Start-up companies, especially US companies centred around tech, have dominated the market for the past two years. According to a recent NYT article, 900 tech start-ups are each worth more than $1 billion. In 2015, it was only 80. Not only that, but the article goes on to state that data for 2021 shows U.S. start-ups raised $330 billion, nearly double 2020’s record haul of $167 billion. More tech start-ups crossed the $1 billion valuation threshold than in the previous five years combined. The median amount of money raised for very young start-ups taking on their first major round of funding grew 30 percent and the value of start-up exits — a sale or public offering — spiked to $774 billion, nearly tripling the prior year’s returns.
Will this trend end in the new year? Probably not.
So far, this year has not looked any different. Three private start-ups have entered the market at a high valuation: Miro, a digital whiteboard company, was valued at $17.75 billion; Checkout.com, a payments company, was valued at $40 billion; and OpenSea, a 90-person start-up that lets people buy and sell nonfungible tokens, known as NFTs, was valued at $13.3 billion.
Investors are also reaching record rounds in funding. For example, Andreessen Horowitz, a venture capital firm, said it had raised $9 billion in new funds. Khosla Ventures and Kleiner Perkins, two other venture firms, each raised nearly $2 billion.
What could be a reason for such a spike? The article says it revolves around the pandemic. For nearly two years, people and businesses increasingly relied on tech, which has created breakthroughs in artificial intelligence, nuclear technology, electric vehicles, space travel and other areas that investors say are poised to change the world. In addition, tech start-ups offering food delivery, remote-work software and telehealth services were more in demand than ever.
Whether you are a PE firm interested in a buy-and-build approach, or a business needing funding or selling, there is no better time than the present. Polestar can help you with all your enquiries. Feel free to reach out!
“The pot of gold at the end of the rainbow has become bigger than ever,” said Mike Ghaffary, an investor at Canvas Ventures. “You can invest in a company that could one day be a trillion-dollar company.”