The startup space was hot in 2021 🔥 — over the last year, capital has been flowing into seed-stage and early-stage startups. As a matter of fact, a record of $93 billion was invested in early-stage companies last year. But could that trend backfire soon??
From web3 to edtech, capital from VC firms flooded a variety of sectors in 2021. During and after the pandemic, tech-based startups provided a plethora of early-stage investing opportunities so innovative and enticing to investors that the median valuation of most seed or early-stage startups ballooned last year. 🎈 💣 In 2021, the median valuation of an early-stage U.S. startup was $26 million — in 2020, that median valuation was $16 million.
As many notable venture capital firms rake in some of their best returns since the dot-com bubble, investors are beginning to question the sustainability of the post-pandemic startup explosion. A partner at Bain Capital Ventures, Matt Harris, commented “It’s going too well. I’m not actually that smart. It can’t continue like this.” An unprecedented 42% of Harris’ portfolio companies IPO’d in 2021. 🚀 🚀
According to Pitchbook and the WSJ, the value of U.S.-based/VC-backed companies that publicly listed or were acquired in Q3 of 2021 totaled $582.5 billion. That number was just $289 billion in 2020. 💰 💰 Additionally, the unrealized gains of international VC portfolios increased to $1.33 trillion in March 2021, which was up from $803 billion in Q4 2019.
Many industry veterans recognize that macroeconomic factors such as bond yields and tech adoption may fuel startup valuations, but sky-high boosts to early-stage valuations don’t come without the risk of a ‘bubble burst.’ 💥