The Early-Stage Explosion πŸ’£

The startup space was hot in 2021 πŸ”₯ β€” 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??Β 

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. 🎈 πŸ’£ In 2021, the median valuation of an early-stage U.S. startup was $26 million β€” 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 β€œIt’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. πŸš€ πŸš€

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. πŸ’° πŸ’° 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.’ πŸ’₯

a16z Announces Record-Breaking $4.5 Billion Crypto Fund

VC goliathΒ Andreessen Horowitz (a16z) announced its fourth, and largest, crypto fund today β€” they hope to capitalize on discounts in the marketplace as the “golden era of web3” ramps up.

a16z’s newest crypto fund is more than double the size of its last one, which it raised last June. At $4.5 billion, it will be not just a16z’s biggest crypto fund, but the biggest one that the world of web3/blockchain/crypto has ever seen. It will take the crown from the Paradigm One Fund, which announced it pooled a total of $2.5 billionΒ in November 2021.

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All Eyes on PE πŸ”Ž KKR Raises $5 Billion for New Fund

KKR & Co is an NYC-based investment company that just unveiled plans for its first fund ever investing exclusively in mid-size companies. KKR is trying to raise $5 billion for the new fund. πŸ’°

KKR, formerly known as Kohlberg Kravis Roberts & Co, is a private equity GIANT. We’re talking roughly 280 private equity investments worth $545 billion. The firm’s new fund for mid-size companies, called β€˜Ascendant,’ will target a variety of sectors, including financial services, healthcare, industrials, consumer, technology, media and telecommunications.Β 

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Private Equity Is Thriving

Amidst all the market chaos going on, it’s a good thing someone is thriving. According to Bloomberg, Blackstone Inc. is reportedly gearing up to raise capital for the biggest PE buyout fund ever. πŸ’ͺΒ 

Private equity funds are pools of money raised from investors that firms use to buy companies (or other asset classes, like real estate) which yield high rates on return on initial investments. It’s reported that Blackstone could raise up to $30 billion for its next private equity fund with the raise tentatively scheduled to begin next year.

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Just How Cool Have Funding Markets Gotten?

Last week Pitchbook released its Q2 2022 U.S. VC Valuations Report, which had some interesting stats about the current environment. πŸ“

Early-stage valuations are beginning to reflect broader economic uncertainty, as quarter-over-quarter median pre-money valuations saw their first decline in ten quarters. The median pre-money valuation for early-stage VC was $52 million, down 16.1% YoY.

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