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Venture capital funding breaks records—and fuels bubble concerns

July 16, 2021, 6:00 PM UTC

The flow of venture capital dollars into startups has officially reached fire-hose levels. U.S. venture capital investment smashed records during the first half of the year—with VCs pouring $150 billion into startups in six months, nearly 90% of the total dollars invested during all of 2020. 

Those all-time highs spanned virtually every industry and investment size, including both late-stage deals and early seed deals, according to second-quarter data from the National Venture Capital Association and data analytics firm PitchBook. Investors poured $108.8 billion into late-stage deals during the first six months of the year, nearly hitting the full-year 2020 total of $109.8 billion. Mega-rounds, or those exceeding $100 million, also shattered records, tallying $85.5 billion for the first half of the year, compared with last year’s total of $75 billion. 

The sheer pace and scale of VC investments has prompted questions about a potential funding bubble. Last year, amid the uncertainty of COVID-19, some venture capitalists pressed the pause button, asking portfolio companies to save cash and turn a profit. But that pause became a blink, and 2020 investments broke the previous year’s record of $164.3 billion, as pandemic lockdowns made investors more comfortable doing deals over Zoom

It’s not just hot in the United States: Europe and India set VC records, and Africa recently knighted four new unicorns, or those startups valued at more than $1 billion. There were 136 new unicorns globally during the second quarter of 2021—nearly six times the 23 unicorns born during the same period a year ago, according to research by CB Insights, a business analytics platform. That’s already higher than the 128 unicorns born in all of 2020. 

Exits, too, are at all-time highs, thanks to the hot market for IPOs, acquisitions, and SPACs (special purpose acquisition companies). During the first half of the year alone, at least 883 exits valued at an aggregate of $372.2 billion were completed—an average of five exits a day. Even with half the year left, the exits represent a new annual record with deal volume exceeding last year’s by 85%. 

With the market so frothy, it’s no wonder that VCs are reporting more competition to get in on rounds, including from mutual funds, hedge funds, and corporate investors.

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