Startup exits, deal values and venture capital raised hit record highs in 2020

Despite the turmoil caused by the COVID-19 pandemic in 2020, the U.S. venture capital industry posted new records for the year, according to the just-released PitchBook-NVCA Venture Monitor fourth-quarter 2020 report.

For the year, the sector hit record highs in total exit value, deal value and capital raised by venture capital funds. Exit value was the second-highest on record. One notable trend was an increasingly concentrated industry with divergent outcomes for established players and newcomers. READ MORE

Silicon Valley’s share of venture capital expected to drop below 20% for the first time this year

The pandemic has upended the U.S. economy and it has also had a far-reaching effect on Silicon Valley, the venture capital industry and the entrepreneurial ecosystem in America.

According to PitchBook’s 2021 US Venture Capital Outlook report that was released late last month, the Bay area’s share of total VC count in the U.S. will fall below 20% for the first time in history, while other cities around the country grab larger amounts of equity capital for their home-grown innovators. READ MORE

Venture capital's record-smashing year

Just weeks into the pandemic, we reported that venture capitalists were still doing deals, even though their offices were closed and their flights were canceled. But we didn't quite foresee the WFH gusto. READ MORE

Funding And Exits Blow Past 2019 Despite Pandemic Headwinds

Startups closed out 2020 in a much stronger position than the one they started the year in, with global venture funding up 4 percent year over year to $300 billion. That growth came as industries disrupted by the global pandemic—work, health care, education, finance, shopping and entertainment—shifted dramatically to online services. That, in turn, created a boom for tech infrastructure and cloud services companies supporting this transfer, leading to a strong IPO and M&A market as companies sought to consolidate and compete. READ MORE

Silver Lining on Tax Treatment of Partnership Interests for Private Equity Managers…At Least for Now

Long-awaited guidance on the tax treatment of partnership (and LLC) interests related to services has been issued in 26 CFR Part 1 [TD 9945] RIN 1545-BO81. For private equity executives assessing compensation arrangements and doing personal wealth planning, there is some good news.

Recall that new Internal Code Section 1061 under the 2017 Tax Cuts and Jobs Act extended the holding period for certain interests to qualify for lower long-term capital gain rate tax treatment from one year to three years, essentially recharacterizing gain for interests held from one to three years as short term gain taxed at ordinary income tax rates (37%), rather than lower long term capital gain tax rates (20%). Proposed regulations issued last summer left many outstanding questions unresolved and provided “unsatisfactory” resolution to others. READ MORE

Private Equity in 2020: Not as Bad as You Thought

U.S. private equity firms raised “healthy” amounts of money from investors after the pandemic began last year, particularly for technology deals, even as most firms also poured cash into struggling portfolio companies, according to PitchBook’s 2020 review of the industry. READ MORE

The December 2020 US Venture Capital Funding Report

Today, I take a look at the state of venture capital and seed funding during the month of December nationally, where over $8.9B was invested into US startups. Analyzing some publicly available data from our friends at CrunchBase, we break down the aggregate statistics for all funding deals by stage of funding (Early Stage [Angel, Pre-Seed, Seed], Series A, Series B, and Late Stage [Series C+]) including mention of notable rounds. READ MORE

Flexible VC: A new model for startups targeting profitability

Of the Inc. 5000 companies, only 6.5% raised money from VCs and 7.7% raised from angels. Where else can fast-growing companies get funding?

More and more startups are pursuing revenue-based VCs, but it’s not a good fit for everyone. A new category of investors has emerged offering a hybrid between VC and revenue-based investment (RBI), which we call “flexible VC.” READ MORE

Investment In Financial Services Using Blockchain Poised For Growth in 2021

Experts say 2021 is poised to see greater adoption and venture capital investment in blockchain technology. That prediction comes as more financial services apps are built using blockchain technology and cryptocurrency has become more widely accepted.

Also working in the industry’s favor is the fact that major financial services companies including PayPal, Visa and JPMorgan have adopted cryptocurrency as a payment method in the past year, as well as more startups coming on the scene—armed with capital—to develop more user-friendly blockchain platforms. READ MORE

Private equity group halts political donations after U.S. capitol siege

A private equity lobbying group that represents some of biggest buyout firms, including Blackstone Group Inc and KKR & Co Inc, said on Monday it has paused all political donations following the storming of the U.S. Capitol last week.

