Never before has so much money been poured into the coffers of many start-ups within three months as in the second quarter of 2021. In the second quarter of this year, the up-and-coming companies raised $ 157.1 billion in more than 7,600 deals.
That sums up the new Venture Pulse report from KPMG on the situation of venture capital (VC) investments.
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It was also the billion-dollar megadeal quarter.
The US start-up Waymo, which is one of the leading companies in the development of autonomous driving, raised $ 2.5 billion, the Indonesian parcel service provider J&T Express raised $ 2 billion, and the Munich-based software company Celonis received $ 1 billion fresh capital.
The biggest round in the second quarter, however, was led by institutional and private equity investors: the Swedish start-up Northvolt AB, founded in 2015 and producing lithium-ion batteries for electric cars, raised $ 2.75 billion.
Fintechs ensure record volumes
In Europe, on the other hand, it was primarily the fintechs (financial start-ups) that achieved another record volume. The Berlin neobroker Trade Republic received $ 900 million in the second quarter, the insurtech Wefox from the capital received $ 650 million and the Swedish fintech Klarna received $ 639 million. According to the financial data service provider Pitchbook, 2021 could become the best venture capital year ever. While financing rounds of $ 100 million and more used to be the exception, there were nearly 200 such deals in the first half of the year alone, according to Pitchbook.
The diversity of investors who took part in the young companies was also remarkable.
In addition to the usual suspicious venture capitalists, it was increasingly other players who provided the start-ups with capital, such as hedge funds or mutual funds.
KPMG also lists pension and sovereign wealth funds, family offices and foundations.
Arnd Petmecky, partner at the management consultancy Bürgenstock Associates, says that the many successful initial public offerings (IPOs) and substantial financing rounds fueled the greed of investors.
At the same time, this also ensures that the money in the venture capital funds is more relaxed.
There is currently a dangerous euphoria in the western market - also favored by the Corona crisis and a certain gold rush mood.
120 IPOs in the first half of the year
Because the value of the “exits” - the income from sales or IPOs - is also setting new records this year.
According to the Pitchbook, the volume in the first six months of this year was already around 30 percent above the previous high of 2020. The first half of the year saw 120 IPOs.
If it stays at this speed, this year could still overshadow the stock market debuts of 1999 and 2000, writes the data service provider.
In the current year, the exits have raised $ 372 billion.
The direct placements from Coinbase and Roblox alone brought more than $ 120 billion into the coffers.
Two risks to a blister
The record sums remind some market participants of the dot-com bubble at the end of the nineties, when huge sums of money flowed into young companies without sustainable business models. Petmecky says there are two fundamental risks to a bubble. If, for example, the growth criteria prove to be unrealistic, for example in the event of further setbacks in the Covid crisis or inadequate evaluations of clinical products. The time factor also plays a role. Ultimately, not all newcomers would be able to survive in certain markets. Per se, there is the risk of a bubble through follow-up and imitation effects.
A look at the ratings, for example of gorillas, shows that the growth targets of some companies are ambitious - "one could even say utopian," said Petmecky. This is also related to regulatory risks. Whether the business model is scalable or unique has to be assessed on a case-by-case basis - a virtue that some analysts and venture capitalists seem to have no longer mastered or ignored in order to win the bid.
"Some start-ups currently have the option of choosing the VCs themselves." According to Petmecky, whether the investment volume will remain that high depends on various factors, which makes it difficult to make a forecast. Money is shy as a deer: A negative example, a major crash with high depreciation for investors - and the alarm bells were ringing in the market, and the gold rush mood was at least affected.