This is highlighted by the record-breaking $620.8 billion in funding that start-ups received from VCs in 2021. This is up from $293.7 billion in 2020 – a year-on-year increase of more than 100%!
Interestingly, although both the median deal size and median valuations are up across all deal stages, the median number of months between funding rounds decreased across all funding stages by between 1 to 5 months. This strongly suggests that start-ups are taking advantage of record-breaking valuations to raise capital earlier than usual, reducing dilution for the founders. Additionally, invested capital may be deployed faster as start-ups are confident they will be able to raise subsequent funding given the increased level of activity in the VC industry.
Lastly, the number of unicorns reached a new high of 959, up from 569 in 2020. In fact, more than 100 were created in Q4 2021 and 2022 may be the year we see more than 1,000 unicorns and 'unicorns' may well become a misnomer. 'Decacorns' (start-ups with a valuation of $10 billion+) might become more relevant and prestigious – in fact, there were 44 decacorns at the end of 2021!
Other records look set to be broken in 2022. A recent article by PitchBook highlights that VC funds in the United States raised $12.8 billion in the first week of 2022, alone. Against this optimism, some scepticism is emerging - Harvard Business School’s Josh Lerner sees a correction as being inevitable, pointing to the dot com crash in 2000 and an opinion piece in the FT by John Thornhill argues that “smart judgement will outweigh dumb luck” in the VC world.
As a Corporate VC, Btomorrow Ventures is focused on making investments that complement the parent organisation and bring strategic benefits. Accordingly, any potential correction in valuations is of less concern to BTV than traditional VC funds, which are fixated, primarily, on financial returns.
Instead, our philosophy is to concentrate on the long-term prospects and strategic returns of any potential investments. We do this by focusing on the performance of the underlying business and the strength and depth of the management team – as evidenced by our fantastic portfolio companies.