The number of start-ups estimated above $ 1bn grew rapidly in the second quarter, as venture capitalists increased the size and pace of their investments after several highly successful public listings in the United States.
Private investors have allocated valuations of billions of dollars to a record 136 start-ups between April and June, according to the data service CB Insights, more than the total for the entire past year.
The United States produced most of the billion-dollar private companies, which included the IRL social calendar app and financing market Pipe. Asia contributed 33 during the quarter, compared to 29 for the full year in 2020.
Billion-dollar start-ups, colloquially known as “unicorns,” have proliferated as deep-pocket investors have become accustomed to paying high prices for shares in young companies. The growth in valuations could raise renewed concerns about overheating in the private tech markets, while also creating difficult targets for start-up founders to meet.
Venture capitalists said the high ratings reflected the influence of companies such as Tiger Global Management, which is in the process of raising a $ 10 billion private technology fund, and a strong reception in public markets for technology companies. which have listed their actions over the past two years, particularly the software group of the Snowflake company and the travel company Airbnb last year.
“The valuations are rich, and there’s a lot of capital in the market,” said Laela Sturdy, general partner at CapitalG, a technology fund that manages money for Alphabet.
But many investors have also underestimated the effect of cloud computing and other technological developments, he said, “resulting in opportunities that are far greater than anyone has realized.”
Start-ups are on track to double the previous annual fundraising record set just last year, when the coronavirus pandemic accelerated technology investment. Investors made $ 292.4 billion in minority investments in private companies worldwide during the first half of this year, almost equal to the total for the whole of last year.
Totals have been driven higher by huge rounds of funding for some of the largest unicorns. Rounds of more than $ 100m in size were nearly 60 percent of the total capital raised in the first half of 2021 but only 5 percent of the total number of deals.
“When a company seems to have won, there is a lot of capital that flows in it or wants to run out,” said Anand Sanwal, executive director of CB Insights. “There’s just a lot of capital out there and not enough opportunities.”
Tiger Global made the most investment in private start-ups of any business during the quarter, dropping 81 deals, or about 1.3 per business day, according to CB Insights. That rate represents an eightfold increase from the same period last year.
Last month, Tiger Global told investors that it “has strived to be disciplined, handing over opportunities that we have considered good in favor of running on the big ones,” according to a letter seen by the Financial Times.
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