THE OBSERVER'S GUIDE TO VENTURE CAPITAL IN 2021
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THE OBSERVER’S GUIDE TO VENTURE CAPITAL IN 2021
Report Author: Paweł Sobotkowski
Editorial Design: Barbara Siemaszko
Cover Picture: Joel Filipe from Unsplash.com
Key takeaways
1. Global median VC deal size at the Seed stage
was $1.6 million in 2019 and was expected to
hit $2.0 million in 2020.
2. Venture Capital funds raised across EU-27 more
than doubled since 2015, going from 16 billion
dollars in 2015 to 39 billion US dollars in 2019.
3. One-third of European tech companies
are in a vulnerable position because of
pandemics.
4. VC investors have an estimated 189
billion dollars in dry powder (cash
reserves and assets).
StartupHansa As we have entered the era powered by innovation, but with uncertainty and opportunity as main currencies on the mar- ket, the global business landscape is rapidly changing, turn- ing tables on the seasoned market players, welcoming un- expected success stories, and creating complex business ecosystems, buzzing with ideas, promise, and opportunities. The price of innovation can be measured by the unpredict- ability of success, and disruption of established patterns and models, so by 2022, 40% of Chief Information Officers will be responsible for their organization’s innovation strategies. For years, Venture Capital investors have support- ed emerging companies, especially high-growth innovative enterprises (HGEs), bringing great ideas into life with a suffi- cient injection of funds at different stages of projects. Just in the first quarter of 2020, VC-backed companies raised more than 61 billion dollars across 4260 deals.
“
The price of innovation can be
measured by the unpredictability
of success, and disruption
of established patterns and
models, so by 2022, 40% of
Chief Information Officers will be
responsible for their organization’s
innovation strategies.
5
StartupHansa
The state of VC
in Europe
1. 18,000 venture capital-backed startups
in Europe
2. 82% of unicorns are VC-backed startups
3. N26, Flixbus, Glovo, Grammarly, Vinted -
emerging European unicorns in 2019
4. The United Kingdom, Germany, and
France were top European countries for
startup fundraising deals in 2019
5. Digital banks are on the rise: Revolut (The UK)
raised $500 mln in funding, whereas Klarna
(Sweden) collected $200 mln
6
As VC companies are, by completely redefined the rules
nature, the earliest supporters of the game, as the promise
of ground-breaking ideas of growth is in the past, with
and emerging industries, it many developed countries
is not surprising that Fintech predicting more than a 10%
remained one of the hottest drop in their GDP. How can VCs
markets for investment. navigate the new pandemic
Digital banks across the globe reality, and what’s the state of
raised millions of dollars Venture Capital in 2020? Let us
in funding rounds: Chime explore the landscape of VC,
(USA) and Revolut (UK) both walk through the investment
raised 500 million dollars procedures, especially due
and Klarna (Sweden) and diligence processes, and take a
Xinja (Australia) collected closer look at the VC’s greatest
respectively 200 million market players and unicorns,
dollars and 160 million dollars. in which they invested their
After a promising start of the faith and capital!
year, the emerging pandemics
7
StartupHansa
“
Digital banks across the globe
raised millions of dollars in
funding rounds: Chime (USA)
and Revolut (UK) both raised
500 million dollars and Klarna
(Sweden) and Xinja (Australia)
collected respectively 200 million
dollars and 160 million dollars.
