By September 2021, capital funding for startups in the US had gone up almost $100 Million dollars from just nine months before. The first three quarters saw record-breaking investments of $240 Billion, coming up from $166 Billion in 2020. This is according to data from venture capital database, Pitchbook.
An excited IPO market is experiencing super high startup valuations, bringing huge returns for entry investors. This encourages turn around investment in more bullish stocks. Non-traditional lenders like mutual funds, hedge funds, and private equity firms are entering the startup investment game with cash on hand to bump deal valuations higher. These mega-deals fuel the market gold rush to find the next big hit and get in on the ground before it takes off.
With more volume than ever before in the US stock market, many fear a burst to the bubble. When deals are made in a frenzy of competition, due diligence is sacrificed. Many of the high-value buy-ins could turn out long-term busts if company fundamentals are flawed. Investments are truly dependent on prospective demand. Many experts believe with the changes the world has quickly faced, these phenomena are just part of the new norm, and less relative to typical cycles.
Despite the potential downturns, combined with the complications of supply chains, and uncertainty of Covid variants, the one sector that seems to be immune is tech. With everyone working, shopping, and meeting from home, advancements in cyberspace continue to be in high demand. Remote work startups are seeing exponential growth, while enterprise software startups account for half of the venture capital funding last year.
With new spheres of willing investors, funding rounds are reaching new heights, bringing astounding valuations. In 2021, 373 startups were valued at $1 Billion or more. Time will tell the outcome of those ultra lucrative flash sales, but for inspiring entrepreneurs, what used to be considered pipe dreams can now be turned into a logical plan, and those wild stories of success are becoming all the more realistic.
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