Q2 2021
In partnership with
Mega-deal activity sets new Late-stage valuations 2021 already sets new record records on capital investment continue to soar in 2021 for exit value and deal count Page 12 Page 26 Page 5
The definitive review of the US venture capital ecosystem Credits & contact
PitchBook Data, Inc. JOHN GABBERT Founder, CEO NIZAR TARHUNI Senior Director, Institutional Research & Editorial
RESEARCH CAMERON STANFILL, CFA Senior Analyst, VC KYLE STANFORD, CAIA Senior Analyst, VC JOSHUA CHAO, Ph.D. Senior Analyst, VC
DATA ALEX WARFEL Data Analyst
Contents Report & cover design by MEGAN WOODARD and DREW SANDERS
Executive summary 3 National Venture Capital Association (NVCA) BOBBY FRANKLIN President & CEO NVCA policy highlights 4 MARYAM HAQUE Executive Director, Venture Forward Overview 5 MICHAEL CHOW Research Director, NVCA and Venture Forward Angel, seed, and first financings 7 DEVIN MILLER Manager of Communications & Digital Strategy Early-stage VC 9 SABRINA FANG Vice President of Communications and Marketing Late-stage VC 11 Contact NVCA Deals by sector 15 nvca.org [email protected] SVB: How hedge funds are influencing venture fundraising 19 Silicon Valley Bank Female founders 21 GREG BECKER Chief Executive Officer MICHAEL DESCHENEAUX President Nontraditional investors 23 SUNITA PATEL Chief Business Development Officer ROB FREELEN Head of Venture Capital Relationship Venture debt 25 Management
Exits 26 Contact Silicon Valley Bank svb.com Fundraising 28 [email protected] Methodology 30
2 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Executive summary
Following a robust first quarter for the venture capital (VC) industry, the industry’s strength continued in Q2, setting the stage for what could be another consecutive record-setting year. Investors established a new high-water mark in Q1 by deploying $75.0 billion to portfolio companies, and investor enthusiasm remained high in Q2 with $75.0 billion in capital going to high-growth US startups. Recent investment activity has been influenced by the COVID-19 pandemic and the permanent imprint it has left on everyday life. 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.
Deal flow at all stages of the investment lifecycle appears healthy, but large and late-stage investments remain the main drivers behind overall strong deal value trends the industry continues to see. Late-stage VC investment through just the first half of the year ($108.8 billion) has almost reached the full-year 2020 total ($109.8 billion). Similarly, mega-rounds ($100 million+) in 2021 have already reached an annual record high of $85.5 billion.
Larger sums of money chasing a fixed opportunity set of investments explains most of the story, but the surge in early-stage activity merits further examination. While supply and demand considerations certainly play a role in the swell of activity in this stage, the increase in early-stage investment is also partly indicative of investors improving their ability to evaluate and make projections for companies raising their first priced rounds. Additionally, improved best practices and better, more easily accessed information have helped startups improve their ability to launch. Lastly, the disruption caused by COVID-19 has led to an influx of top caliber executive talent from all industries joining startups, increasing a talent pool that had been primarily limited to veteran technology professionals. These factors help explain the growth in the relative share of capital invested accounted for by early-stage investment in Q2.
Like investments, exit activity also continued its robust performance in Q2 with 334 disclosed venture-backed exits accounting for $241.3 billion of exit value. Q2 marks the fourth straight quarter in which exit activity has exceeded $100 billion, and all signs point toward continued strength going forward. With positive net cash flows for VC firms in 2020 and a massive $51.3 billion returned to LPs, fundraising has not slowed, and GPs have raised $74.1 billion year to date, not far from the record $81.0 billion raised last year. Ample liquidity exists in the ecosystem for further investments that should encourage strong valuations and generate an appetite for more exits. Strong IPO markets may also be leading some late-stage companies that previously had not considered going public to now reconsider that route as a viable option.
Another noteworthy trend is the increasing number of deals with non-traditional VC investors, such as mutual funds, hedge funds, corporate investors, and crossover investors. Pronounced nontraditional investor (NTI) participation in VC deals is a relatively new phenomenon that took flight in 2018 when deals with NTI participation broke $100 billion for the first time, nearly double the previous high of $59.1 billion in 2015 and the first of four consecutive years with such high levels of participation.
Interest from this set of investors is a testament to the value of VC as an asset class and investment strategy, but such enthusiasm comes with its unique set of benefits and complications. On the positive side, crossover investors with significant public market expertise can add value during late-stage investments, changing conversations in the boardroom for the better. However, applying public market discipline during early-stage investment can prove counterproductive when companies are not ready for that degree of oversight. Additionally, a lack of experience on the part of many NTIs can yield irregular deal terms and valuations that are unappealing for traditional VC investors considering follow-on investments.
While important, these latter trends should not diminish appreciation that the industry is charging full steam ahead. A question on the minds of observers and industry participants alike is how long the good times can keep rolling. From where things stand now, it seems as if the answer may be for quite some time.
