VC investment globally surged in Q2’2021, as all regions of the world attracted very strong levels of investment. In addition to regional record highs in Europe and the Americas, a number of countries saw their highest quarters of VC investment ever, including the United States, Australia, the Netherlands, Switzerland, Israel, India, France, Germany, the United Kingdom, Brazil, Mexico and Canada. The VC market remains very active, buoyed by a significant amount of available cash, high valuations, and no slowdown in IPO activity.

Americas, Europe and Asia all attract mega funding rounds in Q2’21

A growing number of jurisdictions across regions attracted mega VC funding rounds in Q2’21, including the US (Waymo — $2.5 billion, SpaceX — $1.2 billion, Epic Games — $1 billion), Indonesia (J&T Express — $2 billion), India (BYJU — $1.5 billion), China (Horizon Robotics — $1.5 billion), Germany (Celonis — $1 billion), Brazil (Nubank — $1.5 billion) and the Netherlands (MessengerBird — $1 billion).

Institutional and PE investors, meanwhile, powered Sweden-based Northvolt AB’s $2.75 billion funding round. In addition to showcasing growing geographic diversity, these deals highlight the breadth of sectors attracting funding in today’s market, including alternative energy, fintech, B2B services, education, gaming, logistics, and aerospace.

Unicorn births exceed 2020 total at mid-year

Q2’21 saw a surge in companies globally achieve unicorn status, bringing the total number of unicorns in 2021 well above the previous annual high of 179 seen in 2018. While the US accounted for the majority of new unicorns in Q2’21, the others covered quite a geographic spread, from Bitso in Mexico to SafetyCulture in Australia, Paidy in Japan, and GoStudent in Austria.

The large number of unicorns likely reflects the ongoing trend of VC investors focusing on their existing clients, using their investments to allow them to bring on people, fuel their sales and their valuations. Given how cheque sizes have grown over the past two years, there is some question as to what will happen to growing unicorns: will they go for an IPO or is there enough appetite for unicorns to grow beyond a unicorn valuation? This is because there is a cap as to the level of valuation a company can get to before the exit option is limited to a form of IPO.

Corporates continue to prioritise VC investments

Corporate VC investment was strong in all regions of the world during Q2’21. The pandemic has really expedited the need for digital transformation, for innovation, and for doing business better in general. Many established companies globally have come to the realisation that they don’t need to innovate from scratch, and that a better approach might be to partner with or invest in startups that can help them accelerate their transformation in ways that better align with the new normal.

Optimism as the world opens up

While the pandemic isn’t over yet, there a growing sense of optimism as COVID-19 vaccine distribution accelerates globally and investors focus on the sectors expected to remain attractive in the post-pandemic world. Even as parts of the world have opened up more broadly, VC investor have continued to flow money into sectors accelerated by the pandemic, such as fintech, delivery, and B2B services, betting that none of the major change in terms of customer behaviours will revert to historical norms. VC investors expect businesses and consumers will continue to embrace innovative business models even after the pandemic, given their better understanding of the benefits in terms of speed, responsiveness, and agility.

Trends to watch for globally

VC investment will likely remain robust in most regions of the world in Q3’21, given the wealth of dry powder in the market, the growing participation of non-traditional VC investors, and the positive IPO activity. Sectors such as fintech, business productivity, and health and biotech will likely continue to attract significant investment. Cybersecurity will likely also be a hot ticket for investors, given the increasing number of transactions occurring in the cloud.

ESG (environmental social, and governance) is also expected to grow on the radar of investors, given the increasing importance being placed on sustainability across the business world. Already, there is increasing investment in businesses with ESG-aligned business models, such as electric vehicles and food tech. Moving forward, it is likely investments in these areas will continue to grow, while investors may also increase their scrutiny of ESG factors when making funding decisions.

Global venture financing

Globally, there is plenty of cash available for VC investments—and even more coming in from private equity, family offices, and other players outside of traditional VC funds looking for opportunities in the VC market. Almost everywhere in the world, VC investment is incredibly strong and I don’t see the market globally going cold. The amount of money being generated out there is massive and the willingness to invest in tech is just going up.

Jonathan Lavender
Global Head
KPMG Private Enterprise

  • VC investment hits new record high — reaching $157.1 billion.

  • Global median deal size for D+ jumps to $105 million in 2021.

  • Corporates on pace for biggest year ever.

  • Unicorn rounds spike for second consecutive quarter.

  • First half fundraising approaches 2020 annual totals.

  • Top 10 deals globally spread across 8 different countries.

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