Venture Capital Activity Skyrockets in the First Half of 2021

Earlier this year, I wrote about venture capital’s (VC’s) rebound in Q4 after the initial slowdown at the beginning of 2020. Total VC deals globally reached just under $90 billion in Q4, indicating that the consistent uptick in private markets investments over the last few years was back on track. In this post, we’ll look at the first two quarters of VC investments in 2021, which have now reached over $280 billion raised—surpassing the record high total in 2020 ($275 billion) in half the time.

Global Venture Capital (VC) in 2021

The total amount raised from venture capital investments grew 149.9% in the first two quarters of 2021 compared to the same period last year. All regions have seen significant surges, but Europe has seen astonishing growth. European-based portfolio companies picked up their Q2 activity by 78.4% compared to Q1 and activity is up 229.6% from the same quarter in the previous year.

Rapid Growth in Europe

In the first six months of 2021, portfolio companies based in Europe raised nearly $50 billion; this surpasses the $38 billion raised in all of 2020. Of the $50 billion raised, 71.4% was split across five countries: UK, Italy, Germany, France, and Sweden. While these major markets are not new players in VC, smaller emerging markets like Romania, Croatia, and Greece have also benefitted from this capital investment growth. Europe is increasingly attracting investor capital as several technology firms continue to emerge in the region.

Two of the largest investments in Europe this year were for Swedish-based firms. Klarna—a “buy now pay later” firm and the most valuable private Fintech in Europe—raised $1.64 billion in the last six months, valuing the firm at $45.6 billion. The other, NorthVolt, a lithium-ion battery maker, raised $2.75 billion in equity, reportedly valuing it at $11.75 billion.

Technology has continued to be the dominant sector receiving VC funding in 2021. Seven sectors have already outperformed their 2020 VC totals in the first six months of 2021. They are Commercial Services, Consumer Durables, Consumer Non-Durables, Industrial Services, Producer Manufacturing, Retail Trade, Technology Services, Transportation, and Utilities.

Investors Behind the Dollars

Looking at the leading investors into these increasingly large investment rounds, Tiger Global leads with participation in 143 investment rounds, totaling $26 billion in VC investment activity.

Top Global Investors by Number of Investment Rounds

Source: FactSet

Looking at investors contributing to the rising VC levels in Europe, four out of the top five investors are based in the United States, with Goldman Sachs Capital Partners, Accel Partners, and Tiger Global in the top three and participating in $11.6 billion worth of VC rounds collectively.

Top Investors in Europe by Investment Round Participation

Source: FactSet

Turning to limited partner (LP) commitments in 2021, LPs have been committing significant capital investments into funds that have disclosed Europe as a geographical target. Many large U.S.-based pension fund managers have made multi-million-dollar investments in the last six months, ranging from buyout funds to real estate and infrastructure funds.

Limited Partner Commitments

Source: FactSet

Pension funds and foundations/endowments have begun to make direct investments into portfolio companies themselves. In 2021, pension funds and foundations/endowments have already participated in 35 venture capital rounds (compared to 58 in 2020), totaling $4.76 billion in investment round value. This indicates a significant uptick in direct investment participation from firms who typically invest as LPs.

Northvolt’s $2.75 billion equity funding round accounts for nearly half of the Q2 investment amount total. Northvolt’s investors on the round included three Swedish pension fund managers and Compagnia di San Paolo, an Italian-based foundation promoting sustainable development goals. With environmental, social, and governance (ESG) investing coming into the forefront of some investors’ minds, many have taken the opportunity to support company’s aligning with their missions directly.

Investments by Pension Funds and Foundations/Endowments

Source: FactSet

Disclaimer: The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.