Global Startup Funding Reaches $158B in Q3 - Record High

Venture Capital Investment Remains High in Q3

Global venture capital firms maintained a robust investment pace in the third quarter, following a particularly strong second quarter. Significant capital was deployed into startups worldwide.

Continued Growth Since 2020

Beginning in the latter half of 2020, the venture capital and startup ecosystems recognized the resilience of the technology market amidst the COVID-19 pandemic and its economic consequences. This realization spurred increased investment in new companies globally.

The accelerated rate of capital allocation has resulted in a greater number of unicorn companies, larger funding rounds, and an unprecedented level of available capital within the startup landscape.

Analyzing the Data

The sheer volume of venture capital data can be challenging to interpret. TechCrunch will be conducting a detailed analysis of the global Q3 venture capital market in the coming weeks.

This analysis will be segmented by industry (including fintech and edtech), geographic region, and investment stage, providing a comprehensive overview.

Initial Findings and Team Coverage

Currently, a broad overview of the data is being presented, utilizing a recent report from CB Insights. The analysis will be divided among several TechCrunch contributors.

• Alex will focus on overall investment figures.
• Mary Ann will detail the performance of unicorn companies.
• Anna will examine geographic trends and anomalies.
• Ryan will provide insights into the fintech sector.

This initial report offers a first glimpse into the Q3 data. Further detailed analysis will follow.

A deeper dive into the numbers is now underway, promising a more granular understanding of the current venture capital environment.

Record-Breaking Venture Capital Investment

Global startup investment reached an all-time high in the third quarter, exceeding the previous record set in the second quarter by $2 billion. A total of $158 billion was deployed into private companies during the last three months.

These figures represent a virtual tie, signifying the two most robust periods for private company investment in startup history.

Increased Deal Volume

The substantial funding fueled the growth of highly valued, private companies – often referred to as unicorns. A total of 409 deals valued at $100 million or more were announced in Q3, an increase from the 390 deals recorded in the second quarter.

This equates to approximately 4.5 mega-deals per day, highlighting the intense activity within the venture capital landscape.

U.S. Market Dominance

Despite the expansion of the global startup market, the United States continues to attract the largest share of investment. $72 billion was invested in U.S. startups during the third quarter, a slight increase from the $70 billion invested in the previous quarter.

While historically underrepresented regions are gaining traction, the U.S. maintains its leading position in startup funding.

Growth in Key Markets and Sectors

Beyond the U.S., significant investment activity was observed in markets like India and China. Furthermore, sectors such as health tech and fintech experienced considerable funding inflows.

This influx of capital has directly contributed to the creation of more unicorn companies.

Summary of Investment Trends

• Total global investment in Q3: $158 billion
• Number of deals over $100 million: 409
• U.S. investment in Q3: $72 billion
• Key growth sectors: Health tech, Fintech

The Growth of Billion-Dollar Companies Persists

The quantity of privately held companies achieving valuations exceeding $1 billion continues its upward trajectory, as expected. Data compiled by CB Insights reveals that 127 new unicorns emerged during the third quarter, increasing the overall count to 848.

This signifies the third consecutive quarter with over 100 new unicorn designations, according to the CB Insights report.

Geographic Distribution of Unicorns

A significant majority of these newly established unicorns, totaling 69, are situated within the United States. Asia follows as the second-leading region, hosting 30 new unicorns. Currently, the U.S. boasts a total of 429 unicorns, while Asia accounts for 271.

However, it’s noteworthy that the most highly valued of the recent unicorns originated outside of the United States. These companies all operate within the fintech sector.

Notable New Unicorns

FTX, a cryptocurrency exchange headquartered in Hong Kong, specializing in derivatives, options, and advanced trading products, secured $900 million in Series B funding in July, resulting in an impressive $18 billion valuation. The platform supports over 1 million users and processes an average daily trading volume exceeding $10 billion.

Zepz (previously known as WorldRemit), a U.K.-based digital cross-border payments platform, raised $292 million in August, achieving a $5 billion valuation. The company reports serving over 11 million customers across 150 countries.

In September, Sorare, a French startup, announced a $680 million Series B funding round led by SoftBank’s Vision Fund 2, valuing the company at $4.3 billion. Sorare has developed a fantasy football platform leveraging NFTs, or non-fungible tokens.

