Venture capital fundraising ended 2021 with the biggest numbers ever registered, based on data from a recent report published by industry veterans, at a time when companies across the country emerge out of the pandemic but face an Omicron-tainted recovery.
“Total deal count also increased substantially to an estimated 17,054 deals in 2021 (up from 12,173 in 2020), but the increase in deal count did not match the pace of the surge in additional capital, continuing the trend of increasing deal sizes.” Altogether, $904 million was raised by American startups each day.
The San Francisco Bay Area accounted for the highest number of deals in the country with a count of 3,445 (124.7 percent YoY growth) amounting to $120.3 billion (+191.3 percent), followed by New York with 2,295 deals (+138.8 percent) totaling $53.8 billion (+275.9 percent). Other prominent locations included Los Angeles, Boston, Seattle, Philadelphia, and Chicago.
Technology catering to enterprises saw VC deal activity to the tune of $176.6 billion (+120 percent) with 6,856 deals, while consumer tech followed with $96.4 billion across 4,061 deals. Biotech and pharma notched up nearly 1,200 deals worth $37.8 billion (+41 percent). With $50 billion (+144 percent), Fintech was another major segment for venture capitalists.
The COVID-19 pandemic altered the business environment significantly for the VC industry. Robert Schwandt, Regional Manager of Insperity, called these changes an “innovation gap,” referring to a sudden disruption that requires significant strategic adjustment.
“The pandemic sparked a ‘revolutionary’ change for businesses—a flash cut to nearly unmanageable amounts of change creating an innovation gap. Company leaders were forced to immediately suspend strategic plans with survival plans containing measures to fill the gap,” Schwandt said.
Lingering microchip problems, supply chain disruptions, unpredictable inflation, and a shortage of employees, among other issues, have forced business leaders to address their innovation-gap deficiencies and come up with unique solutions to accomplish specific business goals.
As many startups matured over the years, there was a record 1,875 companies exiting in 2021 with a combined exit value of $774.1 billion. This is a 168 percent increase from 2020, indicating that 2021 might be an “outlier year.”
Exits in +$500 million category held only a small share of overall volume, noted the report, while most public listings followed a Series C or later funding during recent years. Altogether, companies raised $681.5 billion through IPOs in 2021.
“VC firms raised a record-shattering $128.3 billion in new capital over the course of the year, representing a 47.5 percent YoY increase over 2020’s $86.9 billion.” This was raised across 730 funds, showcasing a wide pool of investors that entrepreneurs can access for funding their ventures in 2022.
