A similar step change seems to have happened again in the first quarter with $500m rounds now being the new large round.
Back in 2013 it was still rare to see a $100m-sized round, then it became broadly every week as corporate venturing units stepped up their allocation and support to entrepreneurs.
In the first three months of this year there have been one of these large deals every few hours with CVCs being involved in more than 200, according to GCV Analytics preliminary data before the first quarter (Q1) results are announced in the April magazine.
And CVCs’ ambitions have increased further with at least 15 deals in Q1 worth at least $500m in size, according to news editor Rob Lavine’s weekly tally.
Overall, venture capitalists have conducted 29 funding rounds worth $500m or more in the first quarter, and collectively this select group has raised more than $28bn, PitchBook data showed.
Five of these CVC-backed deals were at least $1bn in size, including Robinhood, Lineage Logistics, GoPuff, Klarna and Databricks, according to GCV Analytics.
But whereas in the mid-point of the last decade all the largest deals included CVCs, now other forms of capital are crowding in. Pitchbook said nine companies in Q1 raised at least $1bn.
The wave of liquidity looking for any growth and potential returns in a world of effectively zero interest rates allied to astonishing money creation by central banks through the covid-19 crisis has meant mutual funds, hedge funds and other institutional investors, such as private equity, are bidding up asset valuations and delivering multiple rounds for companies promising to scale, such as Hopin and Gorilla, in short spaces of time.
Add in special purpose acquisition companies offering growth round amounts of capital to private companies wanting a listing at eye-watering valuations for often businesses without any actual product to sell and the word bubble comes to mind.
While, however, there is undoubtedly plenty of froth to blow off some of these deals, witness the excitement around Greensill or Magic Leap let alone Wirecard or Theranos over the past few years, the amount of capital will drive innovation.
Much like the dot com bubble saw plenty of wipeouts and investor losses when it burst so this latest frenzy will see many lose their shirts – metaphorically speaking – but the framework for a more integrated public and private capital markets could drive a more efficient allocation of capital to those best able to use it longer-term.