Each digital card is uniquely registered as a token on the Ethereum blockchain. Users are able to buy, sell, and trade cards with each other, with all transactions permanently recorded on the Ethereum blockchain.

Valuation Trends

The median valuation for late-stage funding rounds has reached a peak in 2021, hitting $1.1 billion compared to $523 million in 2020. Similarly, the median valuation for mid-stage deals has increased to $286 million year-to-date, up from $150 million last year.

Regional Funding Breakdown

Let's now examine the allocation of funding across different regions in greater detail.

Global Startup Funding: A Regional Overview

The third quarter witnessed the United States and Asia taking the lead in startup investments. A substantial 46% of all venture capital dollars were directed towards U.S.-based startups, marking the highest proportion for any single region, as detailed in the report.

This equated to a total of $72.3 billion, representing a significant 90% increase when compared to the same period last year. Furthermore, the sheer volume of deals – 3,210 in total – also established a new record.

Regional Variations within the U.S.

A closer examination of national data reveals a more nuanced picture than observed in the previous quarter. Cities like Silicon Valley, New York City, and Miami are experiencing growth in funding activity.

Conversely, some other prominent metropolitan areas are showing signs of stagnation or a slowdown in investment. Further investigation into these diverging trends is warranted.

Asia's Funding Surge

The evolution of funding within Asia, with a specific focus on China and the potential effects of recent regulatory changes, was a key area of inquiry.

The data indicates a substantial increase in funding for Asian startups, with a 95% year-on-year rise. This growth wasn't solely driven by India; China also saw both the total investment amount and the number of deals reach record levels during the last quarter.

The rise in the proportion of early-stage deals in China – reaching 58% year-to-date – suggests that the observed growth isn't simply a result of delayed reporting.

Funding Trends in Other Regions

In contrast to the positive trends in the U.S. and Asia, Europe, Latin America, and Canada experienced a decrease in funding during Q3 when compared to Q2 of the current year.

However, when considering the cumulative dollar volume for the year to date, all three regions demonstrated growth compared to 2020. This suggests that fluctuations in deal flow may be responsible for the quarterly variations, rather than a fundamental downturn.

Key Takeaways

• The U.S. remains the dominant force in startup funding, attracting 46% of global investment.
• Asia experienced significant growth, with a 95% year-on-year increase in funding.
• Funding activity varied considerably within the U.S., with some cities thriving while others slowed down.
• Europe, Latin America, and Canada saw a quarterly decline in funding, but remain up year-to-date compared to 2020.

Fintech Investment Experiences a Minor Decline While Remaining High

Investment in the fintech sector continues to demonstrate strength within the venture capital landscape. The total capital allocated to fintech startups during the first nine months of 2021 almost surpasses the entire investment volume of 2020.

Data from CB Insights reveals that $91.5 billion was channeled into fintech startups across 3,514 transactions through Q3 2021. This contrasts with the $47.2 billion invested over 3,404 deals throughout the entirety of the previous year.

Although the third quarter witnessed a slight decrease in both the volume of deals and the total investment compared to the preceding quarter, the change was not substantial. Fintech startups received $31 billion in funding across 1,178 deals during Q3, versus $34.8 billion across 1,192 deals in Q2.

However, this represents a significant increase when compared to the third quarter of the prior year, which saw $11.9 billion invested in 830 fintech transactions.

The United States remains the dominant market for fintech investment, attracting $14.4 billion in Q3. This is followed by Asia with $6.0 billion, Europe with $5.4 billion, and Latin America with $2.6 billion.

The substantial difference in overall funding figures is largely attributable to the increased average investment size per deal. CB Insights determined that the average fintech deal size in 2021 reached $31 million (with a median of $5 million).

This is a considerable jump from the previous year’s average of $18 million (median $4 million).

The sheer volume of these figures helps explain the current high level of activity within the industry. The fintech space is demonstrably thriving.

Key Investment Trends

• Total fintech investment through Q3 2021: $91.5 billion
• Total fintech deals through Q3 2021: 3,514
• Q3 2021 investment: $31 billion
• Q3 2021 deals: 1,178
• Average 2021 deal size: $31 million
• Median 2021 deal size: $5 million

These statistics highlight the continued investor confidence in the fintech sector and its potential for future growth.