Venture capital is going to get even bigger, faster, and more expensive this year
The venture capital market has skewed later and larger in recent quarters, something you might have felt in the rapid recent pace of new unicorn formation. December was a hot month (https://techcrunch.com/2020/12/21/as-2020-ends-new-unicorn-formation-continues-to-impress/) for new unicorns, for example. So was January (https://techcrunch.com/2021/01/07/with-5-new-unicorns-in-first-week-of-2021-are-we-in-for-a-stampede-this-year/) . February likely will be more of the same.
Powering those unicorns births are huge rounds led by large funds. In 2020, for example, there were at least 97 global fintech rounds worth $100 million (https://techcrunch.com/2021/01/05/whats-going-on-with-fintech-venture-capital-investment/) or more. That number was up from 92 in 2019 and 66 in 2018. Each preceding year was a prior record.
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It’s possible to see how venture is trending towards bigger, later-stage rounds in other pieces of private market data. Venture capital in Europe during Q4 2020 set a record for dollars invested (https://techcrunch.com/2021/01/22/how-vcs-invested-in-asia-and-europe-in-2020/) , some $14.3 billion, for example. But that money was spread against the continent’s lowest deal count since Q4 2019.
The result of that divergence has been rising deal sizes in Europe. A median Series B on the continent saw its value double from $10 million in 2016 to $20 million in 2020, for example.
Adding to the pile of numbers, the US startup industry raised around 90 rounds worth $100 million or more in Q3 2020 alone (https://techcrunch.com/2020/10/19/late-stage-deals-made-q3-2020-a-standout-vc-quarter-for-us-based-startups/) .
The data goes on and on. If you read essentially any recent TechCrunch piece (https://techcrunch.com/2021/01/20/fintech-startups-and-unicorns-had-a-stellar-q4-2020/) concerning the state of venture capital, private rounds are getting bigger as unicorns propagate, and the pace at which the market manages to find exits for the largest startups lags their aggregate value creation.
2021 could be more than just more of the same; this year could set fresh records for private investment results.
Parsing data from Silicon Valley Bank’s most recent markets’ report (https://www.svb.com/trends-insights/reports/state-of-the-markets-2021-q1-report) , I’ve pulled a few trends that help illustrate where the startup and private capital markets are heading this year. And, for flavor, I’ve also collected some data from an Insight Partners’ dive (https://www2.insightpartners.com/scale-up-report) into the impact that middle-ages startups have on job creation. That final set of data will illustrate how quickly the startup market has bounced back from COVID-19 lows to near-record numbers and what that rebound could mean for 2021.
It’s going to be one hell of a year. Let’s talk about why.
2020’s venture capital market