US Venture Mega-Deals Spike in Q1 Fueled by Record Nontraditional Investor Participation
April 13, 2021
SEATTLE, April 14, 2021 – Venture capital (VC) dealmaking started strong in the first quarter of 2021 with an uptick in mega-deals and increased participation of nontraditional investors, according to the PitchBook-NVCA Venture Monitor, the authoritative quarterly report on venture capital activity in the entrepreneurial ecosystem jointly produced by PitchBook and the National Venture Capital Association (NVCA), with support from Silicon Valley Bank and Secfi. The proliferation of mega-deals ($100 million+), once considered to be anomalies a few years ago, have become commonplace. In fact, mega-deal value in the first quarter of 2021 already accounts for over half of all mega-deal investments from the full year 2020. While much of the world has yet to return to a pre-pandemic normal, angel, seed and early-stage deal activity is seeing sustained momentum in line with the last few years. Many of 2020’s fundraising tailwinds continued into 2021, and the uptick in mega-funds ($500 million+) further cemented the success that established managers have found during the pandemic. On the liquidity side, VC-backed exit activity remained strong in the first quarter due to robust activity on the broader public listing market. While direct listings have remained slightly under the radar, there are a handful of multi-billion-dollar direct listings expected to close in the coming year and this route to liquidity could continue to be utilized by the most valuable VC-backed businesses due to both time and cost savings.
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“On the heels of an unpredictable yet record-setting 2020, the US venture ecosystem is off to a strong start in the first quarter of 2021. Elevated VC activity across investments, fundraising and exits are already on track to set new records by the end of the year,” said John Gabbert, founder and CEO of PitchBook. “With record levels of VC fundraising in 2020 and dry powder still sitting at all-time highs, investors continue to write ever-larger checks at both the early and late stage, which has only been fueled further by nontraditional investors looking to capitalize on the VC investment universe and valuation growth before liquidity.”
“The US venture industry started off 2021 with a record quarter, possibly heralding a strong year for startups across the country. As the nation recovers from the COVID-19 pandemic, high-growth startups are well-positioned to help the economy recover and grow,” said Bobby Franklin, president and CEO of NVCA. “A key opportunity for US VC and startups will be if the new Biden Administration and Congress enact key policies crucial to the startup ecosystem as they pursue the president’s Build Back Better agenda. Investments into infrastructure, climate, and research and development have the potential to help spur new company formation, if implemented correctly. NVCA will continue to work hard to engage Capitol Hill on key areas of upcoming policy proposals that could benefit the venture industry.”
Investment Activity VC deal activity saw $69.0 billion invested across an estimated 3,987 deals in the first quarter of 2021. Following an uptick during the second half of 2020, angel and seed deal financing momentum continued in Q1, tracking the highest quarterly total of deals and topping $2.5 billion in deal value for the fourth consecutive quarter. Early-stage VC deal activity has continued to operate from a position of strength in Q1, quickly rebounding from the struggles of the pandemic and tracking to exceed the record levels seen over the last few years. Late-stage investment saw more than $51.9 billion deployed across an estimated 1,291 deals, the largest quarterly total for last-stage capital investment ever recorded. Mega-deals closed at an extraordinarily rapid pace in the first quarter with 167 completed deals representing $41.7 billion in capital investment. 2021 is on track to easily set a new annual record for mega-deals on both a count and value basis. The first quarter of this year also recorded a handful of billion-dollar deals that contributed to the new record including the $3.4 billion fundraise by Robinhood and $2.7 billion Series F raised by electric automaker Rivian Automotive. As for nontraditional investment activity, Q1 is projected to be the most active quarter on record following record participation in venture in 2020 for both deal count and deal value. The activity of these investors has helped drive the trend of companies staying private longer to raise more capital and continue to grow.
