2021 Smashes VC Records as Late-Stage Deals Reshape the Market

January 12, 2022

Combination line/column chart showing venture capital deals in 2021. Chart subtitle: Investor demand for U.S. venture capital continues to be robust, as recent years have generated significant, market-leading returns and record-breaking fundraising and deployment. Chart description: Left Y-axis shows U.S. VC Deal Value in billions of dollars, ranging from $0 to $350B. Right Y-axis shows U.S. VC Deal Count ranging from 0 to 12,000. X-axis shows years from 2010 to 2021, with two additional categories at far-right for 2021 Early-VC and 2021 Late-VC. Deal value shown in dark teal columns, with 2021 Early-VC in light blue and 2021 Late-VC in light purple. Two lines range across 2010-2021 columns: Early VC Deal Count in light blue and Late VC Deal Count in light purple. 2021 was a record year for VC, nearly doubling in value ($329.8B) and 10,796 early-stage deals and 4,704 late-stage deals. Chart source: PitchBook-NVCA Venture Monitor. End chart description.

U.S. venture capital deployment in 2021 smashed the previous record set in 2020, as $329.8 billion of funds were infused (+98% from 2020) into over 15,500 deals (+27% from 2020). While this tremendous volume of investment was deployed across the market, late-stage deals in particular raised over $100 million in capital in the last year. In fact, within the U.S. venture capital market, the substantial amount of late-stage venture deployment alone eclipsed the previous overall deployment record by 15%, as $190.8 billion of investments were deployed across 4,704 late-stage deals during 2021.

The growth trajectory of the late-stage venture capital market has been steadily climbing over the past decade as part of a broader evolution of the space, as private market companies have become larger and more durable due to capital availability, increased transparency, and minimal reporting requirements. That being said, the market may have now reached a size at which investors could begin to view early-stage venture capital and late-stage growth equity as distinct asset classes given the different investment considerations associated with each (e.g., duration, risk, returns, etc.) and separate the two within portfolios. Indeed, as late-stage deals become larger in size they become increasingly different investments, as many growth companies that have previously been supported by early-stage venture investors evolve into more established businesses with substantial revenues, proven product-market fits, much shorter duration (five years or fewer), lower loss potential, and valuations that are more aligned with public market peers.

As the venture capital market continues to expand due to new participants and existing investors increasing their allocations to the space, it is worth considering allocation mixes within portfolios with an eye toward having specific and dedicated early- and late-stage venture capital deployment targets.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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