It’s a good time to be a technology startup company, as the opportunity to raise venture capital — and lots of it — is perhaps the best it’s ever been.
Venture capital firms, such as Andreesen Horowitz, Sequoia Capital and Khosla Ventures, collectively have about $151 billion tucked into their wallets right now waiting to be invested in young companies. That’s a record high. As has always has been the case, the bulk of venture capital funding goes to technology and biotech companies.
Venture capital funded the launch of tech giants like Apple (AAPL), Intel (INTC), Amazon (AMZN) and Microsoft (MSFT). They’ve also funded the launch of a number of biotech companies such as Amgen (AMGN).
“Venture capital is very healthy right now, with capital being allocated at a pace more rapid than what we’ve seen historically,” said Cameron Stanfill, senior venture capital analyst at PitchBook, a financial data and software company covering capital investments.
Money Continues To Pour In
According to a first-quarter report by PitchBook-NVCA Venture Monitor, jointly produced by PitchBook and the National Venture Capital Association, venture capital firms are raising new funds at a pace that is likely to set a record this year, of more than $100 billion. Traditionally, this money comes from pension funds, insurance companies and wealthy individuals. It also comes from endowments, and sovereign wealth funds seeking a healthy return on their investments.
But with stock markets near record highs and numerous multibillion dollar initial public offerings making headlines, this is pulling in ever-larger pools of money coming from hedge funds and private equity firms that, historically, did not make funding in privately held startup companies a part of their normal investment routine.
“People are seeing these significant returns on investments being made and that’s driving more investments,” Stanfill said.
Venture capitalists invest large sums of money in startup companies in return for minority ownership stakes. Companies use the capital for research and development, hiring, and building the business. This model fuels the growth of the most innovative companies in the world.
Validating Venture Capital Investments
“These investments are being validated via exit markets — large IPOs and acquisitions — providing investors with a healthy return on capital,” said Stanfill.
Indeed, the first quarter was the busiest period for initial public offerings since 2000. Nine offerings raised $1 billion or more in the biggest quarter for billion-dollar IPOs ever.
Moreover, the average…
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