PitchBook News - VC valuations data is bonkers

The rapid pace of US venture capital activity in 2021 has translated to similar rampant growth in the valuations at which deals are being priced.

Median valuations have increased across all stages, with particularly notable jumps for the largest and most mature startups in our dataset.

Illustrating this trend is the growth of the median and average late-stage valuations as of H1 2021 to $130 million and $914 million, respectively, opening the door for an average late-stage valuation over $1 billion by the end of this year.

 

Our US VC Valuations Report has many charts with this trend.

Both of these represent an increase of over 85% relative to 2020's values—which were the previous high-water marks.

(And maybe it's about time we reconsider the term "unicorn" if $1 billion becomes the average.)

Whenever we analyze valuations, capital availability is always one of the first factors we consider.

In recent years, the story with capital availability, especially at the late stage, has been a focus on nontraditional investors.

These participants are essential to the market for VC deals over $100 million, providing the crossover capital for startups prior to exiting.

For nontraditional investors that hold public securities as a core strategy, these crossover rounds can be the start of a long-term relationship, which, along with deep pockets, allows these investors to be less intent on near-term price movements.

This diversity of investment goals from the nontraditional cohort is also another driver in elevated prices of nontraditional venture deals.

And while constantly increasing valuations bring their own worries around risk or an eventual correction, the liquidity release valve of the exit markets is still alive and well.

The valuation step-ups at exit for acquisitions and IPOs were 2.2x and 1.7x, respectively, through H1 2021, both near the highs we've ever recorded.

Until we see a change in behavior from corporate buyers and public market investors with their current risk-seeking via the VC ecosystem, we expect robust exit activity to persist: