Why might 2021 turn out to be a great year for tech startups? Partner Michael Torosian provides his thoughts:
- 2020 saw record investment into high-growth startups, record capital raised by VC funds, and record or near record VC-backed exit value.
- 2020 saw explosive growth in going public as we saw more alternatives for going public come into favor, particularly SPACs, which have been driving offerings and exit opportunities.
- We continued to see non-traditional investment, including corporate venture capital, continue to grow and be a major contributor to VC. CVC is here to stay and it is as big as venture and corporates are partnering with companies in different ways than traditional VCs. Corporates need innovation to help sustain and grow market position, adapt to changes in their markets, find new opportunities to develop new businesses. They may not be able to do all in-house and are looking outside to make those investments. 2020 was a record for first time CVCs investing and with successful IPOs more corporates have announced CVC programs for 2021.
- Funds who have a track record have raised record funding. Fundraising was strengthened by lots of public market liquidity from a strong IPO market, low benchmark interest rates, and the large number of LPs underallocated to venture coming into the year.
- 2020 had $150B of VC dry powder and 2021 has another $150B of dry powder that LPs looking for returns in a low interest rate environment have put into funds. CVC has another $250B+ of dry powder. Investors need to deploy that capital. While uncertainty remains in the new year, the vast sum puts the industry in a strong position to deploy healthy levels of capital into promising startups.
- The trends we saw in 2020 we see continuing in 2021.
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