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Why startup funding is increasing
Analysts researched the technology market and found that the amount of funding for startups last year was at the same level as it had been since 1999. According to them, 2020 was a “black swan” year for business projects, and the pace of investment began to increase. This trend has continued, and now investment in tech companies is rising like never before. According to data from CB Insights, startups around the world received more than $292 billion in funding last year. A record-breaking year for the market was 2020, when the amount invested exceeded $303 billion.
In early 2021, the number of large deals worth more than $100 million rose to the 751 mark. By comparison, there were 665 mega-rounds in 2020. Experts note that a similar optimistic atmosphere was observed in 1999. That period was marked by a large number of proposals, and a lot of dot-com companies were registered. The latter enjoyed great popularity in view of the emergence of the Internet. In the period from 1995 to 2000, the index of the Nasdaq Composite stock exchange increased by 400% also due to speculative investments. Already in October 2002, it fell by 80%, and during the last five years the index has demonstrated the growth by 3 times. An important role in this was played by the market value of major market players, including Facebook, Amazon and Google. Together they are valued at about $1 trillion. As for Microsoft and Apple, together they are worth more than $2 trillion.
However, such dynamics of increasing the value of startups causes concern among a number of experts. For example, not so long ago, the technology company Stripe was valued at $95 billion. It deals with applications for processing and accepting electronic payments. These large sums encourage business owners to keep the startup as privately owned as long as possible. In just the first 6 months of 2021, 249 companies reached unicorn status, meaning they were valued at more than $1 billion. Those numbers are nearly double the number of unicorns in all of 2020.
Not only is the number of startups growing, but also their quality and growth rate. Therefore, now is an ideal time for venture rounds. Competition among investors has also increased, they are afraid of missing out on an interesting project and are raising the stakes. A striking example is SoftBank, which invests serious amounts in new projects through its Vision Fund. This leads to an increase in the market value of startups, which does not always correspond to reality.