State of Private Markets Report from Carta: Astonishing New High in Rounds, Funds Raised in Past Year

In order to assist investors, company founders, and workers with making informed decisions and benchmark past performance, Carta has shared key insights from their private market data.

Carta points out in an extensive report that this past year saw an “astonishing new high in rounds and money raised.” The number of rounds on the Carta platform “increased 31% over 2020, and the total amount of capital more than doubled.” This larger amount of capital “landed in both more deals and larger ones.” The company further revealed that the volume of deals and capital are “up in every sector and stage, as well as across geographies.”

Although all sectors saw a jump this past year, health and biotech for the second year in a row “raised more than any other sector—including software as a service—in seed through Series C rounds.”

The report from Carta further noted that the “Great Resignation” for tech startups may be “slowing.” The firm added that employee-initiated terminations “dropped throughout the last quarter.”

Although 86% of terminations in Q3 were voluntary, that number “dropped to 82% for Q4.”

According to the report from Carta, much of this staggering growth was “driven by the overall availability of capital prompted by many factors.” Low interest rates tend “to drive a search for places for capital to be invested.”

As noted in the update, venture capital has “delivered high returns in recent years, which has prompted some funds to begin or increase allocations to this asset class.” It may also be that after slower growth in 2020, we’re seeing “the result of temporary pent-up demand for investments.” Finally, “the remarkable maturation of healthcare technologies—both pandemic-related and otherwise—may also have played a role.”

The report added that within this record-setting year, there may already be “signs of a correction.” Venture funding has “fallen for two successive quarters.” As mentioned in the update, “Q4 saw 20% fewer deals and 5% less cash than Q2.”

After a more cautious pace of growth in 2020, the venture ecosystem “saw the total cash raised by companies on the Carta platform more than double in 2021,” the report revealed.

While the number of deals and amount of cash raised by companies on the Carta platform have increased each year since 2016, “both accelerated this past year.” The total amount of venture investments “skyrocketed by 111%, from $92B to $194B.” That $102B jump from 2020 to 2021 “is larger than the growth of $67B over the previous four years combined.”

The report further noted that the number of deals also “increased from under 6,000 in 2020 to over 7,500 in 2021.” That’s “a 31% increase compared with an average of 19% per year over the four preceding years.”

The report added that this “is explosive growth follows a more muted rate of annual growth in 2020, which saw increases of 11% in cash and 5% in the number of deals over the previous year.”

The report further revealed that “funding for health, healthtech, and biotech companies outpaced SaaS funding from seed through Series C in 2020 and 2021.” SaaS “returned to the top spot in Q4 2021.”

Every sector saw “a jump in funding in 2021, but the largest amount of money poured into health, healthtech, and biotech.” With fewer deals but a larger average deal size, this sector “outpaced software as a service (SaaS) in early-stage funding for the second consecutive year.”

Last year, California “saw 39% of all venture deals, down slightly from 42% in 2016, but received 47% of total dollars–exactly the same as five years ago.”

The report also mentioned that the geography of venture capital “doesn’t seem to have changed much over the past five years.” In 2021, California was “home to companies receiving 47% of total dollars—exactly the same as in 2016.”

The report added:

“Given large overall increases in investment in 2021 across the country, these relatively steady percentages translate into a substantial uptick in capital throughout the country. For instance, Florida’s total venture investments grew from $0.4B in 2016 to $2.7B in 2021, even while its percentage of nationwide funding dropped.”

The report also mentioned:

“While later stages received the lion’s share of recent growth in venture funding, earlier stages also saw increases. From 2016 to 2021, cash going to seed and Series A companies grew from $11B to $46B, even as their slice of the pie fell from 33% to 13%.”

The report further noted that capital to later-stage companies “continued to grow in 2021.” The percentage of funding going to companies at Series D and beyond “has more than doubled over the last five years—going from 13% to 33%.”

As mentioned in the update, the median founder “gave up two to three percent less of their company in 2021 than they would have two years earlier at the same stage, according to data from Carta.”

As noted in the report:

Headcount is unlikely to be a primary driver of any single company’s valuation. However, this market-wide shift, apparent in Carta’s data across industries, suggests that the market may be expecting more future value from each employee. This may reflect growth in infrastructure, technologies, and knowledge across the startup ecosystem that can allow it to produce value with smaller teams. It may also be that investment money flooding the market has driven up valuations across the board.”

The report also noted that companies raising rounds at series E and above in 2021 “had higher headcounts than their counterparts the year before.” This was accompanied by “a median pre-money valuation that more than doubled from 2020 to 2021, according to Carta data.”

As mentioned in the update:

“In Q4 2021, 69% of companies raising a round in Series E or above achieved unicorn status, with post-money valuations of $1B or more.”

The report added that “while the median amounts raised at Series E and above increased in Q4, round sizes for Series C and D held steadier from the previous quarter.”

The report further noted:

“For companies that closed a Series C round in Q4, 21% were unicorns based on their post-money valuation. At Series D, 35% of companies were unicorns, and at Series E and above it was 69%.n 2021. Dilution was down in 2021 relative to previous years for all stages, but the trends have been somewhat uneven within the year. We will continue to watch whether dilutions continue to creep down in 2022.”

As covered, Carta helps over 26,000 primarily venture-backed companies and 1,600,000 security holders “manage equity.”

This study uses “an aggregated and anonymized sample of Carta’s data.” Companies that have contractually requested that Carta not use their data in anonymized and aggregated studies are “not included in this analysis.”

You can access the complete report here.

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