Venture capital is off to a warm start in 2021, though the market has hit some bumps lately that could be signaling an ever-changing landscape ahead.
Early-year numbers have been impressive so far, with a record of $1 billion “unicorn” companies coming to market and also a surge in initial public offers overall and blank-check SPACs that have lured in huge parts of investor cash.
Special purpose acquisition companies raise capital in IPO and use the proceeds to snap up a private company and take it public.
“There’s seems to be an endless supply of capital looking for a home,” said Conor Moore, national leader of KPMG Private Enterprise, a global professional services advisory.
Money is flowing “particularly to late-stage investment in companies that are either going to continue to exponentially grow in a post-pandemic world, or at least continue the growth they’ve had for the last 12 months,” he said.
A report KPMG released Wednesday reveals on just how much money is flowing around.
In the first quarter, the U.S. recorded births of a record 64 unicorns, or private companies that had accumulated a $1 billion valuation and that group alone accounted for about 40% of all venture capital funding from January through March.
There also were 328 SPACs during the period; there are companies that went public and gathered money from investors without having a specific direction on where it would be spent.
Traditional IPOs also increased, part of $69 billion in venture capital money spread across 3,042 deals. There were nine $1 billion deals globally, a new record.
The million dollar worth question is where such an intense pace can continue. April has recorded a precipitous drop-off in SPACs particularly, warning that the fear-of-missing-out influx of cash could be petering out.
Moore said he’s mostly optimistic about the landscape ahead, though he does see some changes coming.
For one, Moore said those trying to take companies public are realizing that it’s harder than it looks and will need patience. He also notices potential regulatory roadblocks and said valuations in some parts of the capital markets are becoming stretched.
