- According to PitchBook, the average valuation for startups in the late stage has passed more than $ 1 billion.
- Non-traditional venture capitalists have boosted competition and increased valuations.
- Early-stage valuations are also scaling up, as more VCs seek to invest in startups sooner.
- See more stories on the Insider activity page.
Building a billion-dollar business was once a legendary thing. Now becoming a unicorn is the norm.
The average pre-money valuation for late U.S. startups – those that raised a series C or later rounds of funding – climbed to a record $ 1.03 billion in the first quarter of 2021, according to PitchBook. (The median is also a record, but much more modest at $ 122.5 million).
PitchBook attributes a jump in valuations to large asset managers looking to get into highly-regarded startups before they become public. In fact, several VCs who have spoken to Insider before have pointed it out intense competition for business, even by non-traditional investors, as a primary factor to drive valuations.
“The increased flow of mega-deals in late deals in Q1 has placed a premium on valuations, such as non-traditional investor bands and crossovers picked up on board,” according to the PitchBook report.
The PitchBook report also confirms another observation that some VCs have made to Insider: Investors are moving more broadly into early-stage companies to returns while valuations are picked. The success of companies that went public last year, including Airbnb and Roblox, has encouraged them to seek even greater returns by joining companies sooner, the report says.
It is pushing the ratings at the end of the first stage. In the first quarter of 2021, a record 11 early stage companies made a $ 500 million deal, PitchBook said.
However, valuations for angels and seed companies are still limited. Because these startups typically don’t have much of a history, they’re less likely to acquire large price tags, according to the PitchBook report. However, there could also be more financing activity in the early stages of VC investment.
“Enthusiasm for the company has gone far beyond the late stage, and with the growth of capital available to the industry, we expect this trend to manifest itself even in the angel and seed stage.” , the report said.