Financial activity over the past year and a half had to face not only a global pandemic, but also an economic recession, social and racial unrest, and a contentious U.S. election. Although the pandemic initially backtracked venture capital activity, businesses began to quickly adapt to the new consumer landscape, which prompted a strong resurgence of VC investments starting in the second half of 2020, with a particular emphasis in the tech sector.
It is the year for IPOs
Even though public market performance was on track to be one of the worst since 2011, the recovering that it saw, as well as the strong surge in growth among tech companies prompted by lockdowns led to an unexpected rise in IPOs in the second half of 2020 with a 24% increase from 2019 and representing $222 billion in exit value. Some of the highest-growth companies that were listed include Airbnb (largest IPO of the year), Snowflake (one of the largest technology issues of the year), Sumo Logic, DoorDash, Wish, and JFrog.
SPACs and public listings are booming
The rise of SPACs and public listings gave private startups new ways to tap into public markets. SPACS in particular provide an earlier, easier, and quicker path to going public. While VCs have typically avoided these vehicles, they seem to have started to shift their perspective. Some VCs have even become SPAC sponsors themselves, and thus “full-stack” funders of startups, from idea to public market debut.
All-time record number of funding and unicorns
Startups started 2021 by smashing previous years’ records: 98 new unicorns have been minted in Q1 alone, against 61 in Q4’20. Venture capital funding in the United States is up 74%, and 37% in Europe compared to Q4 2020. The deal value in the USA topped $68 billion, over 2 times more than last year’s Q1 for both continents.
Growth in VC activity was particularly high
The main sectors where VC activity focused were delivery, robotics, logistics, automotive, fintech, and cloud computing. Even though these sectors suffered as a result of COVID, they have shown their resilience to this pandemic and the economic recession that followed.
The macroeconomic situation is still far from perfect, and there’s a long way to go. However, the United States and the world have reached a certain degree of stability thanks to the rapid rollout of vaccines and the Federal Reserve stating that it would not raise interest rates until 2024.