Valuations of VC-backed companies were at or near record highs in the first quarter of the year. The venture capital market was buoyed by strong IPO exits, participation of capital-rich nontraditional investors, and broader economic recovery on the horizon.
Our Q1 2021 US VC Valuations Report dissects valuation changes across investment stages and sectors.
Early-stage valuations hit record highs with median and average pre-money valuations coming in at $40.0 million and $96.3 million, respectively. The time between rounds dropped to levels not seen since 2015 as startups raised new financing from a position of strength, not weakness. Late-stage investors also continued to invest earlier in the venture lifecycle, with an increasing number participating in early-stage financings.
An abundance of outsized deals has boosted the median and average pre-money valuations to record highs of $122.5 million and $1.03 billion, respectively. Given that many late-stage deal valuations are loosely coupled with a company’s potential market capitalization upon IPO, the strong performance of comparable public equities significantly boosted valuations at this stage.
Swaths of nontraditional and crossover investors were willing to pay a premium for an opportunity to invest in late-stage companies. Valuations for late-stage deals with nontraditional participation have risen to a median of $219 million, nearly $170 million larger than in deals where these institutions do not invest.