3 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR NVCA policy highlights
As the Biden administration settles in, increases on the private investment the contours of its policy priorities are funds currently financing new company beginning to take shape. We have already formation, climate, and next-generation seen the revitalization of the State technologies is in direct contradiction to Small Business Credit Initiative and the the goals of the Biden Administration. International Entrepreneur Rule and are heavily involved in discussions around • Immigration Policy: After years infrastructure and innovation. One of of fighting for the creation and President Biden’s central strategies is implementation of the International to use increased innovation activity to Entrepreneur Rule (IER), which make progress on three critical societal works similarly to a Startup Visa, challenges: climate change, access to NVCA was thrilled to see the Biden economic opportunity, and competition administration’s recent relaunch of the with China. To achieve the President's rule. IER will allow talented foreign- vision, the plan will need the active born entrepreneurs to launch their Bobby Franklin is the President & CEO of the companies in the US. Related to IER, we National Venture Capital Association (NVCA), participation of the startup ecosystem, the venture community’s trade association continue to encourage Congress to pass including the VC community. focused on empowering the next generation of a Startup Visa, which would establish a transformative US-based companies. Based in NVCA is actively advocating for the role of separate visa category for foreign-born Washington, D.C., with an office in San Francisco, entrepreneurs and the startup ecosystem founders and be an improvement on NVCA acts as the voice of the US VC and startup IER. We recently released a report titled community by advocating for public policy that in our economic recovery. In particular, we supports the US entrepreneurial ecosystem. are focused on: “Immigrant Entrepreneurs Can Drive Economic Growth in the Pandemic • Endless Frontier Act: NVCA applauded Recovery,” about which we have been • Climate and Sustainability: With the Senate passage of the Endless speaking with policymakers to make the venture capital investing a record $12.7 Frontier Act (EFA) in June. This case for a Startup Visa. billion into US climate tech startups in bipartisan legislation includes more 2020, a new generation of companies • Antitrust: NVCA is concerned than $200 billion in funding that would is coming online to address the climate about multiple bills introduced in promote new company formation and crisis. We are working hard on their both chambers of Congress that entrepreneurship by providing major behalf to educate policymakers on ways would negatively impact the ability investment in early research (both that policy can accelerate the climate of venture-backed startups to be public and private), education and technology commercialization process. acquired by other companies. The training, technology commercialization, bill that has seen the most significant • State Small Business Credit Initiative and facilities. This bill is heading to action is the Platform Competition and (SSBCI): Congress passed $10 billion in conference with the House-passed Opportunity Act, which is effectively a funding for SSBCI to help states set up NSF for the Future Act, which recently ban on acquisitions by Apple, Alphabet, debt and equity programs to provide passed with a strong bipartisan vote. Amazon, and Facebook. Introduced by access to capital for small businesses. • Capital Gains and Carried Interest: Representatives Hakeem Jeffries (D- Our SSBCI Working Group provided Taxing capital gains at ordinary income NY) and Ken Buck (R-CO), the legislation recommendations to Treasury as they rates undercuts President Biden’s passed the House Judiciary Committee implement the program and will provide own Build Back Better agenda and in late June but was opposed by best practices to state economic would put the country further behind several key members of the committee. development officials as well. in the race to win the future. We are NVCA opposed the bill and stressed Our VC community and startup ecosystem actively engaged with policymakers on the importance of acquisitions to the are our nation’s greatest economic asset. discussions around capital gains and venture ecosystem. NVCA collaborated As the 117th Congress focuses on the key carried interest policy. While there on a recent paper by Professor Gary legislative priorities, we will continue to has been some significant pushback to Dushnitsky (of London Business School) work with policymakers to explain how taxing capital gains at ordinary income and Professor Daniel Sokol (University they can leverage this strength to solve rates, the outcome of carried interest is of Southern California) that explains long-term challenges. an extreme unknown. We are working the dangers such bills pose to the to present the case that large tax entrepreneurial ecosystem.
4 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Overview 2021 tracking to be venture's best year yet US VC deal activity
12,449 12,362 11,521 11,302 11,066 10,693 10,165 9,494 7,058 8,026 6,897 $45.3 $41.6 $48.1 $74.0 $84.9 $81.7 $88.1 $143.2 $142.4 $164.3 $150.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Deal value ($B) Deal count Estimated deal count
PitchBook-NVCA Venture Monitor *As of June 30, 2021
Mega-deals shatter previous records. Mega-deal activity sets new records on capital 198 VC deals at or exceeding $100 million closed in Q2, bringing 2021’s total to $85.5 investment and deal count billion of capital investment across 385 US VC mega-deal activity deals. This has already surpassed 2020’s 385 record and, with six months left in the year, will easily set a new annual record on both a count and value basis. 329
Crossover investor participation at 249 unprecedented levels. Public equity asset 212 managers have been increasingly adopting venture as a strategy, as we have detailed 114 108 83 previously. H1 has seen an explosion in 46 89 26 crossover investor participation, totaling 36 $63.5 billion of capital across 524 VC deals and will likely surpass the $100 billion mark $10.4 $4.4 $6.1 $19.6 $25.3 $26.0 $24.2 $64.5 $58.6 $75.2 $85.5 by the end of the year. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Deal value ($B) Deal count Earliest stages of the venture lifecycle are increasing their proportion of larger deal PitchBook-NVCA Venture Monitor size buckets. Median and average deal sizes *As of June 30, 2021 have shot up across all stages over the last decade. Capital availability continues to increase due to skyrocketing fundraising numbers, and startups tend to be more mature and developed when accessing institutional capital. As such, the proportion
5 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Deal size buckets shift earlier up the venture lifecycle in recent years US VC deal count by stage and size
100% D+ 90% C 80% B 70% A 60% Seed 50% Angel 40% 30% 20% 10% 0% 2013-2015 2016-2018 2013-2015 2016-2018 2013-2015 2016-2018 2013-2015 2016-2018 2013-2015 2016-2018 2013-2015 2016-2018 2019-2021* 2019-2021* 2019-2021* 2019-2021* 2019-2021* 2019-2021* Under $500K $500K-$1M $1M-$5M $5M-$10M $10M-$25M $25M+
PitchBook-NVCA Venture Monitor *As of June 30, 2021 of angel & seed and early-stage rounds Explosive growth from crossovers in H1 2021 that make up many of the larger deal size buckets (i.e. $5-$10M and $10M-$25M) has US VC deal activity with crossover investor participation grown substantially in recent years. $35 300
VCs have increasingly doubled down $30 250 on generalist and specialist strategies. $25 200 Last month, we published an analyst note $20 on how investment style has changed 150 in the last 15 years. VC managers with $15 a “targeted” approach have dwindled as 100 $10 many either diversified their portfolios or increased specialization within a specific $5 50 industry. Further, new managers tend to $0 0 be more heavily weighted toward targeted Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 and specialist styles when compared to veteran VCs. 2016 2017 2018 2019 2020 2021 Deal value ($B) Deal count Exit value sets new annual record in six months. Robust public listing activity and PitchBook-NVCA Venture Monitor *As of June 30, 2021 acquisitive corporations drove exit value in H1 2021 to $372.2 billion, which is already nearly 30% higher than 2020's all-time record of $287.5 billion. The direct listings of Coinbase and Roblox drove over $120 billion of this value just on their own, which speaks to the power of outliers, as well as just how large startups are able to grow in the current VC market.
