2020 from a Venture Capital perspective
The pandemic and its impact on global businesses have been named a "Black Swan Event" - a term that was coined by Sequoia and its Medium Article published on 5 of March 2020. A lot of the suggestions from this article have proven true, like the drop in business activity, the disruption of supply chains as well as the curtailment of travel and canceled meetings.
Let's have a look if the prediction that
"Private financings could soften significantly, as happened in 2001 and 2009." also impacted the Venture Capital (VC) financing in the US accordingly.
In a recent article from James Thorne and Priyamvada Mathur published in PitchBook, the authors that 2020 saw VC dealmaking in the US incredibly resilient in 2020. Nearly $148 billion were raised during 2020 - a new high after $143 billion in 2018 and $138 billion in 2019. Only the total number of VC deals declined by around 18% compared to the year before. According to the authors:
Much of that funding activity can be attributed to the fat checks investors wrote for their existing, later-stage portfolio companies better suited to survive the worst of the pandemic.
Also the US Initial Public Offering (IPO) market saw a record high in 2020. 120 VC-backed IPOs worth around $260 billion were hosted by US exchanges. Airbnb ($37.2 billion), Snowflake ($29.8 billion), and DoorDash ($29 billion) were the three IPOs with the highest exit values. Also, VC fundraising showed a record strength with 14 UC venture capital mega-funds of $1 billion or more claimed almost $27 billion.
In summary, it looks like the venture capitalists' business model, which entails placing big bets on long odds, managed to set decade highs also in this "Black Swan" year of the pandemic. Is this over-optimism or just a sign that the inflation of investment capital is already underway? Is the future really looking as rosy as the amount of money VC capitalists are willing to bet on it suggests? Or do we witness a situation where every dollar printed is desperately looking to buy at least a bit of value that may be better suited to withstand the prospected inflation? Tell me what you think in the comment section.
This is @no-advice for @spinvest-leo
Posted Using LeoFinance Beta
