US venture capital transactions to set record in 2021 – Quartz

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Investment in U.S. startups is plummeting, threatening to eclipse $ 200 billion this year for the first time.

In the first half of 2021, nearly $ 140 billion was invested, according to EY, the accounting and consulting firm, mainly through larger fundraising.. Almost 60% of all capital raised in the second quarter came from transactions worth more than $ 100 million, said Jeff Grabow, EY’s venture capitalist for the United States.

At the current rate, the flood of dollars will break last year’s record of $ 153 billion. Investors outside of the United States are also enthusiastic. In Europe, venture capital investment is up 215% of last year, while Asia recorded more modest gains.

Investors in 2020 were “defensive,” meaning companies were deploying capital because they weren’t sure if there would be another chance, Grabow said. This year, investors are seeing opportunities everywhere. “We have gone from a defensive funding mode to a growth mindset and that is driving a lot of activity,” he said..

The main areas of investment are startups providing information technology (1,789 deals so far this year), business and financial services (1,199) and healthcare (1,093), although Grabow asserts that the definitions of sectors may become blurred. Much of the investment goes to companies developing technology that has proven its worth during the pandemic as the world has changed the way it works, travels, communicates and purchases.

Most startups thrived during the pandemic, with 4.4 million new businesses launched last year, a 24% increase from 2019, according to the Peterson Institute for International Economics. In part, that’s because the cost of starting a new business has never been lower, Grabow said.

The rush to invest in startups continues a decades-long trend of institutional investors take riskier bets. University foundations and insurance companies invest money in non-traditional asset classes like private equity and venture capital because they seek higher returns than those available for stocks and bonds. Grabow says private equity funds and sovereign wealth funds that once invested in start-ups through initial public offerings are now getting involved earlier and behaving like venture capital firms with much more money. money to spend.

Ultimately, all investors will expect a return, whether through an IPO or a buyout. There are only three results for these startups, said Grabow: “You go public, you get acquired or you go out of business. “



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