Greetings, everybody, and thanks for joining me as we wrap up 2021 in grand holiday fashion.
I’ll be your master of ceremonies here, as we call to order PitchBook’s year-end venture capital banquet. It’s time to put a bow on what has been an extraordinary year of fundraising, dealmaking and a few follies.
This article appeared as part of The Weekend Pitch newsletter. Subscribe to the newsletter here.
Sure, the VC industry has had its share of noteworthy accomplishments in the year 2021. There were massive runups in valuations—I’m looking at you, Stripe. But there were also some head-spinning setbacks, most notably in China-related investments (don’t worry, SoftBank folks, we’ve stocked the bar with you in mind). So without further ado, let’s get to it. Hold your applause. And settle down in the back there, you crypto fans; you’ll get your chest-beating moment.
VC deals and valuations
Let’s begin with one of the most enduring and consequential topics for the venture ecosystem: The ongoing surge in valuations that VC investors are bestowing on portfolio companies, all while handing out copious sums of capital in funding rounds. Later in our festivities, we’ll single out some of the main players behind the trend—thanks, Tiger Global, for gracing us with your presence. Suffice to say that an armada of the world’s largest asset managers have set sail for Silicon Valley, hoping to strike it rich by writing late-stage checks.
It’s nothing new to see prices marching higher across the market as a whole. And yet, even by the lofty standards set in recent years, many VC-backed companies racked up gargantuan valuation leaps in 2021, an especially striking trend in US early-stage deals. The global median price stepped up by a multiple of two times after holding steady around 1.5x in each of the past six years, according to PitchBook data. Another barometer of exuberance: Global investors have paid up, at a median pre-money valuation of $23.2 million—more than double the median before the pandemic. As newly enriched founders might say when shopping for new Lambos, “What crisis?”
Valuation leaderboard: Stripe takes control
The great fintech gold rush of 2021 has reordered the pecking order and crowned a new valuation king, and its name is Stripe. Led by the Irish-born Collison brothers, the digital payments juggernaut has knocked Elon Musk’s SpaceX off the top rung. A year ago at this time, the most valuable VC-backed companies in the US were SpaceX (then pegged at $46 billion), Stripe ($36 billion) and self-driving specialist Waymo (nearly $31 billion). Note that this list excludes Juul, a reviled e-cigarette peddler that hasn’t attracted any equity investors since 2018.
By contrast, Stripe had a busy year opening up to new backers, including a $600 million deal in March that sent its valuation soaring to $95 billion. It didn’t stop there. By June, more investors had bought stakes through secondary transactions that valued Stripe at a staggering $152 billion—topping the current market value of Citigroup. Stripe is reportedly weighing a public listing in 2022, but the company has also made clear that it’s doing just fine biding its time in the private market.
Deal of the year: Robinhood’s “rescue”
Back in January, meme stocks like GameStop were all the rage, and their playground was the Robinhood app. When the trading frenzy went off the rails, Robinhood was overwhelmed, and soon it faced a potential cash crunch to cover trades.
This was a company that, at the time, had been making preparations for its own highly anticipated stock market debut. But the GameStop crisis put all of that on hold.
Investors, led by fintech-focused VC Ribbit Capital, answered the call. And with breathtaking speed, they injected $3.4 billion into Robinhood. It was the largest VC deal of 2021, and one of 20 funding rounds worth $1 billion or more. Robinhood’s emergency financing put a spotlight on Ribbit, led by Meyer “Micky” Malka, as a pivotal fintech investor and also put the company’s long-planned IPO back on track.
First-time fundraising: Lowercarbon Capital
One area where the global VC ecosystem has yet to recover fully is in fundraising by first-time funds. Newly formed venture firms took a hit in 2020, raising a total of $17.3 billion after collecting around $23 billion in each of the preceding three years, PitchBook data shows. There’s still a way to go, with this year’s haul coming in at $18.2 billion so far.
In an industry where investors are accustomed to sizing up emerging general partners by looking them in the eye, the whole LP-GP dance got a lot harder in the fundraising-via-Zoom era. And yet, LPs made some adjustments during the pandemic to how they meet with fund managers. Many stepped out of their comfort zone and took to virtual meetings to ensure they’d get exposure to up-and-coming venture capitalists.
In the first-time fundraising category, the leader of this year’s pack is Lowercarbon Capital‘s $800 million maiden effort. But the judges have put a small asterisk on this one. The vehicle marks venture capitalist Chris Sacca’s return to the venture market after stepping out of the Silicon Valley rat race in 2017. Through his firm Lowercase Capital, Sacca rose to fame and fortune with his early-stage bets on names like Uber, Twitter and Instagram. Now he’s back in the game, this time on a mission to use Lowercarbon’s $800 million war chest to attack the climate crisis.
Besides being the biggest of this year’s first-time funds, Sacca’s new vehicle also symbolizes the zeal that the VC industry showed this year for funding the race to a zero-carbon future.
Mega-funds: Tiger earns its stripes
In the global VC fundraising sweepstakes, the biggest of the big guns showed up in full force in 2021. Mega-funds, which PitchBook defines as a vehicle of $500 million or more, have so far totaled more than $96 billion this year across a record-high 89 funds, second only to the $111.5 billion haul across just 54 funds in 2019.
No investor grabbed more of the dealmaking spotlight than Tiger Global, which completed a blizzard of funding rounds that underscored its status as one of the most prolific venture investors of the year.
The largest fund close of the year belonged to Tiger Global, which closed on more than $6.6 billion for its 14th flagship vehicle. It may not be long before it closes another sizable fund. Tiger Global is reportedly back in the market with plans to close its 15th fund, this one said to be in the $10 billion range and already a third deployed. All of which suggests that this year’s blistering pace of investing is just a prelude to an even more aggressive deal environment in the years to come.
IPOs: Hits and misses
On the heels of a banner year in 2020, the Silicon Valley-powered IPO machine churned out an even bigger class of new arrivals on Wall Street in 2021.
It was a record-setting year that saw US aggregate exit value blow through the $1 trillion mark for the first time in history, according to PitchBook data. Globally, Rivian, Coupang, Coinbase and Roblox led the way, helping focus investor attention on hot market segments like electric vehicles (Rivian), ecommerce (Coupang), cryptocurrency (Coinbase) and gaming software (Roblox).
For all those successes, there were some stunning contradictions. Companies managed to raise massive funding in the IPO market, but in the aftermarket this class of new stocks has underperformed the broader market this year, according to the PitchBook IPO index.
Technically, China-based ridehailing giant Didi Global pulled off the most valuable VC-backed IPO on Wall Street this year, with an exit valued at $63 billion. However, what should’ve been a celebrated triumph was marred by revelations that China’s government opposed the Didi deal, citing data-privacy grounds. Beijing kept turning the screws on Didi even after the IPO, and the company decided under pressure to delist from the NYSE rather than try to fulfill obligations both to international investors and government authorities back home.
Crypto craze
You really can’t recap 2021 without recognizing the extraordinary run that cryptocurrency and blockchain companies made on the dealmaking scene.
Highlighted by Coinbase’s direct listing valued at a whopping $85.5 billion, the crypto scene gave new meaning to investor exuberance. Global median valuations in crypto leaped to a record $35 billion, up from $12 billion last year.
Dozens of VC funding rounds worth $100 million or more showered capital on the crypto category, led by startups like Celsius Network ($750 million), Forte ($725 million) and BlockFi ($500 million).
That concludes our festivities for this year. Fasten your seatbelts. The momentum going into 2022 promises to make next year’s ceremonies memorable as well.
Featured image by AlexRaths/Getty Images