8
The state of
Venture Capital
in 2020
The Venture Capital landscape noted a surprising change
in 2020, as Special-purpose acquisition company (SPAC)
volumes have increased so much that they are almost
catching up to traditional IPOs in the US. Why is it so
important? Well, SPAC “raised more in 2020 than over
the past 10 years combined”. Generally, Venture Cap-
ital has proven to be quite resilient to pandemics, and
global VC deal value reached 84 billion dollars in the
third quarter of 2020, which is a 34% increase from
the second quarter of 2020, and 39% jump from 2019’s
third quarter. Both in the USA and Europe, we could
observe a tendency for the deal volume to rise but the
number of deals to decrease. In the third quarter of
9
StartupHansa 2020, the deal count in Europe fell by 40% compared to the third quarter of 2019. The rising deal value is visible especially in the case of software and healthcare com- panies. Median deal sizes for software companies in the late VC stage went from 4.1 million euros in 2019 to 5.1 million euros in 2020. The numbers are even more im- pressive for healthcare companies, as the median deal size for their late VC stage increased from 3.6 million eu- ros in 2019 to 5.6 million euros in 2020. With the ongoing pandemics, investors’ eyes shifted towards the techno- logical world and medical solutions. 10
The state of
Venture Capital
1. Global VC deals value reached $84B in the
third quarter of 2020
2. In 2020, the VC deal volume went up but
the number of deals went down
3. Special-purpose acquisition company
(SPAC) raised more in 2020 than during
the last 10 years
4. The total late-stage VC deal value has
exceeded $94B in 2020
5. Median deal sizes for software and healthcare
companies in the late VC stage went up by €1mln
and €2 mln respectively
11StartupHansa Globally, VC has seen great gloomy predictions. Early- results in Latin America, stage funding amounted to where the deal volume went 14 billion US dollars, which is up by 147% in the third quarter a 26% rise since the second of 2020. Just like in Europe quarter of 2020, and the and the USA, the soaring result similar to last year’s investments did not translate numbers. Late-stage funding to a higher number of deals. has been steadily growing Investors put more money both in Europe and the USA on the table than in the last and in 2020 the total late- quarters, but they invested it stage deal value has already in fewer projects. In general, exceeded 94 billion US dollars. in the third quarter of 2020, For comparison, the previous seed funding went down by record, broken in 2019, was 18% compared to the third “just” 91 billion US dollars. quarter of 2019, but such a result is positive, given early 12
“
Globally, VC has seen great results
in Latin America, where the deal
volume went up by 147% in the
third quarter of 2020.
13StartupHansa European unicorns are quickly rising to prominence For the first time in history, European unicorns surpassed 100 billion euros in the aggregate post-money valuation, as 13 new unicorns emerged until the third quarter of 2020. With a to- tal of 53 unicorns with a combined value of 102.1 billion euros, the European startup scene is booming with possibilities. Just to put things into perspective, back in 2018, there were just 27 unicorns and the number of multibillion-euro companies was lower. Although pandemics have hit European economies, uni- corns continued to receive substantial financial support with over 5.5 billion euros of capital in 2020. The largest funding rounds for existing European unicorns in 2020 were raised by CureVac (Germany), Klarna (Sweden), Deliveroo (the UK), N26 (Germany), and Revolut (the UK). 14
“
With a total of 53 unicorns
with a combined value of
102.1 billion euros, the European
startup scene is booming
with possibilities.
15StartupHansa
The future of VC
investment in
Europe
1. European VC investment is likely to skyrocket
in fintech, healthtech, edtech and Saas
solutions
2. Cybersecurity is also expected to secure
substantial funding in 2021
3. 2021 may be the year of food tech, given the
growing emphasis on sustainability of the
food supply across the region
4. The UK is a clear leader in VC
investments: 6 out of 10 largest deals in
the Q4 of 2021 took there
16Despite the pandemics, VC the only European country,
investment in Europe actually where $100+ million funding
hit a record 49 billion US rounds took place. French
dollars in 2020, since the deal Ynsect raised $372 million
volume significantly dropped, in funding, German TIER
but the deal size of a handful Mobility - $248 million, Dutch
of chosen projects actually MessageBird - $200 million,
went up. In the last quarter of and Irish Amarenco - $190
2020, Europe’s investments million. In fact, in 2020, we
centered around the UK, where saw VC numbers skyrocketing
6 of the region’s top deals throughout entire Europe, but
were secured: LumiraDx ($389 especially in the UK ($15.3
million), Molo ($343 million), billion), Germany($7.1 billion),
Cazoo ($310 million, One Trust France ($6.3 billion), the Nordic
($300 million), Graphcore ($222 regions ($5.7 billion), and Israel
million), and Trinny London ($5 billion), where annual VC
($192 million). The UK was not investment hit new heights.
17StartupHansa
“
In fact, in 2020, we saw
VC numbers skyrocketing
throughout entire Europe,
but especially in the UK
($15.3 billion), Germany
($7.1 billion), France
($6.3 billion), the Nordic
regions ($5.7 billion), and Israel
($5 billion), where annual VC
investment hit new heights.
