QQ music technology news large asset management companies expanded their dominant position in Silicon Valley in the second quarter, crowding out once minority venture capitalists, and are expected to nearly double the financing record of start-ups set last year.
According to pitchbook data, a market research firm, hedge funds, mutual funds, pensions, sovereign wealth groups and other so-called non-traditional venture investors were more active in the second quarter than ever before. According to pitchbook, large asset management companies participate in 42% of start-up financing transactions, accounting for more than three-quarters of the total investment capital.
Pitchbook’s report shows that the investment in U.S. start-ups in the first half of 2021 reached $150 billion, exceeding the total annual financing of each year before 2020. According to interviews with investors and start-up executives, large asset companies have a huge capital pool and move quickly. They are unlikely to ask for board seats or participate in company decisions when investing, which usually makes them more attractive to the founders of start-ups. This result is dazzling trading speed.
“It’s like a flash date, but it’s more extreme,” said Peter Fishman, a longtime Silicon Valley technology professional. Last year, Fishman co founded Mozart data, a data automation startup.
For a long time, large fund managers have allocated part of their portfolios to traditional venture capital companies. About a decade ago, in an economic environment of near zero interest rates, many fund managers began to invest directly in start-ups, hoping to obtain higher investment returns from technology companies that have been privatized for a longer time. Over the years, traditional venture capitalists have often disparaged them as tourism investors and fools who lack specific skills for start-ups to invest.
Today, in dollar terms, half of the top ten investors in start-ups are non-traditional venture investors, including Fidelity Investments and tiger global management. Pitchbook’s data show that the number of rounds of venture capital financing, including non-traditional venture capital investors and zero risk investment companies, has doubled in the past decade.
Robert natzler, portfolio manager, said that Baillie Gifford, a British asset management company, managed more than $450 billion in assets. The company invested in start-ups for the first time in 2012 and launched a special private market portfolio in 2019 “to really start injecting a lot of capital into the later private market.”
Some traditional venture companies are abolishing old practices to keep pace. In order to act quickly, some venture capitalists say they are cutting audit and customer review and listening to startups on profit and loss.
According to CB insights, a data provider, from 2016 to 2019, there were an average of 35 transactions with financing of US $100 million or more per month. This year, the number soared to 126 per month. All this money has soared the valuation of start-ups, increasing the book profits of all types of venture investors and their founders. According to CB insights, five years ago, the valuation of 14 start-ups reached or exceeded US $1 billion in the second quarter; This year, 136 companies achieved this valuation in the second quarter.
For example, motif FoodWorks, a Boston start-up that produces alternatives to plant meat and dairy products, has the support of non-traditional investors. Jonathan McIntyre, CEO of the company, said that the company raised $226 million in June this year, led by Ontario teachers’ pension plan and BlackRock. MacIntyre said that traditional venture capitalists are hesitant about the financing amount and valuation of the start-up company he founded two years ago. Ontario pension fund and BlackRock will each have seats on the board of directors, rather than all board voting rights.
The affluent capital brought by the upsurge of chief public offering has strengthened the methodology of investors. According to pitchbook, about 95% of the startups that conducted initial public offerings and sold to large companies last year were companies supported by non-traditional investors.
The shift to high-speed investment gives founders more chips. Some people cancelled the once essential company roadshow for potential investors and attended the investor meeting empty handed. According to investors and entrepreneurs, others will ask investors for free gifts — such as the name and number of potential customers — before agreeing to let investors join a round of financing. A venture capitalist said that more founders asked for and obtained the so-called equity renewal, that is, after a round of financing, their shareholding ratio increased by several percentage points rather than decreased.
“I have to be flexible and give much more than in the past,” said Andy Boyd, a senior executive at Fidelity Investment. He helped Fidelity Investment take the lead in the field of start-up investment and now manages bramalea partners, a venture capital firm. This includes giving “insights, data, connections, and building those connections before any investment opportunity.”
Compared with traditional venture capital companies, non-traditional investors often have greater capital supply and lower return threshold, which gives them more room for valuation maneuver. According to pitchbook, the average valuation of transactions dominated by non-traditional investors is five times that dominated by traditional venture investors. Non traditional investors are also often subject to non-traditional trading terms. In May this year, beta technologies raised about $400 million in the first round of institutional financing for the construction of electric aircraft. According to people familiar with the matter, venture capitalists had raised objections to the investment round of the four-year-old startup, but fidelity investment led the deal.
The person said that although Fidelity Investment did not give the highest valuation, it did agree to an unusual condition: more than 70 employees of beta technologies can obtain shares of the same level and price as Fidelity Investment in this round of investment. A spokesman for fidelity declined to comment.
According to the research of scholars and economists, inflation and possible interest rate hikes may reduce the amount of cheap cash available, thus preventing non-traditional investors from making high-risk and long-term bets on start-ups, and reducing the valuation of public stock markets and start-ups. The tax increase proposed by President Biden will raise capital gains tax and corporate tax, which may also inhibit investor activity.
Wang Xianhua Wong, a partner in Vc firm Accel, hopes that the bubble will be eased, “Rich said. We expect to see some capital and valuation declines, “he said（ Tencent Technology (compiled / Mowgli)