The global startup funding appeared to have slowed last year amid the coronavirus pandemic, however, activity in the sector has shown strong signs of recovery. The recovery has witnessed funding hit historic levels.
According to data acquired by Finbold, the global startup funding spiked 157% between 2020 Q2 and 2021 Q2 from $60.7 billion to a record $156.2 billion. The funding surpassed the $100 billion mark for the first time in Q4 2020 at $100.4 billion.
During the first half of 2021, the funding stood at $292.4 billion. Over the last five years, the lowest VC funding for startups was recorded in 2016 Q2 at $37 billion. The data on global startup funding is provided by CB Insights State of Venture Q2’21 report.
Startup funding reverses the effects of the pandemic
The significant funding of the global startup indicates that the sector has put aside the impact of the coronavirus pandemic. Due to the economic turmoil, most venture capitalists slowed down funding while monitoring the situation; however, the funding has recovered, raising significant amounts.
Although the pandemic initially dampened the funding activity, businesses quickly adapted to changing consumer behavior, sparking a massive comeback in funding with robust activity in sectors like healthcare and technology.
The amount going to startups also indicates that companies with the right business ideas can easily access funding. However, these businesses need to strategize on how to beat the competition. Notably, most companies have been able to build strong omnichannel businesses as a means of staying ahead and attracting funding.
Furthermore, venture capital firms focused on supporting their portfolio companies through the pandemic, especially the later stages. This was a perfect option rather than seeking new investment opportunities. However, based on recent quarter performance, the trend appears to have reversed, and venture funding is going on a record high.
In general, many entrepreneurs are focused on the opportunities to develop technologies and build companies that address the needs of a reopening economy. Therefore most VCs have shown intentions to fund such projects.
Startup record high valuation
With large investment rounds, the benefiting companies have also recorded massive valuations. Our previous research showed that the number of new global unicorns had spiked 491% between Q2 2020 and Q2 2021 from 23 to a staggering 136. During the first quarter of 2021, the figure stood at 113, representing a growth of 140.4% from 2020 Q4’s 47 unicorns.
As the startup sector moves into the third quarter, the future looks bright. The recent funding points to a scenario where a large pool of capital is waiting to be invested, especially with the pandemic continuing to subside globally following the rollout of the vaccine. There is an exciting opportunity for companies that rose to prominence amid the pandemic.
At the same time, companies in the cryptocurrency sector are also likely to witness an influx of investors. With continued validation of the sector, venture capital firms like Andreessen Horowitz have raised the highest amount at $2.2 billion, specifically targeting the digital currency sector.