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Non-traditional investors– non-VC funds–drove a sharp increase in venture capital mega-deals in the first quarter of 2021, according to new research from private equity research firm Pitchbook and the National Venture Capital Association, an industry group representing the venture capital investment ecosystem, along with commercial startup financiers Silicon Valley Bank and Secfi. The report found that mega-deals–funding rounds of $100 million or more–which were rarities just a few years ago, have now become commonplace. Mega-deal value in Q1 of 2021 has already matched half the monetary level of mega-deals in all of 2020.

Per Pitchbook and NVCA’s latest Venture Monitor report, VC-backed companies drew $69 billion in Q1, up 92.6 percent from the previous year. Late-stage investments comprised the highest proportion of deals than at any time since 2010, with more than three-quarters of dollar investments allocated to the late stage. Angel and seed rounds and early-stage investments remained strong however, with over 70 percent of early-stage deal value coming from rounds of $25 million or more, according to the groups’ research.

Mega-deals closed at a very rapid pace in the first quarter, with 167 completed deals spanning $41.7 billion in investment. The quarter also included a few billion-dollar deals, including a $3.4 billion fundraise by Robinhood and $2.7 billion Series F raised by electric automaker Rivian Automotive.

As for non-traditional investment activity, Q1 is projected to be the most active quarter on record following record participation in venture in 2020 for both deal count and deal value. The activity of these investors has helped drive the trend of companies staying private longer to raise more capital and fuel growth.

“The US venture industry started off 2021 with a record quarter, possibly heralding a strong year for startups across the country. As the nation recovers from the COVID-19 pandemic, high-growth startups are well-positioned to help the economy recover and grow,” said Bobby Franklin, President and CEO of NVCA, which co-authored the report.

“A key opportunity for US VC and startups will be if the new Biden Administration and Congress enact key policies crucial to the startup ecosystem as they pursue the president’s Build Back Better agenda. Investments into infrastructure, climate, and research and development have the potential to help spur new company formation, if implemented correctly. NVCA will continue to work hard to engage Capitol Hill on key areas of upcoming policy proposals that could benefit the venture industry.”

Identifying the “non-traditional investor” 

Pitchbook defines the “non-traditional” segment as comprising any investor not from a traditional VC fund, including VC arms of corporations, sovereign wealth funds, limited partners (LPs), investment banks, and others. Their research attributes the shift in new participants to the ever-longer venture lifecycle, allowing well-capitalized non-traditional investors to access opportunities out of reach to most traditional funds, due to fund-size constraints. Additionally, Pitchbook and NVCA found, the average valuation for an IPO has grown from $500 million in 2015 to more than $3 billion in 2021 (to date), meaning that non-traditional investors who wait for the IPO could miss out on billions in valuation growth.

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