6 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Angel, seed, and first financings Using H2 2020’s robust dealmaking activity Angel and seed deals setting high pace as a springboard, the angel and seed markets US angel and seed deal activity by stage have catapulted to record highs in the first half of 2021 and offer a tantalizing glimpse 3,187 into future US venture dealmaking activity. Based on the elevated number of companies raising capital through Q2, we expect activity 1,972 in these earliest venture stages to remain 1,502 high for the foreseeable future. The first $7.6 $7.7 $5.3 $8.3 1,271 half of 2021 has seen the highest figures of $3.6 $4.3 angel & seed investment of any half year $3.0 $2.3 $4.9 in our dataset. An estimated 1,733 deals $1.7 were completed in Q2, which heralds a new $1.1 $3.2 $2.0 $2.5 $2.5 $2.7 $2.7 $2.7 $2.6 $2.1 quarterly high-water mark for the industry. $1.3 $1.4 While the resilience of angel & seed deals in 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* the Zoom economy has drawn considerable attention, it is important to note the changes Angel deal value ($B) Seed deal value ($B) over the past few years that have enabled Angel deal count Seed deal count these levels of activity. The emergence of a pre-seed market has created more PitchBook-NVCA Venture Monitor *As of June 30, 2021 opportunities for companies to raise pre-VC capital and enter the venture lifecycle in a stronger position, and the growth in rolling With more than $7.0 billion in capital have been much less pronounced. However, funds and solo capitalists has increased the invested across angel & seed deals, H1 2021 the seed stage continued to attract large, number of investors targeting angel- and has already surpassed the total deal value multi-stage institutional investors. For seed-stage companies. We have also seen of every year prior to 2017. The outsized example, General Catalyst and Founders angel & seed deals expand beyond tech hubs, capital figures at the late stage are easily Fund, which combined to close more than as more than 33% of completed angel or seed traced to the growth in mega-rounds ($100 $4.5 billion in VC funds in 2020, have deals occurred outside the 10 most active million+), but the increase at the angel joined forces to close 21 seed deals in combined statistical areas (CSAs). That figure and seed stages is less straightforward as 2021, while Sequoia, which operates the drops below 19% at the late stage. growth in the median and average deal sizes largest VC fund at $8 billion, has made
Past two quarters set highs for deal count in our dataset US angel & seed deal activity by quarter
$4.0 2,000 $3.5 $3.0 1,500 $2.5 $2.0 1,000 $1.5 $1.0 500 $0.5 $0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 2019 2020 2021 Deal value ($B) Deal count Estimated deal count
PitchBook-NVCA Venture Monitor *As of June 30, 2021
7 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR nine US seed investments this year. This Although first financings are not counted invest in the riskiest companies and have has made dealmaking more competitive, as a specific investment stage, the number confidence in the economy coming off the as larger sums are being invested in single of companies raising their first round of pandemic. Investors look to have plenty of deals. A record 23 angel & seed deals of $25 VC indicates a positive trend in the first six opportunities over the next several years million or higher have been completed in months of 2021. Already, more than 1,700 as these companies come back to market to H1 2021—a figure that far exceeds 2020’s companies have raised a first investment raise additional capital. figure. Such deals had not achieved double- this year, totaling just shy of $9 billion. That digit totals until 2018, showcasing that the the increased available capital is finding stage-stretching deal sizes have not just its way to new ventures is an optimistic occurred at the late stage in recent years. signal that investors are still willing to
Deal sizes creeping higher US angel & seed deal count (#) by size
100% $25M+ 90% $10M-$25M 80% $5M-$10M 70% $1M-$5M 60% $500K-$1M 50% Under $500K 40% 30% 20% 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
PitchBook-NVCA Venture Monitor *As of June 30, 2021
First financings strong through H1 US first-financing VC deal activity
3,494 3,613 3,665 3,492 3,370 3,387 3,250 3,133 3,222 2,763
1,743 $6.0 $6.7 $7.1 $8.3 $9.6 $9.1 $9.1 $14.7 $13.8 $13.9 $9.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Deal value ($B) Deal count
PitchBook-NVCA Venture Monitor *As of June 30, 2021
8 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Early-stage VC
Following a robust start to 2021, early-stage H1 deal value tracking to set a record VC deal activity surpassed expectations in Q2 as $19.6 billion of capital was invested US early-stage VC deal activity across an estimated 1,303 deals, notching a new quarterly record. While the last three 3,908 3,687 3,627 3,481 years (2018–2020) have each surpassed 3,340 3,242 3,105 $40 billion in annual deal value, 2021 will 2,931 2,680 likely shatter that high-water mark since, 2,512 2,518 at the current pace, it would exceed $60 billion—an annual value that previously has only been observed at the late stage.
Early-stage VC is undergoing an identity
crisis as deal size distribution weighs more $14.0 $13.8 $16.4 $21.4 $26.2 $25.6 $30.5 $42.4 $46.2 $43.5 $34.4 and more heavily toward outsized financing rounds, largely due to recycled liquidity
from an overactive exit environment and 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* nontraditional investors descending to the Deal value ($B) Deal count Estimated deal count venture lifecycle’s early stage. Indeed, the proportion of early-stage deals over $10 PitchBook-NVCA Venture Monitor *As of June 30, 2021 million is approaching 50% of aggregate deal count and constitutes more than 90% of aggregate deal value YTD—a strong Q2 deal value notches a record $19.6 billion indicator of the shifting landscape in early- US early-stage VC deal activity by quarter stage investing, given that deals over $10 million barely eclipsed 25% of total deal $20 1,400 count just five years prior. 1,200 $15 While this trend has gradually taken shape 1,000 over the last several years, the run-up 800 seen in 2021 has greatly accelerated deal $10 distribution toward outsized deals. The 600 median and average early-stage deal size in $5 400 H1 2021 shot up to $9.5 million and $20.5 million, respectively—a sharp increase 200 over 2020’s aggregate of $6.4 million and $0 0 $15.6 million. On the valuations front, the Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 median and average early-stage pre-money valuation in H1 2021 has also drastically 2016 2017 2018 2019 2020 2021 expanded to $42.0 million and $96.1 Deal value ($B) Deal count Estimated deal count million, respectively—a notable jump over PitchBook-NVCA Venture Monitor 2020’s $30.0 million and $61.7 million. *As of June 30, 2021 We attribute much of the expansion to the increased competition for deals in H1 2021 managers that also invest in privately growth opportunities have forayed into as the investing landscape heats up and backed companies—has dramatically the early stage as they look to expand applies upward pressure on both deal sizes increased capital availability within their opportunities by participating (and and valuations. VC, and these investors tend to be less sometimes even leading) Series A and B valuation-sensitive than traditional venture rounds. In Q2, most of the largest early- The explosion of crossover investors— firms. Further, crossover investors that stage deals included crossover investor namely, buy-side public equity asset have typically focused on late-stage and participation. For example, Treeline
9 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Biosciences’ $735.0 million Series A As the industry looks toward H2 2021, adds to early-stage companies or merely included participation from Casdin Capital, VCs are still evaluating whether this level sources for large cash infusions. In addition, GV, and Orbimed; and Homeward’s $371.0 of dealmaking will persist and what its as the demand for capital continues to be million Series B included participation from broader impact on the venture ecosystem matched by oversupply, the early stage of Adams Street Partners and Blackstone might be. Skepticism remains whether venture is likely to be fundamentally altered Alternative Asset Management. many crossover investors are true value- for the foreseeable future.