18Thriving VC hubs
around the world
San Francisco Singapur London
New York Mumbai Berlin
Los Angeles Sao Paulo Dublin
19StartupHansa VC investments in India and Indonesia skyrocket As Covid-19 disturbed funding patterns all around the world, VC giants, such as China, Singapore, and Japan recorded sub- stantial falls in their VC funding. China’s funding fell by 33%, from 25,7 billion US dollars in the first half of 2019 to 17,2 bil- lion US dollars in the first half of 2020. At the same time, In- dia’s VC numbers increased by more than three times: from 5,6 billion US dollars in the first half of 2019 to 19,4 billion US dollars in the first half of 2020. For the first time in years, In- dia scored more deals and funding than China. Reliance jio, an Indian telecommunications company, raised over 20 billion US dollars by the end of 2020, and BYJU’S, an ed-tech company, became the first-ever edtech “decacorn” - a company val- 20
ued at $10 billion or more. In the last quarter of 2020,
China rebounded from the previous stagnation, and
Chinese companies secured 5 out of 10 largest global
VC funding rounds. Manbang Group raised 1,7 billion
US dollars, two edtech companies Zuoyebang and Yu-
anfudao collected respectively 1,6 billion US dollars
and 1 billion US dollars, and e-commerce company
Yunwang Wandian alongside Enovate motors raised
907 million US dollars and 736 million US dollars each.
21StartupHansa
The future of VC
investment in Asia
1. Edtech continues to be one of the hottest areas
of investment in Asia, with multiple edtech
companies securing billions in funding
2. Healthtech and biotech are forecasted to
remain popular investment ventures
3. Niche sector, such as sustainability or
inclusive finance, are likely to attract more
attention from investors in 2021
4. India was one of the VC leaders in 2020
thanks to a number of mega-deals (for
example: an edtech company BYJU’S)
22All in all, with 25,2 billion US dollars raised across
1,398 deals, it is clear that Asia is becoming a VC
force to be reckoned with since the continent’s
internal markets are enormous. Chinese investors,
for example, focused on domestic and regional
ventures this year, given that the political climate
did not encourage foreign investment. The COVID-19
pandemics sparked enormous interest in Chinese
biotech companies, which raised millions in their
funding rounds. LianBio and RecBio secured 310
million US dollars and 224 million US dollars
respectively, to expand access to therapeutics and
develop new vaccines, COVID-19 vaccine included.
The health crisis propelled the fast development of
Indian sectors such as home delivery, marketplace
platforms, and e-commerce, with numerous
companies securing more than 100 million US
dollars in funding rounds. Interestingly, investment
in Asia’s financial sector slowed down in the last
quarter of 2020 in favor of biotech and ed-tech,
23StartupHansa but new digital banks are set to emerge in 2022. Additionally, countries like Malaysia might issue their own digital banking licenses in 2021, since digital banks generated quite a buzz in 2020. With the median size of deals raging from 1 million US dollars for angel/seed projects, 5,7 million US dollars for Early VC, and 14,8 million US dollars for later VC, Asia finished 2020 on a high note, despite early pandemics-related stagnation. 24
“
With the median size of deals
raging from 1 million US dollars
for angel/seed projects, 5,7
million US dollars for Early VC,
and 14,8 million US dollars for
later VC, Asia finished 2020
on a high note, despite early
pandemics-related stagnation.
