State of the Markets Report Q4 2021
Key takeaways
01
Liquidity of private markets remains strong this year
2021 was another record year with 52 US VC-backed tech IPOs and an anticipated 1,288 US VC-backed M&A deals. Conversely, de-SPAC activity has slowed down from Q1’s frenzy with 455 SPACs in Q3 searching for targets.
02
Facing the headwinds: Inflation increases
Supply chain problems exacerbated by US port congestion along with an increased money supply and a weakened US dollar has resulted in the largest rise of inflation since September 2008.
03
A new approach to venture capital
Led by Tiger Global, hybrid private equity/venture capital investors willing to pay unprecedented valuations to get the “best” companies are deploying capital faster, disrupting the traditional venture model resulting in an expected 141% increase in the number of deals over $100 million.
Inflation returns
$5 trillion in stimulus, a weak dollar, and supply chain shocks have contributed to the highest jump in inflation rates since 2008, possibly leading to price increases, larger inventories and an increase in onshore production.
Record year for VC-backed IPOs
Positive performance has instilled confidence that the IPO window is open with public market investors showing an affinity for tech. With one quarter still left, 2021 is already a record year for VC-backed IPOs with 52 tech companies going public.
$100 million deals are over half of all VC investment
Private equity funds have jumped into private markets as to not lose out on valuation growth prior to a company going public. Less price sensitive and moving fast, nontraditional investors are driving up deal sizes and valuations.
Startups acquiring startups
As of Q3 2021, over 600 acquisitions were completed by VC-backed companies as growth stage companies take advantage of record capital availability to expand their product offerings, build talent and enter new markets.
Sector growth and profitability
With record VC investment and pandemic-induced uncertainty winding down, spending has increased and profitability has declined as fast-growing companies are able to amass ample capital at sky-high valuations to continue to fuel their growth.
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