Proportion of $10M+ rounds approach $10M+ rounds constitute over 90% of 50% of aggregate deal count aggregate early-stage deal value US early-stage VC deal count (#) by size US early-stage VC deal value ($) by size
100% $25M+ 100% $25M+ 90% $10M- 90% $10M- 80% $25M 80% $25M 70% $5M- 70% $5M- $10M $10M 60% 60% 50% $1M- 50% $1M- $5M $5M 40% 40% $500K- $500K- 30% $1M 30% $1M 20% 20% Under Under 10% $500K 10% $500K 0% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021*
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Rapid cadence of capital allocation Pre-money valuations shoot upward as continues to push median and average competition increases upwards Quartile distribution of early-stage VC pre-money valuations ($M) Quartile distribution of early-stage VC deal sizes ($M)
$25 $120 $21.0 $100.0 $20 $100 $20.5 $96.1 $16.0 $80 $15 $61.7 $15.6 $60 $9.5 $10 $60.0 $42.0 $6.4 $40 $30.0 $21.0 $5 $2.6 $20 $1.7 $15.0 $0 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021* Median 25th percentile Median 25th percentile Average 75th percentile Average 75th percentile
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
10 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Late-stage VC Late-stage capital investment surpassed H1 2021 matches full year 2020 in terms of investment $100 billion for the second consecutive US late-stage VC deal activity year—this time, however, in only 6 months. At this rapid pace of dealmaking, 2021 3,453 will easily surpass 2020 as a new record 3,108 year for investment into the most mature 2,742 startups. Median deal sizes and valuations 2,564 continue to grow, but late-stage deal counts 2,363 2,227 2,243 2,151 are also on a robust trajectory through two 1,967 1,847 quarters, posting a number 47.0% larger 1,792 than the deal count through Q2 2020. Of course, the first half of 2020 bore the brunt of the economic slowdown brought on by the COVID-19 pandemic, so while this may
be a slightly favorable comparable, 2021 is $28.9 $24.7 $27.4 $47.1 $51.9 $49.3 $49.6 $90.5 $85.8 $109.8 $109.4 still on pace to set a new all-time record for late-stage deal count. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Deal value ($B) Deal count Estimated deal count This momentum in deal count is even more pronounced with mega-deals ($100 PitchBook-NVCA Venture Monitor *As of June 30, 2021 million+), which have already set a new annual record in 2021 through only six months. 323 of those mega-deals were 83.3% of late-stage capital raised was in Q2 2021 are coming at the Series C or D in the late stage, 163 in Q2 alone, which rounds of more than $50 million; these rounds, which we think of as the traditional on its own is greater than any full year deals made up just 45.1% of capital late stage. While the “private-for-longer” prior to 2018. This continues to cement investment in 2011. phenomenon remains part of the overall the dominance of the largest companies conversation, it is no longer just companies in aggregate capital raised. To illustrate While there is a contingent of these that extend past the traditional venture this increasing concentration of capital mega-deals that are Series E or F or later, time frame that are receiving these investment within US VC, so far in 2021 a vast majority of the mega-deals from outsized funding rounds.
Capital investment at the late stage remains historically robust US late-stage VC deal activity by quarter
$60 1,400
$50 1,200 1,000 $40 800 $30 600 $20 400
$10 200 $0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 2019 2020 2021 Deal value ($B) Deal count Estimated deal count
PitchBook-NVCA Venture Monitor *As of June 30, 2021
11 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Of course, the maturity level of changes in other asset classes, or broader been a boon for many businesses in this companies raising Series C & D rounds economic shifts (such as rising inflation space, further accelerating the digitization has changed over the past five years, as or interest rates) are likely to be the only within financial markets, including mobile has a differentiation in business models factors to derail the search for growth from payments and trading and areas of lending such as the rise of as-a-service, which has LPs in the VC market. such as buy-now, pay-later and real allowed for more rapid scale. The total estate lending. The quick maturation of capital available to VC-backed companies Fintech was well-represented in these top these trends has propelled many of these continues to swell, especially at the late deals during the second quarter, with Plaid businesses squarely into the late stage, and stage, which we see as a tailwind to these and Brex raising some of the largest VC with the capital intensity of many business kinds of deals that should persist at least deals of the quarter, each deal coming in models in the space, it follows that many of through the end of 2021. Longer-term at more than $400 million. COVID-19 has these deals fall in the top decile of deal size.
Late-stage dealmaking continues at historic Capital investment dominated by mega- pace deals US late-stage VC deal count (#) by size US late-stage deal value ($B) by size
100% $50M+ 100% $50M+ 90% $25M- 90% $25M- 80% $50M 80% $50M 70% $10M- 70% $10M- $25M $25M 60% 60% 50% $5M- 50% $5M- $10M $10M 40% 40% $1M- $1M- 30% $5M 30% $5M 20% 20% Under Under 10% $1M 10% $1M 0% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021*
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Late-stage valuations continue to soar in 2021 Quartile distribution of late-stage pre-money valuations ($M)
$1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Average 75th percentile Median 25th percentile
PitchBook-NVCA Venture Monitor *As of June 30, 2021
12 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Shaping the future of venture capital
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49150 Mekanism In. Oris bp M49150_21-SVB-4566-4_Venture Monitor Print_OneOff 03/30/21 PMSxxxx PMSxxxx PMSxxxx PMSxxxx 2:00 PM Deals by sector: B2B Tech
B2B tech nearly surpasses 2020 deal value Late stage deals outpacing other stages US VC B2B tech deal activity US VC B2B tech deal count (#) by stage
5 6065 365 100 Late 5 324 VC 4 922 90 4 579 4 8194 475 3 032 4 120 80 Early VC 3 354 70 Angel 2 833 60 seed 50 40 30 20 21 0 18 0 22 0 36 8 39 6 41 6 41 3 61 9 72 4 77 1 72 0 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Deal value Deal count 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Current average 60% higher than 2020 Median valuation more than double 2020 Median and average US VC B2B tech deal sizes ($M) Median and average US VC B2B tech pre-money valuations ($M)
30 27 1 700 578 8 25 600 500 20 16 9 400 15 300 232 2 10 200 5 2 5 3 7 100 43 0 20 0 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021 Median Average Median Average
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
15 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Deals by sector: B2C Tech
B2C deals pacing new record Each stage at record pace US VC B2C tech deal activity US VC B2C tech deal count (#) by stage
3 2053 389 100 Late 3 1163 201 3 107 3 057 VC 2 830 90 2 587 80 Early 2 230 1 846 VC 70 1 732 Angel 60 seed 50 40 30 20 13 9 10 3 11 9 21 9 27 5 29 6 27 0 57 7 44 1 49 0 43 0 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Deal value Deal count 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Deal sizes see bump to new highs B2C valuations following trends Median and average US VC B2C tech deal sizes ($M) Median and average US VC B2C tech pre-money valuations ($M)
30 26 5 600 513 1 25 500 19 1 20 400
15 300 275 1
10 200
5 2 7 3 2 100 38 3 18 0 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021 Median Average Median Average
