The Unicorn Population on Earth is Exploding
When the adventure capitalist Aileen Lee made the term unicorn, in 2013, had 39 of them—About four are maintained each year. To date by 2021, 264 U.S. companies have reached such estimates. Around the world, many startups turn into unicorns every day.
The shocking rate at which companies reach billion-dollar values just one of the ways that venture capital broke the charts this year. “We’re looking at $ 240 billion invested in VC-supported companies this year, which is as much as it was a few years ago,” said Kyle Stanford, a senior analyst at Pitchbook. “There’s more capital and more interest in the adventure area than ever before.”
Between July and September, more than $ 82 billion was poured into American startups, according to a new Q3 data report from Pitchbook and the National Venture Capital Association. That’s how much is spent on venture capitalists all in 2017—At that time, the high water mark for capital expenditure was sought from the start of dotcom in the early 2000s. Worldwide, Crunchbase saw a Q3 total of $ 160 billion, a new record high for any quarter in history. Deal sizes have also increased: The average early stage deal in the US is now $ 20 million.
The money it pours into all parts of the startup world, from angel investing to later stage deals, from business software to financial technology. Much of the interest comes from what Pitchbook calls “non -traditional” investors: those in private equity, hedge funds, or corporations, who have deeper pockets than the average Sand Hill Road fund. Investors are elbowing their way into venture capital to try to get a share of the best profits. Across the market, the exit rate — the total cost of a company once it goes public or acquired — is at an all-time high, exceeding $ 500 billion for the first time in a year (which there is one more money to be had). That’s double the record from last year.
Investors, of course, are all chasing the pot of gold at the end of the rainbow. “Everyone comes to venture, because it’s one of the most accomplished property classes in recent years,” Stanford said. In the past year, several companies have gone public with estimates of $ 10 billion or higher, including Coinbase, UiPath, and Toast.
This huge return for investors has boosted the VC cycle, said David Hsu, who researches business capital at the University of Pennsylvania’s Wharton School of Business. Investors saw the big exit, which “encouraged VC’s appetite to invest in startups tomorrow.” Hsu also mentioned that new avenues to the liquid, including SPACs, are making it possible for many startups to be easily visible to the public.
Hsu believes that new technologies, such as blockchain and AI, bring a lot of new innovations to startups. “Other companies have benefited from Covid’s economy, such as some ecommerce and delivery areas,” he said. While those startups may receive more attention than ever before from VCs, Hsu warns that the strength of their business models remains to be seen.
Others are less optimistic. “It’s fruitful there. People are just throwing in money, “said Carey Smith, founder of Unorthodox Ventures, an Austin-based investment firm. Smith disagrees that the current VC bonanza is driven by startup innovation, which in his mind has remained more or less flat over time. “I guess not even one percent of startups today can be business -like,” he said. Smith said that while VCs expect most of their investment to be duds, founders can be deceived in the process. Raising a ton of capital on an increasing valuation carries its own risks: If you don’t live up to that standard, future investors may also check your company down and dilute your equity.