Venture Capital
Why 2021 was a record-shattering year for the early stage
January 14, 2022
Early-stage startups in the US had a phenomenal showing in 2021, reporting record metrics for deal count, capital investment, median deal size and pre-money valuation.
VC deal value hovered just above $40 billion between 2018 and 2020 and eclipsed the $80 billion mark for the first time ever in 2021, according to the PitchBook-NVCA Q4 2021 Venture Monitor. Cameron Stanfill, a VC analyst at PitchBook, said that nontraditional investors continued to be a critical factor within the VC market during 2021 and notably made greater inroads with younger startups during the year.
"This influx of capital from deep-pocketed nontraditional investors, overwhelmingly corporate VCs at the early stage, contributed to the rapid expansion of deal sizes and valuations we recorded during 2021," Stanfill said.
This was illustrated by 156 early-stage mega-deals that closed during the year, representing 155.7% year-over-year growth, and illuminating that some of these massive scale-up rounds can now happen early in the startup lifecycle.
Notable early-stage deals in 2021 include a $1.8 billion Series B for Commonwealth Fusion Systems in December. Sierra Space, a Colorado-based space transportation and infrastructure company, raised a $1.4 billion Series A in November.
Median deal size and pre-money valuation for early-stage startups also hit record highs in 2021, reaching $10 million and $46 million, respectively.
In addition to a rise in nontraditional investor participation, much of the robust numbers can be attributed to the record levels of capital washing through the system as VC dry powder continues to hit all-time highs.
However, macroeconomic catalysts, such as the expected interest rate hikes in 2022 and potential changes to carried interest tax could dampen the momentum and push crossover investors back toward late-stage VC and mezzanine financing rounds in the future, according to the report. But only time will tell.
Featured image by Nuthawut Somsuk/Getty Images
VC deal value hovered just above $40 billion between 2018 and 2020 and eclipsed the $80 billion mark for the first time ever in 2021, according to the PitchBook-NVCA Q4 2021 Venture Monitor. Cameron Stanfill, a VC analyst at PitchBook, said that nontraditional investors continued to be a critical factor within the VC market during 2021 and notably made greater inroads with younger startups during the year.
"This influx of capital from deep-pocketed nontraditional investors, overwhelmingly corporate VCs at the early stage, contributed to the rapid expansion of deal sizes and valuations we recorded during 2021," Stanfill said.
This was illustrated by 156 early-stage mega-deals that closed during the year, representing 155.7% year-over-year growth, and illuminating that some of these massive scale-up rounds can now happen early in the startup lifecycle.
Notable early-stage deals in 2021 include a $1.8 billion Series B for Commonwealth Fusion Systems in December. Sierra Space, a Colorado-based space transportation and infrastructure company, raised a $1.4 billion Series A in November.
Median deal size and pre-money valuation for early-stage startups also hit record highs in 2021, reaching $10 million and $46 million, respectively.
In addition to a rise in nontraditional investor participation, much of the robust numbers can be attributed to the record levels of capital washing through the system as VC dry powder continues to hit all-time highs.
However, macroeconomic catalysts, such as the expected interest rate hikes in 2022 and potential changes to carried interest tax could dampen the momentum and push crossover investors back toward late-stage VC and mezzanine financing rounds in the future, according to the report. But only time will tell.
Featured image by Nuthawut Somsuk/Getty Images
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