To the Moon? Venture Capital Trends

There is no shortage of the word “unprecedented” when describing the last two years.

Despite the initial caution around capital markets, venture deal activity and valuations continue to show strength. These unprecedented times have led to some record-breaking years and quarters for the venture capital market.

There has been increased demand for private investments, largely due to companies staying private longer and private markets having historically outperformed public markets. Venture capital has been a beneficiary of this trend, as venture returns have outperformed private equity.

The result? Growing demand for VC allocations, increasing fund sizes and record levels of dry powder (>$430B).

As we approach the end of the year, let’s reflect back on the market and share some trends we are seeing play out.

Bigger Deals & Growing Valuations

Deals are continuing to grow, in terms of round sizes, valuations, and volume. In Q3 2021, there were over 400 mega-rounds (deals raising >$100M) which represented >50% of funding dollars but only ~4% of the deal count.

There is more competition at the early stage, as traditionally late stage investors are moving earlier and seed investors are moving later. The average seed round was in the $9-10M range, doubling over the last 6 years. Early stage rounds have gone up to $50M from $20-25M, three years ago. The dispersion between top and bottom performing seed deals continues to widen, while Series A investments are proving to be the best performing entry point.

Faster Processes

In conjunction with an increase in deal volume, deal cycles have shortened from months, to weeks, to days. The ability to be nimble and act quickly is a competitive advantage in today’s market - therefore, it is important to have good pattern recognition and a deep understanding of the landscape to make expedient decisions with conviction.


Despite new funds entering the VC arena each year, we are seeing more concentration. For example, the top 1% of most active firms represented ~40% of deals in 2020 vs. ~25% back in 2009. This is leading to a concentration of ideas amongst the larger funds. The areas that are seeing the most funding are concentrating as well, with 33% of VC dollars invested in software today vs. ~20% in 2006.

Strong Exit Activity

2020 and 2021 has seen a flood of exit activity - from IPOs to SPACs to strategic acquisitions. In general, the largest exits have grown more than 8x over the last three and a half years.

In the first 9 months of 2021, IPO activity already surpassed that of 2020 with 670 IPOs. SPAC activity increased to 83 deals from 33 deals last year. Performance of newly public companies has been mixed. According to the Financial Times, of the deals that listed in 2021 and raised more than $1 billion, about half are trading below their listing price. The pressure for private investors to make a return on their investment after pumping large quantities of capital into these companies, leading to elevated valuations, may be one of the culprits behind this trend.

M&A activity reached record levels at ~7,700 deals by Q3 2021, an increase from ~6,800 deals in 2020. Valuations are high for acquisitions as well, with a 2.8x median step-up.

New Hunting Grounds

As more companies and VCs embrace remote or hybrid work, being near Silicon Valley has become less critical for success. Regions like NY, Miami, Austin, and other cities outside the Bay Area have benefitted from this trend, with more companies being started and funded in these regions.


The demand for climate deals continues to strengthen - something we are experiencing first hand as Climate is one of Collaborative’s core investment themes. There has been an uptick in seed deals, but Series A and B deals are seeing the strongest demand (and valuation growth). The dispersion between top and bottom quartile companies continues to widen, highlighting the need to do thoughtful diligence and place the right bet behind the right team.

Lots of things keep us up at night, but what keeps us going remains the same - meeting visionary founders tackling pressing issues with powerful ideas.