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
16 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Deals by sector: Biotech & pharma
H1 biotech companies raise more than $20 Nearly 40% of all deals at the late stage billion US VC biotech & pharma deal count (#) by stage US VC biotech & pharma deal activity
1 043 100 Late VC 952 90 875 835 80 Early 596 VC 722 679 660 70 598 Angel 534 60 498 seed 50 40 30 20 4 9 5 2 6 2 8 4 10 6 10 2 12 5 19 8 17 4 27 2 20 3 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Deal value Deal count 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Plethora of outsized deals push median and Valuations continue to soar as companies average upwards tackle unmet medical needs Median and average US VC biotech & pharma deal sizes ($M) Median and average US VC biotech & pharma pre-money valuations ($M) 40 160 36 9 143 6 35 140 30 28 5 120 110 2 25 100 20 80 15 60 53 0 10 0 10 8 0 40 30 0 5 20 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021 Median Average Median Average
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
17 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Deals by sector: Fintech
H1 fintech investment already shatters Maturation and wider adoption of fintech previous record evident with late-stage deals US VC fintech deal activity US VC fintech deal count (#) by stage
1 049 1 048 100 Late VC 1 066 761 90 795 80 Early VC 688 655 70 640 Angel 492 60 seed 50 356 281 40 30 20 1 4 1 8 2 3 5 4 8 3 7 4 7 9 14 0 16 8 21 3 24 2 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Deal value Deal count 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Deal sizes continue to grow larger Dizzying valuations seen in H1 fintech Median & average US VC fintech deal sizes ($M) deals Median & average US VC fintech pre-money valuations ($M)
40 797 3 37 2 800 35
30 600 25 23 3 20 400 340 1 15 10 7 2 200 5 4 2 64 5 25 0 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021 Median Average Median Average
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
18 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR SVB: How hedge funds are influencing venture fundraising Q&A with Sunita Patel
As competition to participate in the best What conditions are pushing hedge deals grows, a handful of hedge funds funds to move down market? are showing greater interest in venture investments, from early stage to late Some hedge funds are adjusting their strategy to consider earlier-stage stage. Even as demand is pushing up investments as valuations soar at their valuations, the returns are attractive typical investment stage—the last for these funds. Will the trend last? funding round before the company goes Sunita Patel, Silicon Valley Bank’s chief public. Tech and life sciences sectors business development officer, offers have shown a lot of resilience through the her take. pandemic, encouraging hedge funds to enter the lifecycle earlier and strengthen What makes hedge funds competitive in their position for later rounds. this space? We’re in a low-interest rate environment, Hedge funds’ appetite for VC deals has SUNITA PATEL so hedge funds are going to look for Chief Business Development Officer increased, and some of those funds have better returns elsewhere, including VC, reportedly offered to pay as much as where returns have reached the highest 50% to 100% more than traditional VC point so far in this economic cycle. Sunita Patel is the Chief Business Development competitors. Compared with VC firms, And hedge funds are going after many Officer for Silicon Valley Bank and leads all hedge funds typically place less emphasis business development operations for SVB. With sectors. We’re seeing them trying to more than 25 years of experience in lending to on the ownership on the capitalization identify the top three to five companies companies in the innovation economy, Sunita table. They often don’t require a board in each sector and then very aggressively is a highly regarded leader with an expansive seat, while VC firms typically do, which targeting those companies, offering network across the venture ecosystem. may be an attractive dynamic for some valuations as high as 100x annual independent-minded founders. recurring revenue (ARR).
What’s more, hedge funds are moving Do traditional VC and hedge fund interesting to see how patient hedge faster. Now we’re seeing turnarounds investors have different expectations? funds will be over time, and how they from hedge funds of two to three weeks. may support their companies when They’re also offering very clean equity Hedge funds typically set higher things aren’t going well and the markets term sheets—sometimes only one page. performance goals for venture aren’t as robust as they are today. These factors make it compelling for investments, and that could mean they some founders to raise money from would be less forgiving should there In addition, I’d offer companies looking hedge funds. be a rocky patch. Unlike a VC investor, for institutional investors two notes they tend to have less involvement of caution based on SVB’s experience In the first half of 2021, hedge funds with developing a portfolio company’s supporting the venture fundraising participated in 128 US VC deals, strategy and may be more focused on ecosystem. A high initial valuation from surpassing 118 deals for full-year 2020 reaching a liquidity event than the long- an institutional investment may become and 109 in 2019, according to PitchBook. term potential of the company. an impediment when a company seeks its Much of the activity is still focused next funding round. And raising too much on late-stage deals: Hedge funds, for A core benefit for founders working with capital too quickly can bring premature example, participated in just 4% of US VC investors often is the firms’ long- dilution of equity ownership. Series C deals in 2019—a figure that grew term vision and patience in developing to 10% through mid-year 2021. a company over time. It’s going to be
19 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR How are VC funds responding to the What are the implications for the Will hedge funds continue to participate hedge fund competition? fundraising ecosystem? in VC deals at this pace?
We see hedge funds putting deal making In the near term, we expect to see How this plays out will depend on hedge pressure on some traditional Series A shorter periods between funding rounds fund performance and appetite for risk. investors, which has resulted in these and more nontraditional investors At the later stages, it’s all about setting VC firms increasing their seed investing entering VC. That’s likely to inflate dollar valuations and achieving a 1x versus 3x activity. VC investors are not likely to amounts for the most sought-after return, whereas coming in as an earlier blindly follow hedge funds to compete on companies. The longer term is harder investor creates more sizable risk should the highest valuation levels. They’ll likely to predict. Should we have a downturn, the company stall or go under completely. continue to focus on a certain percentage my guess is investors will return to We’ll see how returns work out for these of ownership in their portfolio companies their comfort zones. In the past, when hedge funds. Stay tuned. for the economics to work. the market has returned to a kind of normalcy, we’ve seen many investors go They’re also more inclined to lean into back to their core competencies. their differentiators and focus on being operating partners, involving themselves in company building. Whether it’s access to the VC ecosystem, customers, or talent, VCs often emphasize the added value they could bring compared with hedge funds and other nontraditional investors.
