Feb 18, 2022
Startup Investments: The US continues to lead, Asia follows
Globally, 510 new unicorns emerged in the Calendar Year (CY) 2021, which was about 30% more than all five previous years combined. Almost 55% of all new unicorns are based in the United States. In the startup ecosystem and investments, the US maintained its leadership position. However, in 2021 some interesting trends emerged. They indicated that large business corporations worldwide are extensively collaborating with startups to explore new business avenues and accelerate innovation within their respective organizations. For various reasons, investments for startups, the US and Silicon Valley remain in the limelight. But, now the number of startups in Asia has been increasing significantly, and the ecosystem is also dynamically evolving to support these startups and investments for startups.
Higher Investments for Startups
In 2021 (CY), startup investors put USD 329.5 billion investments across all stages, per Crunchbase data. That's a 92 percent increase above 2020 levels, which is a new high. In 2021, overall venture capital investment nearly doubled year over year, ending a decade of generally consistent increases in funding at all levels. In 2021, every investment step went increasing, from seed through technology growth. As firms in a wide range of industries passed the $1 billion valuation barrier, supergiant rounds multiplied, and more new unicorns were produced than ever before. Startup investors, angel investors, and venture capital (VC) firms put $108.5 billion into early-stage (Series A and B) deals. That's more than double the $53.8 billion invested in 2020. The fourth quarter finished on a high note, with $33.2 billion invested in early-stage rounds, the year's largest quarterly total.
The dominance of the US
In the US Commonwealth Fusion, a Cambridge, Massachusetts-based startup working on building the first commercial fusion power plant, raised $1.8 billion in a Series B round. It is not only Fintech or Edutech startups that took the lead in 2021. Aero space, blockchain, gaming among others were also in the limelight. Colorado-based developer of space transportation systems Sierra Space raised $1.4 billion in a Series A financing in 2021. The startup aims to enable space habitats. Similarly, San Francisco-based Forte, a provider of tools for game publishers, raised $725 million in Series B funding. The company integrates blockchain technology to its solutions. Miami-based company MoonPay- developer of payments infrastructure for crypto also raised $555 million in a Series A funding round. With this its valuation has gone up to $3.4 billion. In total, $12.8 billion was invested in seed-stage deals in 2021. This represents a 35 per cent increase over the $9.5 billion invested in seed in 2020.
The startup ecosystem in the US has a surprise element too. Out of 1,078 founders across the 500 US unicorns, 90 entrepreneurs were born in India, according to a recent study by Strebulaev, a professor of finance at Stanford University's Graduate School of Business. With $50.9 billion in venture capital invested in Asia in the fourth quarter of 2021, it reached a new highwater mark for a quarter, thanks to a solid fourth-quarter push in China. In the fourth quarter, investments in late-stage or technology expansion rounds totaled $33.6 billion.
The Surge: Startup Funding in Asia
In Asia, China, India, Singapore, and Indonesia emerged as leaders in startup investments. In the previous several years, the number of Asian companies that have successfully obtained capital has tripled, and the amount of money invested has increased multiple times. As a global financial center, Singapore has developed a robust startup ecosystem. And Indonesia, as the fourth-largest economy in the world, also witnessed huge investments in startups. In 2021, both countries produced a significant number of unicorns. Ninja Van, Carousell, Carro, and Nium were among the firms that achieved unicorn status in Singapore. There are now 81 unicorns in India, with a combined value of $274 billion. According to data from Invest India, the national investment promotion agency, 44 unicorns with a total valuation of $89 billion were born last year. The year 2021 was a blockbuster for Indian entrepreneurs, with around $35 billion raised across 1,000 rounds. According to the PwC report, startup funding surpassed $10 billion in the fourth quarter.
2022: Favourable Sentiments
Early-stage or seed funding for startups witnessed robust growth, and it is predicted that in 2022 venture capital firms would take it forward in a conducive ecosystem being created over the years and momentum it got in 2021. As per the industry estimates, over 50 startups in India have shown the potential to enter the unicorn club in 2022. If this happens, the total tally of Indian Unicorns may go beyond 100 startup unicorns. It is widely admitted that the base of the companies in growth-stage and late-stage deals will have improved significantly in 2021. It signals a more substantial base of companies having the potential to reach unicorn status. With market sentiments favorably inclined towards startups, and the large base of scaled startup companies at the end of CY21, 2022 is all set to see even higher startup investment and an increasing number of unicorns in the US and Asia.