Megadeals were out in force last quarter, playing a major role in driving investment results. The top 15 national deals were all $500 million or more.
In addition to mega-rounds, we saw record investment in series A, B and late-stage rounds:
- Series A funding totaled $7 billion in activity, which bodes well for the future as it signals increased new company formation and support of emerging ideas and markets.
- Series B reached $11 billion, up 63% from what we saw in this same quarter in 2020. The biopharmaceutical sector was particularly strong.
- Late-stage venture funding also rose to $32 billion, up 104% quarter over quarter. We are also seeing strong fundraising activity as companies move through the venture pipeline and prepare to scale.
What’s next for venture capital
We fully anticipate that the VC market will continue to run hot as technology and innovation continue to fuel growth in the asset class. At this point, it’s difficult to imagine what could hinder investment activity in the near term. However, one factor to watch is the market slowing under the sheer volume we’ve seen since 2018. As a reminder, in each of the past three years in the US, more than $100 billion has been invested in venture-backed startups, with two of those years setting records. We are now on pace to set another record.
Three factors are driving our optimistic outlook:
- Fund formation: All future signs point to strong fund formation as low interest rates will continue to attract more investors seeking yields. This has been evidenced by a record 2020 VC fundraising year at $80 billion, followed by record Q1 2021 fundraising at $33 billion.¹
- Capital deployment: We have a record number of operational venture-backed startups that will continue to raise capital. We expect a prolonged period of investment as businesses become more technology enabled. This will allow investors to continue to deploy vast amounts of capital.
- Liquidity: A number of unicorns have gone public in recent months, fulfilling the promise of venture investment returns. We are also seeing an explosion of SPACs that are providing an alternative path to the public markets. In addition, direct listings are evolving to allow more optionality to raise new capital.
My crystal ball is as cloudy as anyone else’s. Still, I am optimistic. This will be a period of great innovation. I’m confident we will see some truly transformational companies emerge that we should all be keeping a sharp eye out for.