Tue. Jan 18th, 2022

Investors dumped a record $ 330 billion in private start-ups in the U.S. last year, nearly doubling the 2020 total in a spate of transactions that quickly inflated company valuations.

Venture capitalists competed with other deep-pocket investors to win deals, giving the founders of attractive start-ups leverage. Investors gained confidence from a spate of public listings that yielded huge returns to their supporters, such as foundations and donations.

Private enterprise-backed companies in the U.S. raised a total of $ 329.8 billion last year compared to $ 166.6 billion in 2020, the previous record, according to PitchBook data. Investors have invested about four times as much money in new ventures as they did five years ago.

More than half of last year’s total, or $ 190.8 billion, comes from rounds of financing of more than $ 100 million, as investors were willing to plow large sums into relatively young companies.

Bar graph of transaction value ($ billion) showing US corporate funding rising higher in 2021

Venture capitalists paid steep prices for interests in promising start-ups that sometimes had low incomes, attracted by strong demand for business software, e-commerce providers and other winners in the pandemic economy.

Stytch, a two-year-old start-up software startup, had less than $ 1 million in recurring revenue when Coatue Management and other investors valued the company at $ 1 billion in November, according to the company.

Publicly listed business software companies trade at about 16.4 times their revenue, according to the BVP Nasdaq Emerging Cloud Index.

Beginners of cryptocurrencies also attracted feverish activities. OpenSea, a market for non-swimmable tokens, announced on Monday that it had raised $ 300 million in funding under investment firm Paradigm and Coatue, which raised the company’s valuation from $ 1.5 billion in July to $ 13.3 billion. has.

Worldwide, private beginners raised a total of $ 671 billion last year, according to PitchBook data, an increase of more than 90 percent from the previous year.

Some investors have begun to doubt that the boom can sustain itself. The tech-heavy Nasdaq Composite Index swept the past two months, dropping 3.3 percent on Wednesday, with traders emerging software companies which skyrocketed during the pandemic.

U.S. venture capital groups raised a record $ 128 billion last year, including $ 41.3 billion for first-time fund managers, indicating that large amounts of unspent capital could keep the boom alive.

Greg Bohlen, co-founder of Union Grove Venture Partners, which invests primarily in venture capital funds, said the firm had “taken breaks” from some executives who had recently sought to raise new capital quickly.

“Rationality always returns to a market left to itself,” Bohlen said. “What we have seen is not rational.”

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