By Michael Megarit There has never been a better time for the founders of tech companies to sell or go public.
A lucrative exit is the dream of many investors.
Founders, on the other hand, aspire to raise capital, achieve unicorn status and go public through blockbuster IPOs.
The good news is that now is the perfect time to do all of these things.
Indeed, American startups raised an average of $428 million each day last year.
This figure shows how lucrative being an innovative tech company can really be.
Here are 3 reasons why now is the perfect time to IPO or sell your company.
1 – Global Venture Funding Is At An All-Time High
In the first half of 2021, Global Venture Capital funding reached all-time highs.
Crunchbase data shows that more than $288 billion of venture capital was invested worldwide.
Believe it or not, that number is up by nearly $110 billion compared to the previous half-year’s figure, which was also a record.
In fact, 17 companies have raised more than $1 billion this year and every stage of funding was record-breaking:
- Globally, nearly 2,000 startups received early-stage funding, which peaked at $43.4 billion in Q2 2021. This is a 66% YOY increase.
- 3,500 startups received $6 billion of seed funding in H1 2021. This is a 40% YOY increase.
- Late-stage funding more than doubled YOY.
The investment pace is picking up
Global growth equity investors are investing capital at an increasing pace.
Crunchbase data reveals that firms such as Insight Partners and Tiger Global Management added the most companies to their portfolio over the past six months.
Tiger Global was especially active, adding 110 new companies to its portfolio:
- Led 87 investment rounds
- Averaged 14+ investment rounds per month
- Added 58 unicorn companies to its portfolio.
Insight Partners was also active, adding 71 companies to its portfolio.
While Insight added fewer companies to its portfolio, it organized more rounds than Tiger, leading 82 in total.
In H1 2021, 17 Venture Capital firms led or co-led more than 600 investment rounds.
Not only did these firms lead plenty of investment rounds, the total amount of money raised is mind-boggling:
- Tiger Global Management raised $11.8 billion.
- Softbank raised $10.98 billion.
- Insight Partners raised $7.5 billion.
- Coatue raised $7 billion.
- In total, the most active firms raised more than $80 billion.
A record-breaking number of Unicorns
The massive inflow of venture capital funding into private companies is creating hundreds of new unicorns.
In H1 2021, 291 companies joined Crunchbase’s Unicorn Board, compared to 175 for all of 2020.
Crunchbase’s Unicorn Board includes more than 900 private companies valued at nearly $3 trillion. Collectively, they have raised more than $560 billion. Out of these 250 newly valued unicorns, more than half (161) are headquartered in the United States.
Over time, the new unicorns have raised an incredible $78 billion.
As mentioned earlier, late-stage funding is growing at a rapid pace. So far, 1,600 companies have raised late-stage funding this year, which is almost as much as for all of 2020’s last 3 quarters. In fact, the total number of deals and the total amount invested is increasing at a rapid pace.
If this trend continues, 2021 will shatter all previous records.
2 – The IPO Market Is Red Hot
2021 is a record-breaking year for companies making their public debuts on Wall Street – and the year is far from over.
Low interest rates and the rising popularity of SPACs have accelerated IPO activity and direct listings.
These positive IPO performances suggest that the global economic recovery is well underway. Indeed, analysts expect a large number of $1 billion+ IPO valuations in 2021. Tech unicorns, SPACs and companies who showed resilience during COVID-19 are sure to garner significant investor attention.
Ernst & Young reports that in 2021, global IPO volumes rose 150% and proceeds rose by 215% year-on-year.
Q2 2021 was the best performing second quarter in 20 years.
In Q2 2021 alone, 8 companies IPOed at $10 billion valuations or more. In the first 6 months of 2021, an astonishing 16 companies IPOed at this valuation. This is the most in the past decade. Last year, 13 companies backed by venture capital IPOed at $10 billion valuations or more, which was also a record.
In contrast, over the past 9 years, only 16 companies IPOed at such valuations.
A perfect illustration of this IPO frenzy is Coinbase, the San Francisco-based cryptocurrency exchange platform. As a private company, it raised more than $500 million. It IPOed with great fanfare and finished its first day of trading with a valuation of $86 billion.
Another example of the general enthusiasm is Beijing-based Didi, a ride hailing service. While only 9 years old, it raised more than $20 billion as a private company and IPOed at $73 billion valuation.
3 – The Record Boom in Mergers & Acquisitions
Not only are the founders of tech companies raising record amounts of capital and IPOing unicorn companies every month, the first half of 2021 also broke the record for global Mergers & Acquisitions (M&A).
COVID-19 lockdowns and confinements gave birth to the rise of the work-from-home economy. Obviously, this trend benefited tech companies the most. Consequently, they are the prime targets of M&A activity.
Strategic analytics firm Refinitiv recently published data revealing that global businesses closed nearly $3 trillion in M&A, the highest in history.
Of this amount, tech companies accounted for one quarter of all M&A deals, which represents more than $67 billion.
Some notable deals include:
- Singapore-based ride-hailing company Grab closed a $40 billion SPAC-deal
- Microsoft acquired speech-to-text software developer Nuance Communication for nearly $20 billion
- Zoom acquired Five9 for $14.7 billion
- Visa acquired European fintech firm Tink for $2.15 billion, after a failed takeover of Plaid for $5.3 billion
- Prospus acquired Stack Overflow for $1.8 billion
- Hyundai took a controlling stake in Boston Dynamics, bringing the company’s valuation to $1.1 billion
- Visa acquired London-based startup Currencycloud for $700 million
- Jamf acquired Wandera for $400 million
- JFRog acquired software cybersecurity firm Vdoo for $300 million
- Stock media site Shuttershock purchased 3 AI companies for $35 million
- And the list goes on…
The COVID-19 pandemic has accelerated the world economy’s digitization and it is believed that M&A activity in the tech sector will continue well into 2022, and possibly beyond.
What Does All This Mean For Tech Founders?
It doesn’t take a rocket scientist to understand that now is the best time to raise funds, sell or go public.
There is so much venture capital and interest in IPOs that founders would be foolish to ignore these options.
In fact, now is the best and easiest time in history to achieve unicorn status and either sell or go public at inflated valuations.
About the Author
Michael Megarit is the founder and managing partner of Cebron Group. With over 25 years of domestic and international corporate finance experience, he has provided M&A and capital advisory to high-growth technology companies seeking investments and buyers.