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Written by Alex Wilhelm

Fintech startups and unicorns had a stellar Q4 2020

The fourth quarter of 2020 was as busy as you imagined, with super late-stage startups reaching new valuation thresholds at a record pace, and total venture capital funding in the United States recording its second-best result of all time.

That’s according to data released recently by CB Insights, which complements our look back at 2020’s venture capital year in America from yesterday.

At the time, we noted that American startups raised an average of $428 million each day last year, a sum that helps illustrate how rapid the private markets moved during the odd period.


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But a peek at aggregate results for the world’s largest VC market provides only part of the picture. We need to narrow our lens and peer more deeply into standout categories to understand how the U.S. venture capital market managed to post its biggest year ever in terms of dollars invested, despite seeing deal volume slip for a second consecutive year.

This morning, we’re scraping data together to better understand.

First, we want to how unicorns performed in Q4 2020. This column noted in late December that it felt like unicorn creation was rapid in the quarter; how did that hold up?

And then we’ll take a look dig into PitchBook data concerning the fintech sector, a huge recipient of venture capital time, attention and money.

Fintech’s 2020 is a good perspective to view both the year and its wild final quarter. So this morning, as America itself resets, let’s take a moment to understand last year just a little bit better as we get into this new one.

Unicorns

One of the most curious things about the unicorn era is the rising bet it represents. I’ve written about this before so I will be brief: Nearly every quarter, the number of unicorns — private companies worth $1 billion or more — goes up.

The private market is able to create more unicorns than it has been historically able to exit them.

Some of these companies exit, sometimes in group fashion. But, quarter after quarter, the number of unexited unicorns rises. This means that the bet on expected future liquidity from venture capitalists and other private investors keeps ratcheting higher.

A first look at Qualtrics’ IPO pricing

Earlier today, Qualtrics dropped a new S-1 filing, this time detailing its proposed IPO pricing. That means we can now get a good look at how much the company may be worth when it goes public later this month.

The debut has been one TechCrunch has been looking forward to since the company announced that it would be spun out from its erstwhile corporate parent, SAP. In 2019, the Germany-based enterprise giant SAP snatched up Qualtrics for $8 billion just before it was to go public.

Qualtrics is either worth less than we would have guessed, or its first IPO range feels light.

That figure provides a good marker for how well SAP has done with the deal and how much value Qualtrics has generated in the intervening years. Keep in mind, however, that the value of software companies has risen greatly in the last few years, so the numbers we’ll see below benefit from a market-wide repricing of recurring revenue.

Qualtrics estimates that it may be worth $22 to $26 per share when it goes public. Is that a lot? Let’s find out.

Qualtrics’ first IPO range

First, scale. Qualtrics is selling just under 50 million shares in its public offering. As you can math out, at more than $20 per share, the company is looking to raise north of $1 billion.

After going public, Qualtrics anticipates having 510,170,610 shares outstanding, inclusive of its 7.4 million underwriter option. Using that simple share count, Qualtrics would be worth $11.2 billion to $13.3 billion.

In 2020, VCs invested $428M into US-based startups every day

Despite a pandemic that sparked a global recession, 2020 was still a record year for venture capital investments into American startups.

According to data shared by PitchBook and the National Venture Capital Association, investors poured $156.2 billion into domestic startups last year, or around $428 million for each day of the year. The huge sum of money, however, was itself dwarfed by the amount of liquidity that American startups generated, some $290.1 billion.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


The exit-value figure was a record as well, as were the 321 rounds worth $100 million — nearly one for each day of the year.

But while the U.S. venture capital market in 2020 was hot, it was not newly so. In 2018 and 2019, VCs invested around $140 billion into domestic startups, making last year’s $156 billion result a record, but not a shocking departure from previous years.

A first read of the data indicates that the U.S. venture capital market is still getting larger in scale and later-stage in focus. But inside those well-worn trends are a host of notable movements that both underscore what we observed last year in real time, and teach us something new about today’s venture capital market.

So far, 2021’s startup financing and exit market appears to be the mirror of what we saw in late 2020. So we’d best understand the past so we can forecast what we’ll see in Q1 of 2021.

To avoid getting too lost in the data, we’ll proceed by stage, pulling out key facts for each step of the startup lifecycle. Feel free to scroll to the one that makes the most sense for where your company is, or fund invests today.

Seed

In the U.S., seed deal count was high in 2020, around 5,227 per PitchBook’s estimates. Those rounds were worth just over $10 billion, making it the third year in a row in which American seed-stage startups managed around $10 billion in capital against around 5,000 rounds.

Boring, yeah? Not really. Inside those numbers are the whole year’s ups-and-downs: the fact that the seed data is so close to 2018 and 2019 levels is almost silly.

The real surprise from seed, per PitchBook’s report, is that these valuations actually fell on a year-over-year basis in 2020. This, despite the fact that seed deal sizes rose.

Considering these two trends at once, it appears likely that, on average, VC ownership as a percentage of seed-stage companies rose in 2020.

Frankly I was just surprised to see a form of startup valuation decrease after expanding for nearly a decade.