Record year: US-VC fundraising hit $329.6bn, reveals new report

BY Fraser Tennant

Toppling previous records, US-venture capital (VC) fundraising hit £329.6bn in 2021, despite ongoing pandemic disruption and growing adversities such as supply chain issues and labour shortages, according to a new report by Pitchbook.

The ‘Q4 2021 PitchBook-NVCA Venture Monitor’ also reveals that total deal count increased substantially in 2021 to an estimated 17,054 deals – up from 12,173 in 2020.

Additionally, investment activity for seed and angel and early and late-stage companies all hit records, as did investment activity for companies receiving their first equity round of institutional financing and companies raising VC mega-rounds ($100m or more).

According to the report, partly what makes 2021’s VC industry activity so remarkable is that the coronavirus (COVID-19) pandemic disruption continued to have an impact despite the widespread availability of vaccines and national vaccination programmes.

“2021 began with a bang in VC activity and ended in spectacular fashion, producing another record-setting year,” states the report. “While many were bullish on the industry at the start of the year, possibly no one predicted how remarkable the year would prove to be.”

2021 VC highlights include: (i) US VC-backed companies collected nearly $330bn in 2021 – approximately double the previous record of $166.6bn raised in 2020; (ii) non-traditional investors such as corporate VC funds, hedge funds, private equity (PE) firms and sovereign wealth funds participated in nearly 77 percent of total annual deal value; and (iii) exits were a huge part of 2021's story, with more than $774bn in annual exit value created by VC-backed companies that either went public or were acquired.

Looking to 2022, the report forecast that non-traditional investor interest and momentum will likely continue, in part due to the continued strong outperformance of VC portfolios.

“At the same time, traditional VC investors are flush with capital to deploy,” concludes the report. “For entrepreneurs there is a deeper and wider pool of capital sources available to fund and scale the next generation of innovative companies.”

Report: Q4 2021 PitchBook-NVCA Venture Monitor

Record breaker: VC investment in Canada hits $11.8bn, reveals new report

BY Fraser Tennant

Canadian venture capital (VC) investment has hit record levels in 2021, with a year-to-date (YTD) total of CA$11.8bn, according to a new report by the Canadian Venture Capital & Private Equity Association (CVCA).

The YTD total, which includes $3.5bn invested across 174 deals in the third quarter (Q3), propelled 2021 beyond the previous highest annual VC investment of $6.2bn recorded in 2019.

In its report, ‘Q3 2021 Canadian Venture Capital Market Overview’, the CVCA reveals that the average deal size is a record-setting $20.7m – approximately double the $11m recorded in 2019 and the previous highest year on record. Moreover, the average growth-stage investment YTD in Q3 2021 was $129m, which has more than tripled over the last three years.

In addition, investments into later and growth-stage companies have received 63 percent of total VC dollars invested in Q3 2021, a significant increase from prior years (50 percent in 2019 and 49 percent in 2020).

In terms of deal size, there were 55 megadeals ($50m-plus) YTD, accounting for 74 percent of investment in 2021 so far. Notable megadeals in Q3 included Vancouver-based Dapper Labs’ $319m closing, Toronto-based Clearco’s $270m funding and the $265m investment in Montréal-based Blockstream.

“Investment in Canada’s startups has never been stronger,” said Kim Furlong, chief executive of the CVCA. ​“With the recent crop up of new continuation funds and the average growth stage investment rising, we are seeing a willingness to hold with investors as they stay the course in their investments — a testament to the maturing Canadian venture ecosystem.”

Concurrent with its 2021 VC investment analysis, the CVCA has also published a report into private equity investment in Canada over the same period – ‘Q3 2021 Canadian Private Equity Market Overview’ – which reveals a YTD total of $13.2bn invested across 584 deals.

“We are on the journey through post-pandemic recovery,” concluded Ms Furlong. ​“Some of the performance figures we are seeing in Q3 are trending towards pre-covid levels. The consumer and retail sector, for example, has seen some significant investment growth, at almost five times the levels experienced since a low in 2018.”

Report: Q3 2021 Canadian Venture Capital Market Overview

Cost of unicorns grows

BY Richard Summerfield

It is more expensive to become a unicorn in the US than ever before, with the median sum raised prior to the status-conferring round soaring to $126.1m in the first half of this year, according to Pitchbook’s 2019 unicorn report.

The sums raised by companies before becoming a unicorn – which are start-ups valued at over $1bn – are approaching all-time highs.

At midyear, there were 187 active unicorns in the US, with an aggregate private valuation of just over $600bn, down from the peak of $603.3bn recorded in 2018.

The growth of unicorns can be attributed to a number of factors, including burgeoning interest of non-traditional venture capital (VC) investors. 2018 saw a peak of $43.5bn invested across just over 100 transactions, while the first half of 2019 is going strong at $17.7bn invested and 53 completed financings of unicorns both old and new. Indeed, 2018 saw 12 deals worth a total of $4.8bn closed with only foreign investor participation. The first half of 2019 saw over $6bn of foreign capital invested in the unicorn space.

