2020 will go down as a memorable year for venture capitalists, entrepreneurs, and the limited partners who support the asset class. The beginning of the year was marked by uncertainty and hardship brought on by the pandemic, but VC activity roared back to life in the second half as the world adjusted to working remotely. It will be a few months before audited financials come out, but it is our expectation that many VCs had record years for liquidity and value accretion across their portfolios.
Despite the headwinds largely brought on by the COVID-19 pandemic, investor, founder, and customer resiliency pushed the market forward to shatter records, norms, and predictions for the year. US VC fundraising remained strong during the year, breaking a prior record set in 2018 with $74 billion closed during 2020, catapulting the industry into 2021 with $152 billion of dry powder. Overall, investors deployed $156 billion into startups, favoring more developed, later-stage companies, which accounted for 67% of the year’s deal value, and 29% of the total deal count. This vast disparity between late and early-stage deals can be attributed to the increase in mega-deals (financing rounds of $100M+), which reached $71 billion for the year, surpassing the $65 billion record set in 2018. This surge in late-stage investing pushed 71 companies over the $1 billion valuation mark, with 28 companies reaching unicorn status in Q4 alone (PwC/CB Insights). The exit market remained robust throughout the year, buoyed by high-profile Q4 IPOs of Airbnb and DoorDash, (Read more…)