UPDATED 00:01 EDT / JANUARY 14 2021

EMERGING TECH

Startup exits, deal values and venture capital raised hit record highs in 2020

Despite the turmoil caused by the COVID-19 pandemic in 2020, the U.S. venture capital industry posted new records for the year, according to the just-released PitchBook-NVCA Venture Monitor fourth-quarter 2020 report.

For the year, the sector hit record highs in total exit value, deal value and capital raised by venture capital funds. Exit value was the second-highest on record. One notable trend was an increasingly concentrated industry with divergent outcomes for established players and newcomers.

In the fourth quarter, exit value hit $138.2 billion, bringing the annual total to $290.1 billion, surpassing 2019. Exits were propelled by initial public offerings in the second part of the year, while the number of exits remained flat at 1,101.

Exits were not driven by IPOs alone. Mergers and acquisitions along with buyout activity also showed resilience. One particular standout among the exits was the rise of special-purpose acquisition vehicles. The number of public SPAC listings rose to 250 in 2020, accounting for exits totaling $75.1 billion.

Investment activity in the fourth quarter came in at $38.8 billion, bringing the total for 2020 to $156.2 billion, up from $138.1 billion in 2019 and the first time funding has surpassed $150 billion.

Although the headline figures were strong, not all segments fared the same. Early-stage angel and seed venture capital were hit hard by the COVID-19 pandemic earlier in 2020 but recovered in the fourth quarter, with deals coming in at the highest level since the second quarter of 2015. Some $41.8 billion was invested overall in early-stage startups in 2020, surpassing $40 billion for the third straight year.

Late-stage venture capital hit investment topped $100 billion for the first time. Late-stage investment represented two-thirds of total U.S. venture capital value in 2020, the highest level since 2007. Megadeals, those of $100 million or more, came in at at 321 in 2020 for a total of $70.9 billion, a new high.

Venture capital funds themselves had a stellar year as well, raising $73.6 billion in 2020 across 321 firms, passing the previous record of $68.1 billion in 2018.

“The unprecedented macro events of 2020 did not deter the overall VC industry, which reached another banner year across the venture cycle,” Bobby Franklin, president and chief executive officer of NVCA, said in a statement. “The startup ecosystem played a critical role in the technology, services and healthcare support the country has relied on over the past 10 months, and the industry’s resilience and long-term investment eye will be pivotal to the country’s economic recovery in 2021 and beyond. While some segments of the ecosystem felt the brunt of the headwinds from the pandemic and economic uncertainty more than others, VC investors are starting the year in a strong position with ample dry powder to put to work.”

Photo: Coolceaser/Wikimedia Commons

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