From an exit perspective, 2019 has already been a notable year, with a new record of close to $160bn realised across only 14 acquisitions or initial public offerings of unicorns, with around $142bn of that figure attributed to IPO exit value.

“Current unicorns will be truly tested by a significant market shock, which, given that nearly all have only existed within one of the largest bull markets in history, would present a challenge most have yet to face,” said Garrett James Black, senior manager, custom research and publishing at Pitchbook.

He continued: “It is difficult to envision any waning in investor willingness to fund companies to unicorn status unless there are significant market shocks to derail investing activity. The incentives for early exposure to rapidly growing, mature companies are still intact, especially given that several have validated their valuations in public debuts this year. The common limiting factor is the number of investment firms that have the resources and wherewithal to take on the inherent risk and potential outsized reward. There are enough such firms, especially as VC grows more institutionalised.”

Report: Pitchbook’s 2019 Unicorn Report

Iconic UK sports car manufacturer acquired by European investment firm

BY Fraser Tennant

One of the most iconic names in the automotive world, Morgan Motor Company has been acquired by Italian investment firm Investindustrial – which has taken a majority stake in the 110-year old British sports car manufacturer.

The financial terms of the transaction have not been disclosed. However, the investment is being executed without financial debt and Morgan will have a positive net cash position upon closing of the transaction.

Founded in 1909, Morgan hand-builds premium sports cars with a classic design in its historic factory in Malvern, UK, which is visited by more than 30,000 people each year. With revenues of £33.8m and a net profit of £3.2m in 2018, the company sells around 700 cars per year. It is also one of the last remaining British-owned carmakers.

“The past two years have been the most successful in our company’s history,” said Dominic Riley, chairman of Morgan. “However, to really fulfil our full potential and secure our long-term future, both the family and management team felt it was essential to bring in a strategic partner – a partner that shares our vision and has the expertise, financial resources and track record of success in the automotive world, to make it happen. That partner is Investindustrial.”

Following completion of the acquisition, the Morgan family will continue to act as stewards for the brand and retain a minority shareholding. And, for the first time in its history, the management team and all employees will have a share of the business.

“Morgan’s handmade British sports cars are true icons of the industry,” said Andrea C. Bonomi, Investindustrial’s chairman of the industrial advisory board. “We have followed the company and seen its progress for some time and see significant potential for Morgan to develop internationally while retaining its hand-built heritage. We share with the Morgan family the belief that British engineering and brands are unique and have an important place in the world.”

The transaction is expected to be completed in April 2019.

Steve Morris, chief executive of Morgan, concluded: “The future is bright for Morgan. We are coming off the back of two record years and now have the best possible owner and partner to take the business to the next level and develop Morgan’s global potential.”

News: Morgan family sells control to venture capitalist group

2018 sees VC investment record set

BY Richard Summerfield

Venture capital (VC) funding has continued to pour into jurisdictions the world over, with 2018 seeing a record high of $255bn invested globally, according to KPMG’s Enterprise Venture Pulse Report. The fourth quarter of 2018 alone saw almost $64bn.

Activity was not limited to just one jurisdiction. The US, the wider Americas, Asia and Europe all recorded a record high level of annual VC investment during 2018.

“The record levels of funding we are seeing around the world highlight the intense focus VC investors are placing on late-stage deals. One billion+ mega-deals alone in Q4 2018 accounted for $22 billion in investment – approximately a third of the total funding raised this quarter,” said Brian Hughes, national co-lead partner at KPMG Venture Capital Practice, and a partner with KPMG in the US.

He continued: “While the extended decline in the number of deals, particularly at the earliest deal stages, is somewhat concerning, the highest quality companies are still attracting investment and we expect to see a strong IPO market in 2019.”

Across the Americas, VC investment rose to $41.8bn in Q4 2018, up from $32.5bn in Q3. For the third year running, Europe set new records for VC investment (despite ongoing uncertainty around Brexit) with a total of $24.4bn for 2018, although deal volume fell markedly year-on-year.

In Asia, VC investment reached an annual high of $93.5bn during 2018 – a significant increase on the $65.2bn recorded in 2017.

Looking forward, activity seems likely to drop this year, however there should still be significant investment, particularly in the tech space where autonomous vehicles, alternative energy vehicles and ride hailing continue to garner interest.

Despite the increase in investment value, the total number of VC deals globally declined to a six year low of 15,299 deals during 2018, compared to 17,314 in 2017 and a peak high of 20,172 in 2015. The drop in quarterly deal volume was also notable, with the 3048 deals seen in Q4 2018 the lowest number since Q3 2012.

Report: Venture Pulse Q4 2018