Venture capitalists are rushing to back Silicon Valley technology startups at a dizzying pace, with increasing competition to fund the hottest new companies despite concerns of over-valuation, Financial Times (FT) reported on Wednesday (March 10).
Investors were tracking through February to invest over $460 billion into private startups this year, according to the data provider PitchBook — an almost 40 percent increase from a recent peak in 2018.
“There’s a tremendous amount of competition,” Arun Mathew, a partner at the venture capital firm Accel, told FT. “There’s just so much capital in the market at all stages.”
The investment stampede is being led by bigger firms such as Coatue Management and Tiger Global Management. Tiger manages $50 billion in assets and has almost doubled the pace of its investments from last year. Coatue put money into 17 private firms this year, according to Pitchbook data, per FT.
The hot market means that venture capitalists have to move fast, particularly in verticals that got a boost from pandemic-fueled changes in behavior.
“You have to make a decision in the space of a week rather than a few weeks,” Nicole Quinn, a partner at Lightspeed Venture Partners, told FT. Lightspeed targets investments in consumer startups.
Some investors are sounding the alarm that some tech startups in hot areas have valuations far exceeding their worth relative to their business progress.
“Not every company can be Zoom or Snowflake,” Mathew told FT. “Those are amazing companies . . . but they’re unique.”
VC funding for business-to-business (B2B) FinTechs totaled roughly $118 million. Hot areas for funding included B2B payments solutions for small and medium-sized businesses (SMBs), and eCommerce-as-a-Service.
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