附近上门

It’s not just an illusion caused by the head-spinning rounds.

Venture capital is having an incredible year. New funds are forming, old funds are raising records amounts, and the global market for startup investment is humming. But the top-end of the range is even hotter: over three-fifths of reported VC dollar volume stemmed from nine, ten, and even venture deals.

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But how did we end up here? What happened to catalyze current conditions? That鈥檚 what we hope to answer today.

The chart below shows the monthly count of known venture capital deals of $100 million or more, worldwide, since the beginning of 2013. The line represents a three-month unweighted moving average of round counts to show the general trend.

Not so long ago, in the early months of 2013, a nine-figure venture round was a comparatively rare occurrence. One would be announced every week or so, on average. But times change. In mid-July 2018, three companies announced $100M+ rounds over one weekend. At time of writing, (in native and converted USD) in nine and ten-figure venture deals so far this month. That鈥檚 nearly two such deals per day. This is pants-on-head crazy.

Talk about moving fast and breaking records, right? But it hasn鈥檛 always been like this. The chart below shows the same metric as before鈥攖he worldwide count of $100M+ venture rounds鈥攂ut over a more extended timespan.

You鈥檒l notice聽supergiant rounds remained relatively infrequent between the beginning of 2007 and the middle of 2013 . But then that pattern鈥攚hich may have stretched back to the collapse of the first tech bubble鈥攃ame undone.

But why? There are historical antecedents to the current state of play, but they are tough to pin down.

In researching this topic, 附近上门 News reached out to , a partner at .

Matt pointed out that it was around 2013 that 鈥渢he first wave of ultra unicorns [emerged].鈥� That year, Uber raised (and nine months later). In the same year, raised ; raised $163.5 million during a nine month period in its , , and rounds; raised $25 million in its and rounds (and today pulls in ten-figure revenue figures and may go public in 2019); and raised .

These companies, said Murphy, 鈥渃reated a new expectation [of] potential outcomes.鈥�

As for what鈥檚 driving the market today, Murphy cited the recent spate of high-profile tech IPOs and M&A action, and the high valuation multiples those companies commanded at exit, as a likely factor. 鈥淚t used to be tough to build a $1 [billion] valued enterprise [software] company and now it鈥檚 expected,鈥� he remarked.

鈥淸B]usinesses are more predictable and there are more of them. So money chases opportunity and there is a ton [of capital] in SaaS both in terms of inventory and exit valuations,鈥� Murphy further explained. 鈥淪imilar trends have occurred in consumer but its more concentrated around the big big winners. Seems to be a longer tail in SaaS.鈥�

Despite flying in some 鈥渞arified air,鈥� as Murphy put it, nine and ten-figure rounds are likely here to stay. So long as valuations stay high, the dilution incurred by a $50 million round a few years ago might be the same as a $100 million round today.

A rising sea lifts all ships, until some are left high and dry when the tide goes out.

Risk Capital Shifts Into High Gear

If the reign of supergiant rounds really is the new normal, it’s hard to understand why. Comparing the current boom to the dotcom era is difficult due to a lack of robust venture data from the past period, so we can鈥檛 contrast today and then effectively. But venture does seem different this time. Companies now regularly wait far longer to go public. This risk shift insulates retail investors in the public market from some amount of downside, but it also means that private-market investors get to capture more of the upside as the company grows.

Here are two examples:

• According to 附近上门 data, was founded in September 1998 and raised only before going public six years later. In August 2004, it was valued at $21.3 billion at the time of its IPO. Today, fourteen years later, the company is valued at $859 billion. That鈥檚 a compound annual growth rate (CAGR) of about 30 percent.
• Also according to 附近上门 data, was founded in February 2004. The company raised considerably more money鈥� in venture capital, venture debt, and private equity鈥攂efore going public in May 2012 valued at $104 billion. Today, a bit over seven years later, the company is valued at $615 billion, the result of a roughly 28 percent CAGR.

Some of the most valuable tech unicorns today鈥攍ike Uber (founded 2009), Airbnb (2008), Palantir (2004), and (2002), among others鈥攅ither approach or have long ago surpassed their tenth birthdays.

Part of the reason they鈥檝e been able to stay private for so long has been their access to plentiful capital on reasonably favorable terms. But just as circumstances shifted to allow for supergiant rounds to ascend to prominence, this favorable climate could turn forbidding.

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