After a boom year for the tech industry, investors invested money in grocery shipping companies, online brokers, and more in early 2021 Elon Musk’s SpaceX, resulting in a record quarter for US venture finance.
Venture-backed firms raised $ 64 billion in the first three months of the year. This came out of an analysis by Ernst & Young this week that used data from Crunchbase. That’s 43% of the $ 1.48 billion raised in all of 2020, a record year.
“We’re still technically in a pandemic and trying to get out of it,” he said Jeff Grabow, US venture capitalist at Ernst & Young, in an interview. “A year ago everyone thought we were falling into the abyss. To have a record quarter like this is pretty amazing.”
Grabow said while we are clearly on our way to seeing a fourth straight year of $ 100 billion in venture funding, “the question is – will there be a $ 200 billion year?”
The late-stage market continued at a rapid pace after a historic second half of the year for IPOs that included offers from Snowflake, DoorDash and Airbnb. The first two quarters of 2020 were calm as companies changed their plans due to Covid-19, but the market recovered dramatically and continued.
Grabow said there were 183 venture deals worth at least $ 100 million in the first quarter, more than half of the total for all of last year. The biggest business was the autonomous car company Cruise’s $ 2 billion funding Round in January, led by Microsoft as part of a strategic agreement with General Motors, Majority owner of Cruise.
Digital supermarket Gopuff raised $ 1.15 billion in March for the second largest deal of the quarter. Cloud data analysis software provider Databricks raised $ 1 billion during the reporting period, as did the investment in the app Robin Hoodwho needed liquidity after wild trading GameStop left the company in a financial crisis.
The largest sub-billion dollar round was for private space companies SpaceX, which raised $ 850 million in February, valued at approximately $ 74 billion. The payment software company was also among the top offers Stripe raises $ 600 million at a valuation of $ 95 billion.
In addition to the increasing number of mega-rounds, the early-stage market is also brand new. Grabow said there were a record number of Series A and B deals in the first quarter.
Smaller funds are popping up from week to week, and the AngelList website also allows investors to bring together syndicates of people who want to raise money for startups without networking locally. With so much capital in the system and the advent of virtual dealmaking ZoomingVenture rounds come together much faster than in the past.
“There is a lot of buoyancy and excitement in the market because people believe we got through Covid,” Grabow said. “The digitization and technological enablement of the industry has been carried over to steroids.”
The record level of venture investing coincides with the phenomenon of special purpose vehicles (SPACs), or blank check companies, which private companies acquire and publicize. SPACs are a possible alternative to late-stage rounds.
As early as 2021, around 306 SPACs raised $ 98.9 billion SPACInsider. This surpasses the $ 83.4 billion raised throughout 2020 Record year. Grabow admits that between traditional funding and SPACs entering a company, investors are sure to be taking undue risk.
“It’s called Venture for a reason,” Grabow said. “These are high return situations that involve high risk.”