The first quarter of 2021, Q1’21 saw an all-time high nine $1 billion+ Venture Capital deals- this was around $17 billion in total global VC investments. The largest funding rounds were from the US; the companies that raised the VC funds belonged to a variety of sectors such as e-commerce, wealth-tech, delivery, automotive, healthcare, challenger banking, and logistics.
Fintech attracted major investments in the Europe and Asia remained attractive to the VC investors. Though the travel restrictions affected the investment in this region but the VC funding didn’t drop to an all-time low. Alongside the investment boom, there were new unicorn startups that were created at a rapid pace.
US Venture Report
Venture Capital funding in the United States is continuing to hit record highs despite the pandemic. In 2020, the VC funding to the US-based companies hit a new high and the trend has continued in 2020. The Q1’21 broke a quarterly funding record with more than $62 billion of VC funds. The VCs across the country are doing very well with majority of the tech investments from startups based in California, Massachusetts, and New York.
Two of the smart money Venture Capitalists made an important impact in this regard; New Enterprise Associates (Washington DC) and Andreessen Horowitz (California, Idaho). The top 5 investors of the United States include Andreessen Horowitz (California), Lerer Hippeau Ventures (New York), Accomplice (Massachusetts), and New Enterprise Associates (DC).
During the first quarter of 2021, the VC backed companies raised 117% year-over-year (YoY) as compared to Q1’20 and 62% as compared to Q4’20. After Q1’21 the YTD funding accounted to almost half of the total funding in the year 2020 which means that there will be a good total at the end of the year. As compared to the last quarter of 2020, the deal activity increased to 1,735 deals which was 5% more than Q4'20.
Strong VC investment was seen in Mexico in Q1’21 where Fintech was the most highlighted area of investment. The economy of Mexico is struggling because of the pandemic, there can be negative impacts on the investment in this regard. However, during Q1’21 the investment was strong; the online supermarket Justo raised the largest deal in the country which caused $65 billion series A raise.
Mega Rounds
In Q1’21, 184 mega-rounds took place which is a new record for quarterly VC funding. The quarterly mega-rounds has hit a new high as the US based companies have raised rounds of $100 million during the first quarter of this year as compared to the 102 mega rounds in 2020. The Mega-round investments accounted for $40 billion during the first quarter this year and the deal share was around two-thirds of the total funding during the first quarter of this year.
Deal Stage
The Deal stage activities is high in during Q1’21 except for seeds. The deal activity for seed-stage rounds was lower as compared to the last quarter of the year 2020. However, the deal stage activity for series A and later rounds was higher in Q1’21.
As seen from the above graph, the seed deals activity saw a drop off during the first quarter of this year. The seed stage activity went down to 437 from 592 while the Series A and B saw a prominent rise in the deal stage activity. However, when we compare the total deal count, it has increased from 1714 deals to 1735 deals. This shows that the total deal count increased in spite of the decrease in the seed deals.
European Venture Report
Talking about the VC funding in Europe, in Q1’21 huge capital poured into numerous European startups. A new VC deal hit the quarterly high of 17.6 billion pounds and seeing this strong pace, we can clearly say that the annual records will also surpass the previous year’s stats. Despite the Covid situation, evolving restrictions, political unrest, and uncertainties regarding vaccine supplies, the VC funding wasn’t suppressed.
Mega-rounds
The European records for mega-rounds will continue to be broken. Throughout the first quarter of this year, the late-stage rounds closed on high values. Klarna’s latest financing rounds accounted for 1.1 billion pounds, which increased in valuation to 25.6 billion pounds.
The total deal growth during this quarter didn’t entirely depend on outsize-follow on rounds. The first time deal value of 1.4 billion pounds was more than the figures in 2020. One of the largest first-time rounds during the first quarter were from Berlin-based Company which accounted for 123.9 million pounds.
Deal Stage
The late-stage deal value in Q1’21 reached 13 billion pounds which was around 74% of the total deal value of the quarter. This is a great trend and it is likely to be continued in the next quarters. Despite unemployment and rising Covid cases, the late stage rounds were closed in regularity. The late stage Venture Capital Funding developed very quickly in the Europe and the frequency of most-developed VC-backed companies also increased.
The above chart explains the first time VC deal activity in the Europe. The first time deal value was 1.4 billion pounds in Q1’21. E-commerce boomed during the pandemic as almost everyone shifted to online shopping.
Overall healthcare trends in Q1’21
The Global healthcare funding in the Q1’21 hit a record quarterly high. The total equity funding in this sector was $31.6 billion and the mega rounds accounted for $100 million. The deal count reached the second highest for the previous 12 quarters as it grew to more than 1.5k deals. The funding in Asia, however, declined by 12% in the first quarter.
As you can see in this graph, the deal count of healthcare funding was 1551 for the quarter, which is more than Q4’20 but less than Q3’20. The early-stage share deal raised slightly in Q1’21 while the mid-stage deals remained same as the previous quarter. The late stage deals dropped but only by 1%. The global digital health funding increased by 9% in the first quarter; and the equity funding was an all-time high of $9 billion. The deal count also increased to 13%.
Mega rounds
The mega-rounds in the first quarter of 2021 increased drastically in North America and Europe. For Asia, the funding decreased only slightly as mentioned earlier. The ‘Other’ section in this graph indicates South America, Africa, and Australia. The total mega-rounds in the healthcare sector for this quarter were more than $100 million. Have a look at this graph:
Following is a summary of the healthcare trends during Q1’21:
AI in healthcare:
The first quarter of 2021 saw a huge funding of $2.5 billion; most of it comprised of mega-rounds of around $1.5 billion. The deal count increased by 9% and reached 111 in Q1’21. The mega-rounds included patient payments and applications from drug discovery.
Tele-health:
The tele-health organizations around the world raised $4.2 billion in equity funding, which was a record high. The deal count in this sector increased by 10% with around 130 deals from 32 countries around the world. Also, there were 6 telehealth companies that became unicorns too with more than $1 billion valuation.
Medical devices:
The medical device organizations raised around $4.6 billion in the first quarter, which shows that it declined by 23% from the record high which was during Q4’20. The deal count also decreased by 11% and the mega-rounds made the most of the quarterly funding.
Mental health:
The funding in mental health was increased by 54% which accounted for $852 million from the mega-rounds. The funding raised from mega-rounds was from late-stage mental health and wellness related platforms. The deal count increased from 14% which consisted of 64 deals.
Women’s health:
The funding in women’s health sector increased to $964 million and majority of the deals were early stage ones. There were product launches and regulatory updates in this sector which indicated an increase in interest.
Omics:
The deals and funding was decreased during the first quarter of 2021; there were $1.8 billion raised from 39 deals. The sector continued to receive huge amounts of mid and late stage funding. The US VC funding in this regard saw a 60% of deals which is an increased figure after a 3-year downward trend.
Health IT:
The funding in Health IT doubled during Q1’21 with an amount of $1.8 billion. The total deal count in this sector was 52, but the early stage deals were very few. The early stage deals accounted for only 7% of the total deal share as compared to the previous quarter.
Bottom Line
The US-based VC-backed companies have shown a strong start in Q1’21 as they raised more than $62 billion which was up to 62% more than the previous year’s last quarter Q4’20. The number of quarterly mega-rounds hit a new record during this quarter.
Talking about Europe, the first quarter saw a 17% rise in deal counts. Though the deal count declined in Europe as compared to Q4’20 but the European market was competitive with early stage funds playing an important role in the VC strategy.