The "New Normal" of VC
What to expect in 2022 for the venture capital asset class
Did you know that seven out of ten of the world’s largest companies, including Apple and Amazon, were venture capital-backed?1 In addition to the iPhone, venture capital financing has led to the electric car, mRNA vaccine, and the search engine. So, it’s not a hyperbolic claim that venture capital has transformed our day-to-day lives.
However, you may be surprised to learn that while VC-backed companies make up nearly 76% of the total public market capitalization since 1995, they only represent .5% of American companies created each year.2 Yet despite being a fraction of the new businesses launched annually, investing in startups is becoming more mainstream.
While institutional asset managers like Black Rock and Tiger Global continue to direct massive capital inflows to venture, accredited retail investors are now participating in significant numbers as well. Factors like low-interest rates, an outperformance of VC to public market equivalents over many periods, companies staying private longer, a desire to be exposed to innovative companies, and a lower barrier to entry are contributing factors.3
The result has been record-breaking fundraising for venture-backed companies. Newly published data from Pitchbook revealed that fundraising in the first three quarters of 2021 surpassed 2020’s full-year totals. Additionally, VC mega-deal activity in 2021 (deals sized $100 million or larger) accounted for 820 investments, generating a cumulative deal value of $190.8 billion.4 By contrast, VCs completed only 46 mega-deals totaling $10.4 billion just one decade earlier.5
As The Economist stated, “A larger pool of capital chasing a bigger universe of ideas will boost competition, is likely to boost innovation, leading to a more dynamic form of capitalism.”6 No longer the Silicon Valley cottage industry of the early 2000s, venture capital has evolved into a ubiquitous presence in the broader U.S. economy.
And while venture capital has historically been a challenging asset class for individuals to access, it is no longer only available to the ultra-high-net-worth investor. Today, venture capital is an asset class that any accredited investor can own.
Alumni Ventures creates and offers accredited investors diversified venture portfolios. Ranked as the most active VC investor in the United States by Pitchbook in 2021, we’ve completed 850+ investments since our inception in 2014.
We believe the future is bright for venture capital, as a new generation of VC incubated startups, from blockchain to biotech, are poised to disrupt the status quo. New York, Chicago, Boston, San Francisco, and Austin venture ecosystems are robust with startup activity. As a network-powered venture capital firm, we have offices and teams in these critical VC hubs to access exciting new ventures, add value to our portfolio companies, and be at the forefront of this dynamic asset class.
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1 The Economist Newspaper. (2021, November 27). The bright new age of venture capital. The Economist. Retrieved January 5, 2022, from https://www.economist.com/finance-and-economics/2021/11/23/the-bright-new-age-of-venture-capital/21806438
4Q4 2021 Pitchbook-NVCA Venture Monitor first look. PitchBook. (2022, January 5). Retrieved January 6, 2022, from https://pitchbook.com/news/reports/q4-2021-pitchbook-nvca-venture-monitor-first-look
5 Hamlin, J. (2021, December 22). Venture Capital isn’t slowing down in 2022. Institutional Investor. Retrieved January 5, 2022, from https://www.institutionalinvestor.com/article/b1w02tpsx80lgj/Venture-Capital-Isn-t-Slowing-Down-in-2022
6The Economist Newspaper. (2021, November 27). The bright new age of venture capital. The Economist.