Venture capital funding for startups stayed strong in the second quarter of 2021, continuing a notable recent upswing and setting a record trajectory for the full year, according to two new reports.
Precisely on pace with the first three months of this year, VC funds invested $75 billion in U.S. startups in the second quarter, according to PitchBook's NVCA Venture Monitor. The $150 billion total for the year's first half means 2021 is nearly certain to shatter 2020's full-year record of $164.3 billion in deal value.
It is not just in the United States that venture capital is trending toward record levels. Globally, it's up 157 percent over the same period last year, with $156.2 billion invested in the second quarter of 2021, according to CB Insights' State of Venture report for the quarter.
The environment was perhaps best summed up by famed serial entrepreneur Phil Libin, whose one-year-old video-communications startup Mmhmm just raised $100 million from the Softbank Vision Fund and other investors: "It's a pretty good time to fundraise."
Larger, later-stage funding rounds are especially on the rise. Late-stage investment through the first half of the year amounted to $108.8 billion in the U.S.--almost matching the full-year 2020 total of $109.8 billion, per PitchBook. Rounds at or exceeding $100 million, of which there were 198 in Q2, brought 2021's total to $85.5 billion of capital investment across 385 deals. Just six months in, that sets up 2021 to far exceed last year's records for "mega deals," according to PitchBook.
With large investment rounds come massive valuations--even for companies just taking a Series A round (which in the U.S. hit a median of $42 million). In the second quarter of the year alone, 136 new companies were freshly valued at more than $1 billion, according to CB Insights. That's a nearly 500 percent increase in "unicorn births" year-over-year. "Seriously, if you raise now and are not a unicorn, it's almost odd," writes CB Insights' Anand Sanwal.
Here are a few additional takeaways from the reports on the current funding landscape.
Promising areas for investment
- Fintech: Fintech companies received $1 out of every $5 invested in the second quarter of 2021, according to CB Insights. Investment in the sector reached $33.7 billion, up from $25 billion last quarter and $11.6 billion a year ago.
- Pandemic-inspired innovation: "Many innovators and entrepreneurs are now focused on the abundant opportunities to develop technologies and build companies that address the needs of a reopening economy and a structurally different post-Covid environment," PitchBook writes.
One area that's slowed down
- SPACs: While SPAC mergers have continued at a brisk pace, public filings have slowed dramatically, according to CB Insights. New SEC rules in April regarding filings could be having dramatic effects, with just 61 filings in the second quarter of 2021 after 298 in the first.