Fundraising Activity US venture firms raised $32.7 billion across 141 vehicles in the first quarter of 2021. At this pace, bolstered by the increase in mega-funds ($500 million+), fundraising in 2021 is on track to exceed $100 billion for the first time ever. 13 mega-funds were raised in 2021 thus far, with billion-dollar funds accounting for 44.8% of all capital raised in Q1. When combined with a significant contraction in small micro-funds (under $50 million), mega-funds have pushed the median and average fund size to $80.0 and $235.2 million, respectively. Notable VC mega-funds that closed in Q1 include TCV’s Fund XI of $4.0 billion (the largest VC fund raised since Sequoia Capital’s Growth Fund III of $8.0 billion in 2018), Bessemer Venture Partners’ Fund XI of $2.5 billion, Bond Capital’s Fund II of $2.0 billion and ARCH Venture Partners’ Fund XI of $1.9 billion. Continuing a trend brought on by the pandemic in 2020, first-time fundraising continued to struggle in Q1 2021 as general partners (GPs) raising first-time funds experienced notable difficulty with LPs tending to favor and commit capital to those with strong previous relationships and solid past fund performance. In Q1, only $1.4 billion was raised by first-time VC managers across 25 funds, while seven VC firms raised individual funds in Q1 that each exceeded the aggregate $1.4 billion raised by first-time funds, further cementing the success that established managers have found during the pandemic.
Exit Activity VC exits remained strong similar to the rest of the ecosystem with $118.1 billion becoming liquid in the first quarter of the year across an estimated 447 exit events. Outlier transactions are crucial in retaining the recent levels in exit value, with 2021 already seeing a few headline-grabbing exits. The largest exit of the quarter was Roblox’s (NYSE: RBLX) direct listing, valued at $41.9 billion. The broader public listing market also remained robust in the first quarter and dominated total exit value at 90.1% of quarterly exit value. There were several notable traditional IPOs during the quarter including point-of-sale lender Affirm (NASDAQ: AFRM), health insurance startup Oscar (NYSE: OSCR) and platform-as-a-service provider Tuya Smart (NYSE: TUYA), which were valued at $10.6 billion, $6.5 billion and $10.8 billion, respectively. While these IPOs were the most valuable, biotech & pharma startups sustained exit momentum from 2020 with 24 exits (representing 48% of the total public listings in the first quarter) to the public markets via either traditional IPOs or SPAC combinations. Over a year into the recent explosion of SPAC IPOs, the acquisition activity by these blank check vehicles has finally started to trickle in. Notable deals that closed include Clover Health (NASDAQ: CLOV), Chargepoint (NYSE: CHPT), Metromile (NASDAQ: MILE) and AppHarvest (NASDAQ: APPH). With dozens of other deals announced, SPAC acquisition activity should continue gaining momentum and have a material effect on exit valuations and late-stage VC valuations.
The full report will include the following components:
NVCA policy highlights
Angel, seed & first financings
Deals by sector
SVB: Attracting and retaining pre-partner talent
Secfi: Why startup equity is the next untapped market
About PitchBook PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York, London and Hong Kong and serves more than 50,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.
About National Venture Capital Association The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the US venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.
Shai Goldman, Managing Director of Venture Capital Relationship Management, Silicon Valley Bank “General partners are opening the aperture when it comes to the experience they look for in pre-partners. De-emphasizing the importance of a rarified set of credentials means venture capital firms can access a much more diverse array of pre-partner talent — people with varying perspectives, backgrounds and experiences who can add substantial value.”
Frederik Mijnhardt, Chief Executive Officer, Secfi "2020 was the most active year for IPOs ever in the US and Q1 of 2021 is proving the gold rush will continue. But many startup employees — the builders of these companies — are left empty-handed simply because they can’t afford the upfront cost to exercise their stock options. Last year alone they left $5 billion on the table. With new tools to understand their options, and how to exercise them, they have the chance to be a part of the success continuing to unfold in 2021."
Patricia Nakache, General Partner, Trinity Ventures “2021 is off to a promising start for the industry. With vaccinations well underway in the US, investors are now open to doing post-COVID deals, considering which changes made during the pandemic are permanent and which will prove to have been temporary. Robust equity markets also hint that this will be another strong year for exits, which bodes well for both IPOs and SPACs.”
Dana Settle, Co-Founder & Partner, Greycroft “We continue to see record levels of deal activity going into 2021, which is exciting for entrepreneurs building the next generation of businesses. The pandemic has fueled innovation and brought new ideas and new ways of operating to the forefront, and this is being supported by robust investment activity. However, we must not lose sight of the need to bring more female founders into the mix.”