State of the Markets Report Q4 2020
Key takeaways
01
SVB Proprietary Data shows VC-backed companies extend cash runway to new heights.
Companies have cut expenses and raised additional capital, leading to an increase of 25% growth in median cash runway between Q2 and Q3.
02
VC funds sit on record dry-powder reserves, and fundraising remains strong.
US VC fundraising is expected to eclipse $72B in 2020, the highest it has been since 2000.
03
78% of VC-backed Tech IPOs YTD occurred in Q3, and 44% occurred in September.
These Tech IPOs have garnered favorable valuations — the median revenue multiple sits at 19x.
Sweet Home North Carolina?
Moving into 2021, we expect companies and employees to continue to migrate from expensive real estate locations to cities outside the traditional Tech hubs.
Private Markets’ Rapid Rise
We expect VC fundraising to reach $72B by the end of the year, the highest year since 2000, which topped $98B when adjusted for inflation. Rapid fundraising has pushed cumulative dry powder to a record high of $152B.
Operating on Another Level
Median operating expense for each Tech vertical declined by mid-to-high single digits in the second quarter. As companies cut expenses, they also sought to raise capital. SVB Proprietary Data shows the median company increased its runway by 25% between Q2 and Q3.
Summer Surge Ahead of Election
While the past three months have seen a surge in IPOs (78% of VC-backed Tech IPOs YTD1 occurred in Q3, and 44% occurred in September), things will likely slow in the final quarter until management teams have a clearer picture of what the future looks like post-election.
ChiNext in Line for Reform
Following the initial success of Shanghai’s Nasdaq-style STAR Market and in an attempt the revive an economy ravaged by COVID-19, China recently implemented capital market reforms for Shenzhen’s startup board ChiNext, modeled after rules used by the STAR Market.
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