In January 2021 Endeavor Catalyst predicted that companies with valuations over $1 billion (unicorns) would grow significantly. Specifically companies in emerging markets from Fintech, Edtech, and Healthtech sectors. However, the speed of their growth surpassed Endeavor Catalysts’ expectations.
Allen Taylor of Endeavor Catalysts believes there are three drivers for the current VC market:
1. Investors believe emerging market leaders will be massively successful
Traditionally, venture capitalists outside the US and China believed that there was no real role for late-stage global investors because the return on investment was simply not large enough. Now late stage investors like Alkeon Global, Coatue, Tiger Global, Dragoneer, and Altimeter are willing to invest in global firms like UiPath with a $35 billion valuation.
Why the shift? Due to the pandemic, companies like Australia’s Atlassian and Sweden’s Spotify are now valued at over $50 billion. With so many companies outside of the US and China reaching these unprecedented evaluations, it allows investors to realize the value of technology leaders in emerging markets. Guillaume Pousaz of Endeavor UAE’s board and CEO of Checkout.com, achieved a valuation of $15 Billion. Endeavor has been focused on helping top talent in emerging markets around the world for over two decades and it appears that investors are finally realizing the potential of this talent.
2. A surge in late-stage private rounds led by traditionally public investors
According to data from Crunchbase News, global venture dollar volume from Q1 2020 nearly doubled in Q1 2021. Q1 2020 reported $64.3 billion invested across angel-seed, early stage, and late stage investments while Q1 2021 reported $125.2 billion across the three categories.
This 94% increase is led by multiple factors. The influx can be attributed to the overall macroeconomic environment, robust public market, the boom of Special Purpose Acquisition Companies (“SPACs”), and Private Investment in Public Equities (“PIPEs”). Founders of private firms believe this influx of financing from traditionally public investors can help their companies transition if they decide to go public.
3. The End of Geography, “The Temporary Suspension”
Taylor notes that in his last 15 years of working alongside top founders in emerging markets, there has never been growth and funding at this level. Looking at funding rounds for unicorn companies from April 2016 to April 2020, there were a total of 29 rounds with an average of 6 rounds per year and 26 of them being held in either the US or China. In the first 7 days of April 2021, 15 rounds of funding for unicorn companies have already been announced and 11 rounds are outside the US and China.
“We simply can’t know if the trends captured here will still be with us in six months, or six years. But what we believe is here to stay is investors believing in and backing great entrepreneurs in emerging and traditionally underserved markets. We look forward to helping more founders in more places dream and win big in 2021 and beyond..the world is ready!” Taylor concludes.
The conclusions drawn for this post are derived from Endeavor Catalyst’s Managing Director Allen Taylor’s article “Venture Capital in 2021: Bigger, faster and more global”. Read the original article here.
