For the first time in recent years, more money is now going into tech startups than is coming out in the form of exits.
Using CB Insights data, we analyzed the amount of capital being invested into US VC-backed tech companies each year against aggregate exit valuations.
When we plot the numbers against each other, we see that aggregate exit valuations outpaced total funding in each of the five years since 2010. In 2012, a peak year, the total value of exits was $149B, or more than the 8x the $18.6B invested in US tech startups that year. But the gap between total funding and exits began to close in the next two years, and in 2015 total funding leapt ahead of annual aggregate exit valuation by $16B+.
This trend is driven by companies staying private longer and raising mega-rounds in private markets, yielding companies that have raised sizable war-chests with valuations that are only validated on paper. Also, annual funding has continued to grow even as exits have stagnated.
Some interesting points to note:
- More than $42B has been invested into VC-backed tech companies in 2015 in the first three quarters, already surpassing investment in all of 2014, and up 207% over 2010 funding, with a quarter still left in the current year.
- After 2010, exits saw much larger annual aggregate valuations, largely due to several breakout exits including Groupon’s ($17.8B in 2011), Facebook’s ($104B in 2012), Twitter’s ($14B in 2013), and Whatsapp’s ($19B in 2014). 2015 has yet to see a VC-backed tech exit in the US above $10B, with Fitbit being the closest at $4.1B (and no others above $2B at exit).
- 2011, 2013, and 2014 saw aggregate annual exit valuations that were 2x to 3x the amount of total funding into VC-backed tech companies. 2012 was an outlier, with a total exit value that was 8x funding, due to Facebook’s exit.
While 2015 may still yield some large exits, it’s also probable that large funding rounds will continue, meaning the $16B gap is unlikely to close.
*Analysis was of exits with disclosed valuations and rounds with disclosed amounts
**Analysis did not include debt or grant rounds, and only included first exits and the funding rounds leading up to that
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