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20 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Female founders
H1 already on par with prior years' totals Companies with all female founders raise US VC deal activity for female-founded companies more than $2 billion in H1 US VC deal activity for companies with all female founders
2,8372,758 730 2,514 703 2,312 615 2,080 1,936 1,979 527 1,592 478 455 1,623 420 399 1,236 375 284 874 225 $3.6 $5.1 $6.7 $9.3 $11.6 $10.1 $15.5 $19.3 $23.3 $23.0 $23.2 $0.9 $0.8 $1.2 $1.7 $1.7 $1.4 $2.2 $3.1 $3.3 $3.6 $2.3 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021* Deal value ($B) Deal count Deal value ($B) Deal count
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Deal count proportion on par with 2020’s Deal value proportion of companies with at values least one female founder sees uptick Female-founded companies as a proportion of total US VC deals (#) Female-founded companies as a proportion of total US VC deals ($)
30% 24.9% 20% 24.6% 25% 16.3% 15% 20% 14.8%
15% 10%
10% 6.5% 6.1% 5% 5% 2.3%1.6% 0% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021* All female founders At least one female founder All female founders At least one female founder
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
21 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Mixed and all male founding teams see the Valuations rise across the board biggest deal size jumps Median pre-money valuations ($M) by founder gender mix Median US VC deal sizes ($M) by founder gender mix
$6 $50 $45.0 $5.0 $45 $5 $40 $4.2 $35 $4 $3.5 $30.0 $30 $3.0 $3 $25 $21.0 $20 $17.0 $2 $1.7 $1.6 $15 $15.0 $1 $10 $11.9 $5 $0 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021* All male All female Mixed All male All female Mixed
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Top 5 US CSAs by capital raised ($B) for companies with all Angel & seed deal count proportion female founders (2017-2021) continues to contract Combined statistical area Capital raised ($B) US VC deal count (#) for female-founded companies by stage New York-Newark, NY-NJ-CT-PA $4.2 100% Late VC San Jose-San Francisco-Oakland, CA $3.9 90% Early VC Los Angeles-Long Beach, CA $1.7 80% Boston-Worcester-Providence, MA-RI-NH-CT $1.0 Angel 70% & seed Other $0.6 60%
PitchBook-NVCA Venture Monitor 50% *As of June 30, 2021 40% Top 5 US CSAs by deal count (#) for companies with all female 30% founders (2017-2021) 20% 10% Combined statistical area Deal count 0% New York-Newark, NY-NJ-CT-PA 605 San Jose-San Francisco-Oakland, CA 535 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Los Angeles-Long Beach, CA 410 2021* Boston-Worcester-Providence, MA-RI-NH-CT 144 PitchBook-NVCA Venture Monitor *As of June 30, 2021 Seattle-Tacoma, WA 111
PitchBook-NVCA Venture Monitor *As of June 30, 2021
22 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Nontraditional investors Nontraditional investors are taking Nontraditional investors leading trends across the their venture investment strategy into “traditional” or at least “standard” territory market more and more each quarter. The enormous US VC deal activity with nontraditional VC investor participation change the market has gone through over 4,040 the past decade has been predicated, at 3,759 3,517 3,301 least in part, on the participation of firms and institutions not labeled as “VC firms.” 3,026 2,911 Accordingly, it may be time for a rebrand of 2,712 2,793 these nontraditional venture investors, as 2,199 1,834 their recent activity and the outlook of their 1,565 participation point to their continued, and heightened, presence within venture.
Through Q2, activity by nontraditional investors is not merely on track to reach a new high, but is also likely to set a completely new bar of expectations. An estimated 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 3,301 deals have received investment from Deal value ($B) Deal count Estimated deal count a nontraditional institution (81.8% of the PitchBook-NVCA Venture Monitor 2020 record high), representing $115.9 *As of June 30, 2021 billion in deal value (nearly matching 2020’s total). While deal count participation rates Each of past four quarters has been new record for for these institutions have only gently activity ticked upward in recent years, the deal US VC deal activity with nontraditional VC investor participation by quarter value represented by nontraditionals has skyrocketed. The median late-stage deal size $70 2,000 with nontraditional investor participation 1,800 $60 eclipsed $43 million in 2021, nearly $18 1,600 million higher than the same median in 2020. $50 1,400 $40 1,200 PE firms, CVCs, and asset managers 1,000 (including hedge funds and mutual funds) $30 800 are participating in 45% or more of the $20 600 total market deal value. Our past estimates 400 have pegged the capital available from $10 200 nontraditional firms north of $250 billion $0 0 worldwide—essentially doubling the amount Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 of capital available to global venture-backed companies—and that capital is being put to 2016 2017 2018 2019 2020 2021 work at the late stage, extending the venture Deal value ($B) Deal count Estimated deal count lifecycle for many companies. In the US, the number of unique active investors counted PitchBook-NVCA Venture Monitor *As of June 30, 2021 under our nontraditional methodology has doubled since 2013, surpassing 3,000 in institutions’ investment strategies. The last CVC programs are being resupplied with each of the past three years. three years have seen double the number of capital. United Airlines, Zoom, CVS, and corporate VC deals when compared to 2013, Coupa Software are just a few of the new The deal value attributed to rounds with and nearly 1,000 unique corporates have investment programs launched in Q2, while nontraditional venture participation already completed a deal in 2021. Within Toyota Ventures launched two more funds cannot be solely linked to nontraditional the corporate world, CVC has been included ($150.0 million each), and TDK Ventures’ investors because many venture firms also as part of business growth programs at second fund ($150.0 million) is set to participate in those deals. However, venture an unprecedented rate, as companies begin investment. has become ingrained as part of these launch new CVC arms and experienced
23 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR The number of these investors has grown Late stage cemented as main investment rapidly type US VC NTI and CVC unique investor count US VC deal activity (#) with nontraditional VC investor participation by stage
14,000 12,635 1,800 1,661 12,000 1,600 1,352 10,000 8,996 1,400 1,200 1,113 8,000 1,000 6,000 771 764 800 4,000 3,106 2,236 600 434 1,421 2,000 400 0 962 200 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
Unique NTI count Unique CVC investor count 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Total unique investors Angel & seed Early VC Late VC
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
NTIs investing in larger portion of deal value Deals with nontraditional investor participation as proportion of overall US VC deal value
60%
50.2% 50% 48.6% 46.7% 45.8% 45.3% 40% 37.9%
30% 27.3% 27.4%
20%
10% 8.3% 5.2% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* CVC investor PE investor Asset manager Government/SWF Other tourist investor
PitchBook-NVCA Venture Monitor *As of June 30, 2021
24 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Venture debt
