain’s venture capital sector is recording all-time highs in terms of capital deployed.
Which sectors have seen the biggest rebounds in investment from private equity funds as the pandemic has begun to subside?
The sectors that VC firms are focused on post-pandemic are the same ones that did well during the pandemic. For example, life sciences companies obviously did very well during the crisis, but other sectors such as e-commerce also received a boost and are now seeing increased interest from investors. In addition, we’re seeing a lot of interest in sectors such as machine learning, artificial intelligence, clean tech, energy, infrastructure, logistics, agricultural technology and cannabis cultivation.
“We have seen firms adapt to the crisis by either slowing down their fundraising or lowering the targets for the funds.”
Have firms that delayed their exits from their portfolio companies started looking at exit opportunities again, or are they still looking to hold on to their investments for longer?
We are starting to see exits again, but portfolio companies have been adopting other strategies as a result of the crisis. Secondary offerings, for example, have become more popular. We are also starting to see more continuation funds and third-party funding.
Have firms had to slow down their fundraising at all or reduce the size of their funds in the last 12 months?
To some extent, yes. We have seen firms adapt to the crisis by either slowing down their fundraising or lowering the targets for the funds. We also saw fundraising periods be extended, as for many periods investors LPs and GPs were simply physically unable to travel to meet in person due to pandemic restrictions. And while the industry has certainly adapted to less travel as a result of the crisis, a certain amount of business has to be done face to face, which was impacted by Covid.
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