"Our country faces enormous health, economic, and social challenges that take precedent over politics. In this environment, the American Investment Council is pausing all political contributions to candidates from the AIC PAC," a spokeswoman for the Washington-based American Investment Council said in a statement. READ MORE

COVID-19 Ignites Digital Health Investment Activity

2020 was a good year for digital health. Venture funding for the sector shot up 66% over 2019, with a record $14.8 billion raised globally in 637 deals, according to Mercom Capital Group, a global communications and research firm. Telemedicine was the leading investment target, receiving $4.3 billion in venture capital funding during 2020. 

The same phenomenon responsible for creating worldwide havoc is the driving force behind these trends. READ MORE

What Democratic control of the Senate could mean for VC

After winning a pair of runoff elections in Georgia last week, Democrats seized narrow control of the Senate. The outcome shifts the outlook for legislation over the next two years in ways that could deliver wins and losses for the venture capital industry. READ MORE

3 telltale signs your startup has the potential to be disruptive

There isn’t a term or phrase that’s more buzzworthy than “disruptive” in the startup world. Every startup claims that they are disruptive and that their product or service is going to disrupt the industry.

The truth is that most startups aren’t disrupting anything. What does it mean to “disrupt” and how do you know whether or not a startup is truly disruptive? READ MORE

SEC Provides Guidance on Special Purpose Acquisition Company Disclosure Requirements

With the proliferation of special purpose acquisition company (SPAC) vehicles and acquisitions, potential SPAC sponsors should be mindful of the risks that come with investment. Our Securities Group breaks down CF Disclosure Guidance: Topic No. 11 and what it means for IPOs and business combination transactions. READ MORE

E-commerce Startups Need To Flex Their Customer Service Muscles In 2021

Retailers that started 2020 without an online sales presence most likely went into 2021 with one, or at least plans to do so, in order to get a piece of what is likely to become an increasingly larger e-commerce pie.

The e-commerce landscape has been a good space for startups, too. The sector has shown growth for direct-to-consumer brands as well as for providers of tools that help retailers sell more stuff online. Data shows global e-commerce sales are poised to reach record numbers by 2022, with revenue expected to grow to $6.54 trillion. READ MORE

Healthy Social Media Investment Is Happening—But It’s A Two-Way Street

The way consumers devour digital media today vaguely resembles a pit stop at a 7-11. Given a choice of Cheetos, cookies and soda, we gorge on all of it—then feel slightly ill.

In the same manner, many of us spend hours following clickbait links, binge-watching shows, and scrolling through endless threads of posts, tweets and stuff to buy. We later emerge regretful for wasting time that could’ve been spent on more productive pursuits. READ MORE

Venture capital hits record high in U.S. in 2020 despite pandemic

Venture capital backed companies in the United States raised nearly $130 billion last year, setting a record despite the COVID-19 pandemic, figures from data firm CB Insight released on Friday show. READ MORE

VCs dispense with niceties during Capitol riots: “Never talk to me again”

It was hard not to feel emotional today, as the world watched for more than four hours as rioters stormed into and throughout the Capitol building in Washington to disrupt the certification of the election win of incoming U.S. President-Elect Joe Biden. They’d been encouraged earlier in the afternoon by outgoing President Donald Trump to head to the building and protest what he falsely claimed yet again was a stolen election, a lie he began to spread the evening of the U.S. election in November. READ MORE

Revenue-based financing: The next step for private equity and early-stage investment

Revenue-based investing (RBI), also known as revenue-based financing, or revenue-share investing,1 is a natural next step for the private equity and early-stage venture investment industry. However, due to RBI being a relatively new model, publicly available data is limited.

To address this foundational gap in market information, we have developed a proprietary data set of 32 RBI investment firms, 57 distinct funds and 134 companies that have secured revenue-based investing. READ MORE

Why VC funding is falling out of favor with top D2C brands

In 2020, venture capitalists unceremoniously broke up with D2C brands and product-based businesses.

Many watched as the consumer brands in their portfolios rushed to make hefty layoffs and eke out more runway and grew more concerned with their business models. READ MORE