Venture debt deals on strong pace Late-stage companies taking out highest US venture debt activity number of loans US venture debt count (#) by stage
3,119 100% 3,070 Late VC 2,745 90% 2,533 2,620 Early VC 2,404 80% Angel 2,027 70% & seed 60% 1,631 1,537 1,361 50% 1,066 40% 30% 20% $4.2 $7.5 $7.9 $12.0 $17.1 $15.0 $15.3 $25.0 $31.4 $33.4 $13.3 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
Deal value ($B) Deal count 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
Tech venture debt pacing alongside 2020 Few large loans in 2021 leaving loan value US venture debt activity for tech low through H1 US venture debt activity for healthcare
2,4802,403 2,229 795 2,069 1,998 731 1,931 656 619 1,571 552 506 506 1,234 1,216 371 380 389 993 333 760 $2.8 $6.2 $6.2 $9.2 $13.7 $12.4 $11.4 $19.7 $27.6 $26.6 $11.6 $1.2 $1.2 $2.0 $2.4 $2.2 $1.9 $3.7 $5.3 $4.5 $7.7 $1.9 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021* Deal value ($B) Deal count Deal value ($B) Deal count
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
25 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Exits The US VC exit market was extremely 2021 already sets new record for exit value robust during Q2 2021, as it seemed to be US VC exit activity in all other phases of VC as well, continuing the trend observed over the last few years. With more than $372.2 billion of 1,173 value becoming liquid in just the first six 1,127 1,131 1,109 1,059 months of 2021, this year has already set 1,000 926 955 a new annual record in just two quarters. 879 883 Even the exit count is historically strong, 748 with an estimated 883 deals through six months, likely to be a new record by the end of the year. It is encouraging to see a positive relationship form between exit value and count, since we’ve seen massive
exits dominate the storylines over the last $67.1 $129.0 $71.9 $112.6 $73.4 $72.9 $100.7 $123.7 $261.9 $287.5 $372.2 few years. More exits happening across the VC ecosystem is a broadly optimistic 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* sign for the health of the venture market Exit value ($B) Exit count Estimated exit count going forward, as that capital will likely be returned across a larger proportion PitchBook-NVCA Venture Monitor *As of June 30, 2021 of GPs.
Nonetheless, outsized exits propel most of the capital distributions, and IPOs are still of the quarter, their IPOs valued at Undoubtedly, this public listing activity the story behind the elevated exit value $85.0 billion, $29.0 billion, and $14.3 has been buoyed slightly by the special totals. In fact, 26 of the top 30 exits by size billion, respectively. The depth of the IPO purpose acquisition company (SPAC) in Q2 came in the form of public listings, market extended well beyond the top two phenomenon that overtook the financial reinforcing their dominance as the main companies, however, as 123 public listings markets over the last 15 months or so. For route to liquidity for the largest VC-backed have closed so far this year, putting 2021 context on the growth of SPACS, these startups. Coinbase, UiPath and Marqeta squarely within the sights of a new decade reverse mergers represented 34 of the were responsible for the top three exits high for public listing count. public listings in the first half of 2021 as
IPOs drive outsized aggregate exit value Quarterly US VC exit activity ($B) by type
$180 Buyout $160 Public $140 listing $120 Acquisition $100 $80 $60 $40 $20 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 2019 2020 2021
PitchBook-NVCA Venture Monitor *As of June 30, 2021
26 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR compared to 33 in all of 2020. While the Public listings expand with proliferation of SPAC deals IPO activity of new SPACs has cooled significantly in Q2 2021, the hundreds of and open IPO window active SPACs will continue to be a tailwind US VC exit count (#) by type for VC-backed public listings for at least 100% the rest of this year as they race against Buyout 90% the ticking clock that accompanies a SPAC Public IPO to deploy their capital. Driven by 80% listing the convergence of these factors, public 70% Acquisition listings so far in 2021 represent 17.6% of 60% exits by count—the highest proportion 50% this decade if the trend holds through the 40% end of the year. The public equity markets 30% have performed strongly over the past few years, which has undoubtedly helped drive 20% the continued flow of new listings. Public 10% market sentiment will be a key factor to 0% watch in determining the longevity of VC-backed IPO activity. The potential for 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 interest-rate increases and inflationary 2021* fears has introduced some volatility into PitchBook-NVCA Venture Monitor the public equity markets, which currently *As of June 30, 2021 sit at historically elevated valuations, some of which may effect plans for companies Home-run aspect of VC exits maintains importance to go public if adverse volatility becomes more rampant. US VC exit count (#) by size 100% $500M+ M&A activity has also shown signs of 90% strength in 2021, with a historically $100M- 80% $500M rapid pace of deal activity that led to 435 transactions closing in the first half. This 70% $50M- lines up with the most active years in the 60% $100M last decade, all of which notched more 50% $25M- $50M than 800 acquisitions. Large acquisitions 40% (those at or exceeding $100 million) have 30% Under also remained quite robust, comprising $25M 20% 36.5% of completed acquisitions with known transaction amounts in 2021. 10% Regarding acquisition by sector, we’ve 0% seen a relatively strong diversity across the core VC sectors but with particular 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 strength in the healthcare space. This 2021* activity has been spread across the PitchBook-NVCA Venture Monitor *As of June 30, 2021 breadth of the sector with businesses focusing on oncology, healthtech, healthcare devices, and drug discovery VC-backed startups in the healthcare activity; however, it will be important to seeing strong interest from corporate sector, given the vast number of watch these indicators for any signs of this acquirers. While biotech firms exit to incumbent businesses in the space. The recovery stalling or a shift in sentiment the public markets via IPO relatively general economic recovery of the last few that may affect corporations’ willingness frequently compared to other verticals, quarters and strong consumer confidence to make new investments. acquisitions remain the lifeblood of most will continue to be tailwinds for acquisition
27 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Fundraising Coming off 2020’s record-setting levels, Fundraising likely to clear $100 billion annually fundraising activity did not wane in H1 US VC fundraising activity 2021 as $74.1 billion of new capital was raised by 338 venture funds. This half-year 706 692 data comes close to last year’s high-water 583 573 mark of $81.0 billion annually, creating 529 expectations that VC fundraising may clear 526 $100 billion annually in 2021. While the 447 fund count remains modest, this strikingly 338 high fund value was caused by the raising of 290 a handful of outsized new funds. Indeed, the 269 median fund size in H1 remains relatively 191 steady at $50.6 million, in line with 2020’s median of $50.4 million; meanwhile, the
average fund size in H1 has skyrocketed $23.1 $24.7 $21.2 $37.8 $41.4 $49.0 $43.7 $72.3 $61.5 $81.0 $74.1 to $228.7 million, which represents a 22.6% YoY jump over 2020’s average of 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* $186.5 million. Capital raised ($B) Fund count
