Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
This morning we’re taking a look at mega-rounds: funding events of $100 million or more.
What’s fun about these rounds is that they experience less temporal lag than other venture financings. Generally speaking, the larger a venture round is, the faster it becomes public knowledge. This is why seed rounds are the laggiest of all startup rounds and as you progress up the Series ladder (from A to B to C to D), the rounds that you hear about are increasingly fresh.
If we wanted to take a look at 2020’s largest rounds to date, for example, instead of staring at an incomplete picture that might tell us nothing at all, we could get a reasonable handle on what’s going on in the very late-stages of private equity financings.
This morning we’re looking at $100 million and greater rounds from January, February and March (through the 23rd) for both 2019 and 2020. As you will see, the data shows us that the late-stage private market for startup investments is in better health than we might have expected. This is true despite spotting weaknesses in other parts of the global venture scene (China venture data remains very weak, for example).
The unicorn era, for better or for worse, appears to be still standing for now, despite the chaos that surrounds it.
$100 million or bust
We’re using Crunchbase data this morning, looking at equity-only funding events for private companies around the world. We’re not, in this case, looking at country-specific data. Instead, we’re casting our net wide to prevent narrowing more than we have to (as we’re looking at only a small category of rounds, adding country filters felt excessive).
Here’s the known number of mega-rounds of $100 million or more from 2019, according to Crunchbase:
- January 2019: 57
- February 2019: 48
- March through the 23rd, 2019: 28
And from this year:
- January 2020: 45
- February 2020: 30
- March through the 23rd, 2020: 28
The decline in January results do not feel surprising. The unicorn era was long in the tooth then and exits were not impressive. Add in China’s venture slowdown and seeing a decline of 12 rounds (21%) from the year-ago period feels reasonable.
February’s declines were more material, with known $100 million funding events falling 37.5% year-over-year. Given that the number of unicorns in the world rose and February 2020 had an extra day, it’s a weak result. And one that is at the very start of when we might anticipate seeing any COVID-19-related impacts to late-stage raises.
Many February fundings were closed before the month, meaning that we might expect to see more of a slowdown in March instead of February, if we were hunting for the impact of COVID-19 on the late-stage venture world. However, as we can see in the March data, to-date results are flat compared to March 2019.
Surprised? I was. To see March 2020 do better than March 2019 is downright confusing. To understand what was going on, I looked at the most recent, 2020 mega-rounds that made our cut. Here’s the latest three:
- This morning’s Cazoo round, adding $116 million to the used-car marketplace;
- A $200 million round for Scopely, a mobile gaming company from California;
- UserTesting’s $100 million deal from late last week, a round that makes sense as it’s a big SaaS deal.
It’s a mix of funding events. Some that fall inside the TechCrunch tech-first wheelhouse (Usertesting, Scopely), and some that land outside our usual topics but still fit under our remit (Cazoo).
Let’s try another angle, however, to make sure when we say that mega-rounds are doing better than we expected that we aren’t talking rot. Let’s switch from looking at round counts to counting the dollars invested in those rounds. This will tell us if investors are betting more or less money, even if we’ve already established that they are laying more wagers than we expected.
Dollars
Looking at the same dataset across the same time period, here is the dollars view of the mega-round world. Again, we start with 2019:
- January 2019: $15.69 billion
- February 2019: $17.33 billion
- March through the 23rd, 2019: $8.37 billion
And, from this year:
- January 2020: $9.57 billion
- February 2020: $8.55 billion
- March through the 23rd, 2020: $10.3 billion
Here we see sharp declines in both January and February of 2020, with March of this year once again operating as a standout. It appears that, while the first two months of 2020 saw incredible declines in dollars invested at the latest stages (worse than their round volume declines might have led us to expect), once again March is behaving counter to our expectations.
My only hypothesis is that perhaps, in January, optimism was high, leading to a good number of deals being started. This could have boosted March-era announcements that appear incongruous to our current reality. It’s too soon to say, but, for the optimists out there, here is the good news you were hoping for.
We’ll know a lot more when we have full Q1 data from the various counting agencies, but for now, the late-stage venture world simply isn’t as bad as we expected. Perhaps more unicorns will survive than we expected. That’s good news for late-stage employees, founders and investors alike.