Q2’21 Venture Pulse Report – Global trends

A growing number of jurisdictions across regions attracted mega VC funding rounds in Q2’21, including the US (Waymo — $2.5 billion, SpaceX — $1.2 billion, Epic Games — $1 billion), Indonesia (J&T Express — $2 billion), India (BYJU — $1.5 billion), China (Horizon Robotics — $1.5 billion), Germany (Celonis — $1 billion), Brazil (Nubank — $1.5 billion) and the Netherlands (MessengerBird — $1 billion).

Institutional and PE investors, meanwhile, powered Sweden-based Northvolt AB’s $2.75 billion funding round. In addition to showcasing growing geographic diversity, these deals highlight the breadth of sectors attracting funding in today’s market, including alternative energy, fintech, B2B services, education, gaming, logistics, and aerospace.

Q2’21 saw a surge in companies globally achieve unicorn status, bringing the total number of unicorns in 2021 well above the previous annual high of 179 seen in 2018. While the US accounted for the majority of new unicorns in Q2’21, the others covered quite a geographic spread, from Bitso in Mexico to SafetyCulture in Australia, Paidy in Japan, and GoStudent in Austria.

The large number of unicorns likely reflects the ongoing trend of VC investors focusing on their existing clients, using their investments to allow them to bring on people, fuel their sales and their valuations. Given how cheque sizes have grown over the past two years, there is some question as to what will happen to growing unicorns: will they go for an IPO or is there enough appetite for unicorns to grow beyond a unicorn valuation? This is because there is a cap as to the level of valuation a company can get to before the exit option is limited to a form of IPO.

Corporate VC investment was strong in all regions of the world during Q2’21. The pandemic has really expedited the need for digital transformation, for innovation, and for doing business better in general. Many established companies globally have come to the realization that they don’t need to innovate from scratch, and that a better approach might be to partner with or invest in startups that can help them accelerate their transformation in ways that better align with the new normal.

While the pandemic isn’t over yet, there a growing sense of optimism as COVID-19 vaccine distribution accelerates globally and investors focus on the sectors expected to remain attractive in the post-pandemic world. Even as parts of the world have opened up more broadly, VC investor have continued to flow money into sectors accelerated by the pandemic, such as fintech, delivery, and B2B services, betting that none of the major change in terms of customer behaviours will revert to historical norms. VC investors expect businesses and consumers will continue to embrace innovative business models even after the pandemic, given their better understanding of the benefits in terms of speed, responsiveness, and agility.

VC investment will likely remain robust in most regions of the world in Q3’21, given the wealth of dry powder in the market, the growing participation of non-traditional VC investors, and the positive IPO activity. Sectors such as fintech, business productivity, and health and biotech will likely continue to attract significant investment. Cybersecurity will likely also be a hot ticket for investors, given the increasing number of transactions occurring in the cloud.

ESG (environmental social, and governance) is also expected to grow on the radar of investors, given the increasing importance being placed on sustainability across the business world. Already, there is increasing investment in businesses with ESG-aligned business models, such as electric vehicles and food tech. Moving forward, it is likely investments in these areas will continue to grow, while investors may also increase their scrutiny of ESG factors when making funding decisions.