Late-stage capital fundraising recorded impressive growth in 2020 with significant increase in both volume and value, despite COVID-19 uncertainty and global economic headwinds. A total of 847 late-stage venture capital (VC) rounds (Series D or above) were announced over the course of 2020, a 43% increase compared to 2019, according to Dealogic data. Total value came to US$72.8 billion, a 45% increase in value.
Late-stage VC investment activity started off 2021 promisingly, with two investments in excess of US$1 billion each already announced by the end of February.
Chinese ecommerce dominates
A total of five fundraising rounds of more than US$1 billion each were recorded in 2020, compared to just two in 2019, reflecting healthy activity at the top end of the global VC market.
In the largest funding round of 2020, Chinese real estate platform Beike secured US$2.4 billion in a Series D+ funding round led by Softbank Vision Fund. Existing investors including Tencent, Hillhouse Capital and Sequoia Capital China also joined. Founded in 2018, Beike enables real estate agents to list second-hand property, new property, and rental property on its online platform. The company reportedly operates in 106 Chinese cities, with 360,000 brokers registered on its platform, and 1.2 million customers as of March 2020.
China’s real estate market has been booming in recent years, with residential sales reaching 13.94 trillion yuan (US$2.01 trillion) in 2019, up 10.3 percent year-on-year, according to data from the National Bureau of Statistics.
COVID-19 catalyzes Edtech interest
The global shift to remote learning amid the pandemic has accelerated investor interest in remote working solutions. Three of the five funding rounds of more than US$1 billion took place in the online education space.
Online education provider Yuanfudao’s US$2.2 billion fundraising marked the largest Edtech investment of 2020. The fundraising, announced in September, was split into two rounds—a Series G1 investment led by Tencent and a Series G2 investment led by DSTGlobal. This was the startup’s second fundraising in 2020 valuing the company at US$15.5 billion, having previously secured US$1 billion through a Series G investment led by Hillhouse Capital Group and Tencent in March.
Competition within the Edtech industry is heating up. Zuoyebang, one of Yuanfuao’s main competitors, raised US$1.6 billion in a Series E+ funding round including Alibaba Group, along with returning investors Tiger Global Management, SoftBank Vision Fund, Sequoia Capital China and FountainVest Partners.
EV startup boom
The global push toward a low-carbon future has turned investor focus to electric vehicles. This trend has entered the VC space—seen in Chinese EVstartup WMMotor’s US$1.5 billion Series D funding round, announced in September. WMMotor is widely seen as a credible challenger to US EV giant Tesla, which was given the go-ahead to manufacture cars in China in 2019.
The fundraising was led by Shanghai Automotive Industry Corp., followed by Baidu Inc and SIG Asia Investments LLLP. According to WMMotor, it is the largest-ever single round of financing for a domestic EV startup. China’s EV start-up ecosystem is growing rapidly, driven by investor interest, with WMMotor’s competitors Xpeng Motors and NIO recently listing on the US stock market.
China’s not alone. In February, US-based Volta Energy Technologies announced an initial closing on its industry veterans-directed venture fund focused on batteries, energy storage and related hardware and software for electric vehicles and renewable power generation.
The new fund closed with US$72.6M of committed capital in December and will continue to accept additional capital commitments through the end of Q1 2021, by which Volta expect to have collected an additional US$150 million, according to the company.
2021 off to strong start
VC fundraising is showing no signs of slowing down in 2021. Chinese grocery shopping app Xingsheng Youxuan’s US$3 billion Series D fundraising round, announced in February, is the largest VC round since 2017, according to Dealogic data.
The funding round, led by Sequoia Capital China, followed by Tencent Holdings, FountainVest Partners, Temasek, KKR, DCP, Primavera Capital and China Evergrande Group, reflects the boom in online grocery shopping during the pandemic.
Meanwhile in the US, data and AI start-up Databricks raised US$1 billion in a Series G funding round led by Franklin Templeton Investments—increasing its valuation to US$28 billion.
Databricks has stated it will use the funding to expand its data lakehouse technology.
By mid-March 2021, Spanish digital temporary staffing service JobAndTalent raised US$219 million, thanks to investments from SoftBank Vision Fund and BlackRock, and all following a US$107.4 million Series C top-up just announced in January.
The longer-term investment horizon of VC partly explains why the industry saw relatively little impact from the immediate shock of the COVID-19 crisis. Interest rates—rising, but still low—mean more funds available for private capital firms, as investors turn away from fixed income and credit securities.
A recent study conducted by Harvard Business School found that despite the economic uncertainty, 91 percent of venture capitalists expect their investments to outperform major equity indexes going forward.
Many high-growth tech companies have benefited from the pandemic, attracting investor interest due to the solutions they offer to consumers adapting to the “new normal.” Meanwhile, startups offering solutions to reduce global carbon emissions will become increasingly valuable, as calls for action from governments and consumers grow louder.
Indeed, a surge in VC fundraising is on the cards in 2021, as investors continue their search for high-growth potential.