Feb 18, 2022
Startup Funding in the USA: The Toppers
The year 2022, notwithstanding the market vitality, witnessed significant deals and seed funding for startups in the United States of America (USA) which dominates the global startup ecosystem with a large number of startups and unicorns. In Quarter 3 of 2022, venture capitalists in the USA raised $37 billion and overall they were able to $151 billion year to date, marking a record-setting year. The second-highest investment year on record is already 2022. San Francisco, New York, Boston, and Los Angeles continue to be the top four regions, accounting for 63% of investment in Q3. Miami experienced an increase in activity, placing ninth in terms of deals and sixth in terms of investment. Financial Services, Energy, E-Commerce, Life Sciences & Healthcare and Information Technologies including Software & Artificial Intelligence were among the top-funded sectors. According to a forecast by EY, total investment was anticipated to surpass $200 billion in 2022 for the second consecutive year and the fifth year in a row of more than $100 billion in VC investments. Energy and health care were the two sectors with the most mega-round financing in Q3. This is the first time in nearly a decade that energy cracked the top three sectors in mega-rounds. Not only pre-seed investors but angel investors were driving the investment activities and deals.
Given the concerns of the environment, climate change, and sustainability, venture capital companies in the USA have shown their interest in the energy sector
Interest in the energy sector has triggered seed funding in this segment. Many startups have raised significant investments in two rounds so far. According to Crunchbase Data, TerraPower, Longroad, Flow, Lunar Energy, and SeatGeek were the top five funded startups in the USA. TerraPower, a nuclear innovation company secured an equity raise that yields a “minimum of $750 million.” The round also is one of the largest advanced nuclear fundraises to date. Boston-based Longroad Energy, focused on wind, solar and storage project development, locked up $500 million in August 2022 from MEAG, a Munich Re company. Flow also raised $350 from a new venture capitalist in the USA. In the last two years, the California-based Lunar Energy closed two rounds of financing totalling $300 million. At a $1 billion pre-money valuation, SeatGeek raised $238 million as part of a Series E round. Longtime investor Accel served as the round's principal. SeatGeek has already raised around $400 million, according to Crunchbase data.
Financial services: The Fast-Moving Segment
The most money was invested in startups in the financial services sector, where at least $131 billion was invested globally
The fintech industry is budding each year, and financial solution providers have been filling the gaps in the marketplace. The fintech startups innovatively fulfil customers’ demands and are shaping the forthcoming finance domains. Globally, nearly $131 billion has gone to startups in the financial service domain. Leading fintech startups in the USA operate across diverse domains including Banking, Investment & Wealth Management, Digital Payments, Financing, Blockchain, and Mortgage Lending. Venture Capitalist Companies in the USA including Kleiner Perkins and Index Ventures showed their interest in Fast which is a fast-moving fintech. They invested $124.5 million in the startup. Digit, another San Francisco-based Fintech helps users better understand and manage their money. In Series C, it raised $ 66.3 million and investors include General Catalyst and GV.
Healthcare and Digital Health: The Promising Sector
Health tech had a good run in 2021 as venture capital funding flooded into the market and though subdued in 2022, the future looks bright with this most promising sector as 23 healthcare-focused startups became unicorns
According to Rock Health, a venture fund specialising in digital health, companies raised an astounding $29.1 billion across 729 deals in 2021, driving up financing for the sector to a fever pitch. With 458 deals totalling $12.6 billion in funding as of the third quarter, it seems unlikely that this year's digital health pot will even come close to matching last year's total. According to CB Insights, 23 healthcare-focused startups became Unicorns in 2022. Prominent among them are Incredible Health, IntelyCare, Clipboard Health and Nomad Health.
Headspace, Parsley Health, Biofourmis, Incredible health, and IntelyCare are leading healthcare-focused startups. Raising $97.3 million, Incredible Health built a digital nurse hiring platform that uses proprietary custom matching algorithms to match the best candidates to open roles at health systems and hospitals. In August, Incredible Health, a Unicorn, scored $80 million in fresh funding to help it scale and expand to more states. Its investors in Series B funding included Base10 Partner, Andreessen Horowitz, Kaiser Permanente and NBA champion Andre Iguodala. California-based Headspace, a digital health platform, has raised $215 million and investors include SV Angel, Allen and Company. New York-based Parsly Health is an innovative take on modern healthcare and primary care. It raised $36 million from Sand Hill Angels and FJ Labs. Redesign Health is yet another promising startup.
IT & E-Commerce: The Distinguished Disruptors
Technologies dominate the startup ecosystem in the USA and Information Technologies and E-Commerce are two sectors which have got a lot of traction from the investors
Information Technology with all its dimensions including Artificial Intelligence (AI) and Blockchain among others has become a distinguished disruptor. Several startups attracted funding from angel investors and venture capital investors. In the AI domain, SoundHound raised $326 million from them. Based in Silicon Valley SoundHound help developers and business owners in keeping control over their brand image from any location utilising voice-enabled AI. The firm has a number of solutions available, including Houndify, an AI platform with the quickest speech recognition and voice search in the world. San Francisco-based People.ai received $100 million in funding from Andreessen Horowitz, Lightspeed Ventures, and Y Combinator in a Series C round. Through the study of income prospects, People.ai uses the power of AI technology to build an enterprise revenue platform that assists sales, marketing, and customer service teams in offering the greatest customer experience. In the Software domain, Motive, San Francisco-based startup raised $567 million from Kleiner Perkins and Index Ventures. The startup has been transforming the way logistics operates. Florida-based Premier Virtual has raised undisclosed funds from SHRMLabs.
E-Commerce is yet another eye-catcher in terms of startup funding. Santa Monica, California-based Verishop raised $30 million in a Series C round from Lightspeed Venture Partners and Alumni Ventures Verishop is an online marketplace.
The Way Forward
The startups that offer innovative and real utility benefits gather the most interest from angel investors in the USA. Similarly, venture capital companies also prefer startups that develop products and services for necessities like energy, healthcare, and other tech-enabled solutions. The startup investment ecosystem has also been witnessing tremendous interest in climate-related technology, such as electronic vehicle charging and other green energy products. Seed funding for startups in green products and services has significantly increased over the years. Going forward, venture capitalists in the USA would be more willing to focus on Clean Tech 2.0 as companies address climate change and develop differentiated energy sources. Overall, the market is expected to maintain its momentum and investors will continue to direct funding to companies with strong business models and compelling value propositions.