25StartupHansa
The trends in the
Asia-Pacific Region
1. First-time VC funds hit a new high in Asia
2. Chinese Manbang Group is the top
investment of Q4’20 in Asia-Pacific with
$1.7B raised in funding rounds
3. The deal volume in India has been steadily
growing since the second quarter of 2020
4. Australia recorded an enormous rise in VC
financing in the last quarter of 2020 after an
underwhelming 3rd quarter of 2020
26Investments spring
up like mushrooms
in the Americas
Companies in both Americas raised a total of
41,0 billion US dollars across 2,725 deals and the
entire region was buzzing with VC activity despite
the ongoing pandemics. FinTech continued to be
extremely important as numerous fintech companies
secured enormous funding: Robinhood (668 million
US dollars), Chime (533 million US dollars), Hippo
Insurance (350 million US dollars), Creditas (255
million US dollars), and Wealthsimple (86 million
US dollars). While investors from the USA and
Canada focused on insurtech and wealthtech, Latin
America invested more in payments, and lending,
27StartupHansa fintech services, which enjoy growing popularity in the region. Interestingly, although traditional innovation ecosystems (for example, Silicon Valley) continue to attract investors, there is an increasing diversity in innovation hubs across both Americas. Latin America’s presence on the VC map is stronger every year and with the emergence of new unicorns in Mexico and Brazil, the attention of investors is shifting towards new regions. 28
The trends in
the Americas
1. Used-car sales platform Kavak became
Mexico’s first tech-based unicorn
company
2. VC investments in Canada remained steady in
the last quarter of 2020, and fintech started to
gain more traction
3. Corporate venture capital investments grew
significantly during the pandemics from
$64B in 2019 to $71 B in 2020
4. In 2021, fintech, delivery, logistics, and B2B
services are expected to enjoy a great popularity
amongst investors in the region
29StartupHansa Mexican Kavak and Brazilian for talent outside traditional Credit generated buzz, as hubs, which already suffer they raised respectively 397 from a talent shortage. With billion US dollars and 255 the development of Latin billion US dollars in late 2020. America’s innovation hubs, In Brazil, 2020 was really a many US-based investors may year of fintech, e-commerce consider moving some of their platforms, and delivery, and ventures outside the USA, and the competition between Canada, since globalization e-commerce companies and allows for location-independent banks was stronger than ever, collaboration with talented propelling innovation in the professionals from all around region. With the emergence of the world. new VC hotspots, it is likely that companies will begin to look 30
“
Latin America’s presence on the
VC map is stronger every year
and with the emergence of new
unicorns in Mexico and Brazil,
the attention of investors is
shifting towards new regions.
31StartupHansa
The centres of buzzing
VC activity around the world
Stockholm Amsterdam Gdańsk
Phoenix Hong Kong Tel Aviv
Boston Beijing Paris
32All things considered, political to accelerate their pace of
unrest, global pandemics, and digitalization to cope with
regulatory uncertainties across challenges created by COVID-19.
the globe were not enough to Amidst the global health
discourage VC investments, crisis, investment in health
and global fundraising hit and biotech projects naturally
an impressive $112 billion, skyrocketed across all regions,
which is a great increase from and companies such as UK’s
2019’s $90 billion. Although Resilience, Tempus Labs, and
the volume of deals decreased LumiraDX secured respectively
in many regions, 2020 was $725 million, $450 million, and
the year of mega-funds, with $389 in funding deals. China’s
numerous companies around LianBio ($389 million) and
the world reaching unicorn RecBio ($224 million), alongside
status. The pandemics created German ATAI Life Sciences
opportunities for tech-driven ($125 million), also managed
solutions and corporate VC to raise substantial funding for
investment reached high further development of their
levels since companies had projects.
33StartupHansa
VC trends for 2021
1. Global median deal size hit an all-time
high of $18.4 mln in 2020
2. First-time financings continued to decline
in 2020 with the deal value of $24.9B across
6,580 deals
3. China ended 2020 on a high note, securing numerous
mega deals in the last quarter of 2020 (Manbang
Group, Zuoyebang, Yuanfudao, to name a few)
4. Unicorns continued to thrive with an
enormous number of deals secured in
2020 (up from 2019)
34With a shift in customer behavior, and increasing
willingness to use digital solutions, tech-driven
companies are likely to generate even more buzz
in 2021. With the growing popularity of sectors
such as fintech, delivery and logistics, edtech, and
business productivity, VC investment around the
world is on a good track. Nevertheless, as the size
of deals continues to grow, their volume steadily
decreases. Investors begin to focus on late-stage deals,
turning away from early-stage companies, which
makes it challenging for many innovative companies
around the world to raise enough funds for further
development. Nevertheless, given the favorable VC
climate, booming innovation, and the great amount of
dry powder in investors’ pockets, 2021 shapes up to be
a promising year for VC all around the world.
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venture-capital-and-high-growth-enterprises
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