According to the New York Times, at present, there are more than 900 technology startups with a valuation of more than 1 billion in the United States, and the total amount of funds raised by technology startups in 2021 is as high as 330 billion US dollars, and the median amount of the first round of financing funds has increased to 13 million US dollars, an increase of 30% over last year. This month, three tech startups, Miro, Checkout.com and OpenSea, all valued at more than $10 billion.
At the same time, fed rate hikes and the COVID-19 pandemic have led to a decline in technology stock prices. In this regard, investment companies remain optimistic, they are optimistic about the fiercely competitive market, believe that the overall market situation will not change significantly, especially the epidemic has provided a once-in-a-lifetime opportunity for the development of technology startups, investors and entrepreneurs believe that technology startups can achieve more rapid development during this period.
In order to seize investment opportunities, investment companies have used a "backselling" strategy, conducted detailed surveys of interested technology startups, analyzed their customers and competitors, etc., and demonstrated their strong interest in these companies, which has been a certain success.
First, technology startups raised more than 300 billion yuan, and the median financing funds increased by 30%
In the past two years, due to the impact of the new crown epidemic, individuals and enterprises have increased their dependence on technology products, creating development opportunities for technology startups. The demand for food distribution, long-distance office equipment, and long-distance medical services has increased. In addition, breakthroughs in artificial intelligence, nuclear technology, electric vehicles, space travel and other fields have also made investors more aware of the ability of technology to change the world.
Investors are scrambling to invest in a limited number of tech startups at the end of 2021, and with tech stocks such as Apple, which is valued at more than $3 trillion, a new record high, investors are investing in tech startups to a feverish level. PitchBook, which tracks private investment, says U.S. tech startups raised a total of $330 billion in 2021, nearly double what they did in 2020, with more tech startups valued at more than $1 billion than in the past five years combined. The New York Times says there are nearly 900 tech startups currently valued at more than $1 billion, and in 2015, 80 were considered many.
In addition, PitchBook data points out that after the end of private financing and public listing, the market value of technology startups can reach up to $774 billion, and the return on investment is 3 times that of the previous year. According to Crunch, the median first round of funding for U.S. tech startups was about $13 million in 2021, up 30 percent from $10 million in 2020.
Crunchbase publishes a chart of median first rounds of funding, with mid-2021 up 30% from the previous year
This month, the valuations of three tech startups reached eye-popping levels: Digital whiteboard company Miro was valued at $17.75 billion, and the Checkout.com paid company was valued at $40 billion. OpenSea, another company that sells NFT (Non-Fungible Tokens), has only 90 employees but is valued at $13.3 billion. Investors responded positively. Andreessen Horowitz, an investment firm, said it had raised $9 billion in new funds, while two other investment firms, Khosla Ventures and Kleiner Perkins, each raised nearly $2 billion.
Second, the Fed's interest rate hike has brought about a decline in the stock price of technology stocks, and investors remain optimistic
Recently, the Federal Reserve's calls for interest rate hikes have been high, coupled with the uncertainty of the Omicron coronavirus variant, and the stock prices of technology stocks have fallen, such as the sharp decline in the shares of the special purpose acquisition company listed last year, and the price of bitcoin has fallen by nearly 40% since its peak in November last year.
But investors say the situation has not yet affected investment in the private sector. Ambar Bhattacharyya, a board member at venture capital firm Maverick Ventures, said he had never seen such a competitive market. Investors believe that even if the economy slows down temporarily, the overall situation of the market will not change much. Over the past decade, from Facebook's acquisition of Instagram and WhatsApp to the soaring valuations of startups like Uber and WeWork in the private market, the heated debate about the tech bubble has never stopped, but each time the frenzy will eventually return to normal. Roy Bahat, an investor in Bloomberg's Beta, said the so-called new conditions were just the norm in the market.
Investors and entrepreneurs alike agree that the pandemic has created a once-in-a-lifetime opportunity to change the situation. Entrepreneur and investor Phil Libin said the pandemic has dramatically changed every aspect of society, with startups achieving progress in a year that would have taken five years. In mid-2020, he founded Mmhmm, a company that provides video communications for remote work, and raised $136 million in funding. Libin said he receives a lot of letters from interested investors every week.
Phil Libin raised $136 million for his company Mmhmm
Third, the financing cycle of technology start-ups is shortened, and the "reverse sales" of investment companies seize the financing opportunity
Tech startups, which used to seek new investments every 18 months, now do so several times a year. To get a head start in the formal financing process for tech startups, investment firms often use "backselling" methods to conduct exhaustive surveys of their investment partners, demonstrate their interest in these tech startups, and possibly share some useful data.
Hinge Health, a digital health company that provides users with teletherapy services, and its co-founder Daniel Perez, has been receiving a lot of emails from investors since the end of 2020. The emails contained exhaustive research by the investment firm on Hinge Health, including interviews with dozens of the company's customers, as well as data from competitors. Last January, Hinge Health selected Tiger Global to lead a $300 million funding round with investment firm Coatue Management, in which tiger global funding reports were 90 pages long.
Hinge Health's teletherapy products
Vijay Tella, founder of Workato, a tech startup that specializes in automation software, said that when his company launched its latest round of funding last November, investors sent detailed information, and even interviewed 30 of Workato's customers. Tara, fearing that his clients had received spam from investors, apologized. Last year, Workato raised $310 million through two funding rounds, valued at $5.7 billion. At the moment, the company is not launching new financing, but Tra said, "I bet these calls will not stop now."
Conclusion: Investment is hot, financing is fast, and technology startups may be "vanguards" for economic growth
Society's attention to technology products and technological breakthroughs in the technology industry have promoted the boom of American technology startups. At present, the stock price of technology stocks has fallen due to the impact of interest rate hikes and the intensification of the epidemic, but investors are optimistic about it, and businesses also believe that the development opportunities brought by the epidemic should be seized, so the financing of AMERICAN technology startups has not been affected by it.
At the same time, the science and technology innovation board launched by the mainland has built the main position for the listing of high-tech enterprises for science and technology-based and innovative enterprises with growth potential, help solve the financing difficulties of scientific and technological start-ups, and stimulate the development of scientific and technological start-ups, thus laying a more solid foundation for mainland high-tech enterprises to occupy a place in the international market.
From the perspective of capital markets, the technology industry is very active in 2021, and technology is a key variable in today's economic growth. The large amount of financing obtained by technology start-ups can help them become "vanguard" enterprises with strong innovation ability, high market share, mastery of key core technologies, and excellent quality and efficiency, contributing to the development of science and technology and economic growth.
Source: The NewYork Times, Crunchbase