Fernway DiarySM

Feb 14, 2022

The last year marked a dramatic surge in investments in the startup funding environment, with record-breaking venture funding supporting companies at every stage of growth. According to data from Crunchbase, global venture investment totaled $643 billion in 2021, up from $335 billion in 2020, representing growth of 92 percent year over year. This contrasts sharply with the venture capital picture of a decade ago, when venture capital investments amounted to only $59 billion globally.

Late-stage and technology growth-stage startups accounted for the largest share of funding, with $413 billion of the total raised at Series C or later, $196 million more than was raised in 2020. These rounds of investment went to more than 3,000 unique companies globally. The number of companies funded also increased significantly from 2020, with 1,000 more startups raising late-stage funding in 2021, a growth of 50 percent.

Early-stage startups nearly doubled their 2020 total in 2021, with $201 billion raised as compared to $101 billion in the previous year. Funding at this level was invested in 8,000 companies, up from the 6,500 companies that received funding in 2020.

Capital directed to seed-stage startups accounted for $29.4 billion in 2021, $10 billion (or 56 percent) more than in 2020. More than 17,000 startups around the world were accounted for in this figure, although Crunchbase noted that due to lags in information entering their database, they expect this figure to rise.

By sector, financial services raised the most venture capital in 2021, with the highest growth among leading industries year over year, followed by healthcare, e-commerce, and transportation. North America and Asia continued to dominate the venture funding capital ecosystem, although Latin America and Europe showed a greater percentage growth in funding year over year. North American accounted for $330 billion invested (91 percent growth from 2020), Asia $165 billion invested (50 percent growth from 2020), Europe $116 billion invested (150 percent from 2020), and Latin America $19.6 billion invested (300 percent growth from 2020).

Crunchbase also noted that the number of unicorns they track grew by 586 new entrants in 2021, to a total of 1,148 as of January 5, 2022. During 2021, startups reached unicorn status at a rate of over 10 per week, as compared to 3 per week in 2020 (a total of 167 for that year). The companies on Crunchbase’s list have raised a total of $682 billion over time, with a collective valuation of $3.8 trillion, an all-time high.

In addition, a record number of venture-backed companies went public at high valuations last year. Among companies debuting on the public market, 238 were valued above $1 billion in 2021, far exceeding the 61 at that level in 2020. Thirty-five went further, debuting at more than $10 billion, compared to 13 in 2020.

According to a MarketWatch report, Tiger Global was the top venture capital investor in the world last year, with 328 deals. Other top investors included SOSV with 314 investments, Sequoia Capital China with 276, and Andreessen Horowitz and Insight Partners with 240 each.

The growth of venture investment into technology startups in the last year is credited to the effect of the pandemic and the corresponding increase in demand for online services, as well as the shift to cloud services. The growth in early-stage funding anticipates an ongoing strong venture funding environment in the near future, as these companies continue to grow.

Pursuing Funding Opportunities

Growing startups seeking VC backing need strategic financial advice and expertise to effectively secure funding. Accurate financials, meticulous due diligence, and tax and regulatory compliance are all essential to demonstrating sound business planning to potential investors. Fernway Solutions offers a full range of advisory, accounting, and tax compliance/planning services to ensure your business has what it needs at each stage of its growth, from startup to unicorn.

For more information, please contact your US tax advisory team at youradvisor@fernwaysolutions.com or visit us at www.fernwaysolutions.com.

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