The robust exit market of the last 24 months PitchBook-NVCA Venture Monitor *As of June 30, 2021 has returned record amounts of liquidity to LPs. Near-record levels of distributions have continued to drive positive cash flow continues to skew more heavily toward vibrant exit environment have shifted much back to LPs. This in turn has forced many to larger funds. Funds exceeding $1 billion of the fundraising focus to mid- to late- reassess their core portfolio allocations as have taken a larger share in H1 than in stage growth opportunities, especially as VC fund performance has outperformed all previous years, accounting for nearly first-time fundraising activity continues to other asset classes globally when comparing half of all new fundraising value. This is in remain sluggish. 1-year and 3-year horizon IRRs. GPs have contrast to the proportion of micro-funds certainly capitalized on this eagerness as (those under $50 million) that have hit Notable funds that recently closed the distribution of fund sizes in H1 2021 record lows as skyrocketing deal sizes and a include rapid-fire dealmaker Tiger Global
$1B+ VC funds take a larger share as micro- $1B+ VC funds account for nearly half of all funds hit record low fundraising value US VC fundraising count (#) by size US VC fundraising value ($) by size
100% $1B+ 100% $1B+ 90% 90% $500M- $500M- 80% $1B 80% $1B 70% $250M- 70% $250M- 60% $500M 60% $500M 50% $100M- 50% $100M- $250M $250M 40% 40% 30% $50M- 30% $50M- $100M $100M 20% 20% Under Under 10% $50M 10% $50M 0% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2021*
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
28 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Near-record distributions drive positive cash flow US VC cash flows ($B) by type
$80
$60
$40
$20
$0
-$20
-$40
-$60 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* Contributions ($B) Distributions ($B) Net cash flow
PitchBook-NVCA Venture Monitor *As of September 30, 2020
Management’s $6.7 billion flagship fund— just one month after closing Fund XIV. development from portfolio company the second largest venture fund ever We also saw the largest-ever dedicated Moderna, has granted Flagship Pioneering raised after Sequoia’s $8.0 billion fund in biotechnology venture fund raised in Q2 as a whole host of tailwinds as the broader 2018—and TPG’s The Rise Fund II of $2.2 Flagship Pioneering re-opened Fund VII for biotech industry has seen record levels of billion that closed in May. Tiger Global has a final close of $3.4 billion. Rapid investment dealmaking and fundraising over the course also begun fundraising for its next flagship activity in Valo Health and Inari, among of the COVID-19 pandemic. fund with a targeted size of $10.0 billion, others, coupled with successful vaccine
First-time funds begin to emerge post- Fundraising by established firms continues pandemic to be robust US VC first-time fundraising activity US VC funds ($) by emerging and established firms 203 100% Established firm 172 90% fund value ($B) 157 80% Emerging firm 126 126 115 70% fund value ($B) 102 60% 50% 73 59 67 51 40% 30% 20% $3.5 $2.2 $2.1 $3.6 $3.6 $4.7 $8.1 $13.5 $7.9 $6.2 $3.6 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Capital raised ($B) Fund count 2021*
PitchBook-NVCA Venture Monitor PitchBook-NVCA Venture Monitor *As of June 30, 2021 *As of June 30, 2021
29 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR Methodology
Deals
We include equity investments into startup companies from an outside source. Investment does not necessarily have to be taken from an institutional investor. This can include investment from individual angel investors, angel groups, seed funds, VC firms, corporate venture firms, corporate investors, and institutions, among others. Investments received as part of an accelerator program are not included; however, if the accelerator continues to invest in follow-on rounds, those further financings are included. All financings are of companies headquartered in the US, with any reference to “ecosystem” defined as the combined statistical area (CSA). We include deals that include partial debt and equity.
Angel & seed: We define financings as angel rounds if there are no PE or VC firms involved in the company to date and we cannot determine if any PE or VC firms are participating. In addition, if there is a press release that states the round is an angel round, it is classified as such. Finally, if a news story or press release only mentions individuals making investments in a financing, it is also classified as angel. As for seed, when the investors and/or press release state that a round is a seed financing, or it is for less than $500,000 and is the first round as reported by a government filing, it is classified as such. If angels are the only investors, then a round is only marked as seed if it is explicitly stated.
Early-stage: Rounds are generally classified as Series A or B (which we typically aggregate together as early stage) either by the series of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history, company status, participating investors, and more.
Late-stage: Rounds are generally classified as Series C or D or later (which we typically aggregate together as late stage) either by the series of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history, company status, participating investors, and more.
Nontraditional investors: “CVC” includes rounds executed by established CVC arms as well as direct equity investments by corporations into VC- backed companies. “PE” includes VC deals by investors whose primary classification is PE/buyout, growth, mezzanine or other private equity.
Exits
We include the first majority liquidity event for holders of equity securities of venture-backed companies. This includes events where there is a public market for the shares (IPO) or the acquisition of majority of the equity by another entity (corporate or financial acquisition). This does not include secondary sales, further sales after the initial liquidity event, or bankruptcies. M&A value is based on reported or disclosed figures, with no estimation used to assess the value of transactions for which the actual deal size is unknown. IPO value is based on the pre-money valuation of the company at its IPO price. One slight methodology update is the categorical change from “IPO” to “public listings” to accommodate the different ways we track VC-backed companies’ transitions to the public markets. To give readers a fuller picture of the companies that go public, this updated grouping includes IPOs, direct listings, and reverse mergers via SPACs.
Fundraising
We define VC funds as pools of capital raised for the purpose of investing in the equity of startup companies. In addition to funds raised by traditional VC firms, PitchBook also includes funds raised by any institution with the primary intent stated above. Funds identifying as growth- stage vehicles are classified as PE funds and are not included in this report. A fund’s location is determined by the country in which the fund’s investment team is based; if that information is not explicitly known, the HQ country of the fund’s general partner is used. Only funds based in the United States that have held their final close are included in the fundraising numbers. The entirety of a fund’s committed capital is attributed to the year of the final close of the fund. Interim close amounts are not recorded in the year of the interim close.
30 Q2 2021 PITCHBOOK-NVCA VENTURE MONITOR