State of the Markets Report
H1 2022
Key takeaways
01
Exceptional VC investment growth in 2021
US VC investment doubled 2020’s record high fueled by both record levels of US VC fundraising and extensive participation from hybrid PE/VC investors.
02
Growth expected to level set in 2022
With the drop in the US markets, it is questionable whether 2022 will see the same level of growth experienced in 2021, yet growth is expected to continue at a more sustainable rate.
03
Persistent headwinds continue
Innovation companies continue to experience challenges including hiring talent, market inflation and supply chain delays resulting in increased costs.
Series A deal sizes grow
In 2021, over half of the Series A deals were over $10 million, punctuated by anomalous $100 million plus Series A deals with incredibly high valuations.
The rapid increase in the amount of dry powder has accelerated the trend of higher deal sizes, while at the same time, investors move downstream to secure before valuations increase with later-stage rounds.
The new wave of non-traditional VC investors
Rewriting the rules of traditional venture, non-traditional VC investors participated in deals contributing to 33% of all VC investment in the US in 2021.
Prioritizing fast-cash, a hands-off philosophy and with a preference for software-as-a-service (SaaS) companies, hybrids have raced to secure the most promising companies on founder-friendly terms, leading to deal size and valuation inflation.
Web3 explodes into the mainstream
With $3 billion of VC investment across 85 deals, Web3 startups attracted more investment than all previous years combined.
The promise of blockchain technologies fostering decentralized ownership of web content, shifting power to content creators and away from platforms, has attracted interest from investors and talent as well as attention from EU and US regulators.
S&P outperforms IPOs
Although more IPO value was release in public in 2021 than the previous 5 years, performance lagged in the second half.
Though there remains a substantial backlog of high-quality companies poised to access markets, continued volatility in growth stocks is likely to increase price sensitivity and create a more challenging exit environment.
M&A deals under $50 million continue to dominate in 2021
M&A activity of US VC-backed companies saw a 34% increase in 2021 with 1,330 M&A deals compared to 996 deals in 2020 with public companies having the greatest share of strategic M&A deals.
Despite an abundance of capital entering the venture ecosystem, many companies (due to a lack of cash) might have been forced into an acquisition, a boon for acquirers looking for new technology or scarce tech talent.
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