VC Investments – Leading indicator for FinTech, M&A and a Unicorn ‘Blessing’ for 2021

January 2021 — By John Mathis & Anne Zehil

Our FinTech team sits down each year and takes stock of the early-stage VC investments for a view to future trends.

The future looks intense – US Venture Capital investments rose 14% in 2020 to $130 billion – the highest level since the turn of this century.

The U.S. VC market activity stats are eye-popping –

Summary: VC funded companies made a bull run to market in 2020 – The traditional IPO channel saw a 60% increase in IPOs.  The M&A path was a bit weaker, down 38% from 2019, likely as deals were made more challenging with COVID and companies found more attractive exit paths through IPO or the latest trend – SPACs.  The Special Purpose Acquisition Companies hit the mainstream in 2020, with more than $73 billion in proceeds, a 400%+ increase over last year.

Crystal Ball: If this much financing energy is happening in a pandemic, imagine the post-vaccine world?  The formula for more seems very linear:

VC Funds are raising capital and putting it to work at record pace while the exit market is accelerating with traditional IPOs being overshadowed by the SPAC activity.  Just look at the S-1 filings in the second week of January – more than 28 filings raising more than $7bn – in ONE WEEK. Given the 23% increase in VC capital raised in 2020, these firms are compelled to keep up the pressure hunt for the next unicorn. 

A Blessing for 2021: The unicorn population grew by 50% in 2020 to 225 in the US.  Expect more headlines about what a herd of unicorns is called – A Blessing. If ever the world needed a blessing, 2021 seems like as good a time as any.

What This Means for M&A:  In our experience, later staged VC backed companies (series C and later) can be surprisingly active acquirers.  They are all about growth and are on accelerated time frames to get to scale and exit.   We expect greater M&A intensity from these firms as they build and likely add to the post-COVID momentum.



DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.