Venture capital activity reached new heights in Q3’21 as investors continued to plow money into late stage deals around the globe. A significant amount of dry powder, strong fundraising activity, and healthy IPO and exit activity suggest the pause is seasonal, with a renewal in activity expected heading into Q4’21.
Megadeals play a big role in global VC market as all regions attract $1 billion+ deals
During the quarter, large mega deals continued to dominate activity, with $1 billion+ deals remaining very prolific — particularly when combined with the sizable number of $100 million funding rounds. All regions of the world attracted big funding rounds in Q3’21. In Asia, India saw a $3.6 billion raise by Flipkart, and a $1.7 billion raise by Byju, while China saw a $1.5 billion raise by Svolt. In the Americas, the US capture seven $1 billion+ deals: Rivian ($2.5 billion), Generate ($2 billion), Databricks ($1.6 billion), Articulate ($1.5 billion), Devoted Health ($1.2 billion), Chime ($1.1 billion), GoPuff ($1 billion). In Europe, Germany-based Gorillas raised $950 million followed by $800 million by London-based Revolut.
Investor interest in ESG and cleantech sees big leap forward in Q3’21
Investor interest in ESG and cleantech has grown significantly, particularly in areas like electric vehicles, clean energy, mobility, and infrastructure. During Q3’21, a number of the largest deals globally had a cleantech focus, including the $2.5 billion raised by electric vehicle manufacturer Rivian, the $2 billion raised by alternative energy infrastructure company Generate, the $1.5 billion raised by energy storage company Svolt, and the $700 million raised by battery recycling company Redwood Materials.
Emerging areas of ESG and cleantech are also quickly gaining traction with investors, as evidenced by Germany-based Grover — a company focused on maximizing the circular economy by offering technology rental programs – raising $1 billion in Q3’21. Adjacent areas like foodtech are also seeing interest; In Q3’21, Israel-based cultured meat company Aleph Farms raised $105 million.
Non-traditional investors taking more active role in VC market
Globally, VC investment continues to be very high, in part due to the growing participation of non-traditional investors, including a greater number of PE firms, hedge funds, mutual funds, and pension funds. Many of these non-traditional VC investors are looking at the returns being generated by private companies and looking for ways to get in on the action.
A growing focus on crossover financings is also helping to drive interest from a broader range of investors. With the fear of the IPO window closing arbitrarily lessening, companies are focusing less on going public as soon as possible and more on going out at an optimal valuation. This is driving some to hold crossover rounds to bridge the gap to their anticipated exit. Non-traditional investors are particularly interested in crossover rounds given the potential to see return within 18-24 months.
Trends to watch for in Q4’21
Globally, fintech, health and biotech, B2B services, and logistics and delivery are expected to remain very attractive areas for VC investment. Given the number of companies operating in the delivery space, there will likely be some serious consolidation at the regional and global levels over the next few quarters as companies look to scale and grow their market share.
Investor interest in ESG and cleantech is expected to keep growing. With COP26 scheduled to be held in Q4’21, sustainability and climate change will be top of mind — likely leading to the development of more funds with an ESG focus and to more investments in ESG-related technologies and cleantech solutions able to help mitigate the impacts of climate change.
VC investment hits new record high – reaching $171.7 billion
Global median pre-money valuation for D+ jumps to $1 billion in 2021
Unicorn rounds spike for second consecutive quarter
Fundraising approaches 2020 annual totals – with a quarter to go
Top 10 deals globally focus on US, India, China and Brazil