A surge in venture capital last year is expected to continue into 2022 and beyond, which is great news for startups, small businesses, and the economy as a whole.
Despite the ongoing pandemic, according to the Q4 2021 Pitch Book-NVCA Venture Monitor, U.S. companies alone raised nearly $330 billion last year. For context, that is almost double the record $166.6 billion raised in 2020.
The pace was similarly robust worldwide, and the expansion is expected to continue. The Monitor, which looks out five years, anticipates the global capital market to continue increasing at over 20 percent a year through 2027.
A variety of factors are driving this growth:
- Venture capital provides above-average returns to investors.
- The number of startups has increased during the pandemic.
- The range of investors has increased as well, with mutual funds and banking institutions increasingly involved.
- Venture capital, once focused on tech, is branching out into healthcare, agriculture, media, and other fields.
Consequently, new and developing businesses can look for more assistance from this important sector. The growth in venture capital is especially welcome news for companies that have been in business for fewer than two years and may have limited access to capital markets and traditional bank loans.
Forbes magazine recently highlighted the increase in venture capital as particularly good news for women entrepreneurs. “Though still small in amount — $54.8 billion — there was a whopping 138% rise in venture capital going to private companies with at least one female founder in just one year,” the magazine noted.
Black entrepreneurs are attracting more attention in the venture capital market as well.
All of this money being poured into venture capital is good for founders of all stripes according to author Sebastian Mallaby in his new book, “The Power Law: Venture Capital and the Art of Disruption.” Mallaby describes a fundamental power shift where investors, who once had an upper hand over entrepreneurs are losing influence.
But, as Bill Reichert recently pointed out in Inc., more money in venture capital does not mean that funding is necessarily easy to get. Entrepreneurs still need an understanding of the venture capital process. They must be able to present a compelling value proposition, a solid team, an identifiable market opportunity, sustainable technological advantage, and favorable financial projections.
Venture capitalists are becoming more sophisticated at making their decisions on where to invest, using algorithms and machine learning to identify startups with a higher growth potential.
So, venture capital represents a huge and growing opportunity. But funders need guidance to capitalize on what’s available. Fortunately, Bridgeford professionals have extensive experience drafting, negotiating, and closing financing rounds from angel investors and venture capital funds.
To find out how your firm can benefit as venture capital continues to grow, schedule a consultation today by calling 470.588.0420 or emailing us at firstname.lastname@example.org.