Child Prodigies

Image source: Shutterstock Vector Juice, Behance Deep Lab

What's going on?

They grow up so fast: data out on Thursday showed venture capital firms invested a record amount of cash into Americas startups last year.

What does this mean?

Venture capital (VC) firms invest in private early-stage companies in hopes theyll grow up big and strong or at least big enough to list on the stock market and make investors a serious profit. And filled with confidenceafter a wave of very lucrative initial public offerings, those firms plowed a record $330 billion into US startups last year. Thats nearly double 2020s total, and helped push up their global investments by more than 90%. Americas VC funds have more than enough cash to back thenextbright young thing too: they saw a record influx of cash last year, as rock-bottom interest rates made alternative investments including VCs a better bet for returns.

Why should I care?

The bigger picture: VCs might be overpaying.
All that demand has pushed up valuations of the pandemics heavy-hitters, like business software and ecommerce providers. Just look at Stytch: the two-year-old authentication platform hit a $1 billion valuation in November, which means its trading at more than 1,000x its yearly revenue. Compare that to the average publicly listed business software companys 16x, and youd be forgiven for thinking VC firms might struggle to make a profit later on.

Zooming in: VCs next frontier.
VC firms are paying a lot of attention to and a lot of cash for crypto startups: OpenSea announced on Monday that it raised $300 million in VC funding, valuing the NFT marketplace at $13 billion. Thats a near nine-fold increase from its valuation just six months ago, and its not hard to see why: NFT evangelists did spend over 600 times more on the platform last year than they did in 2020.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Oh Baby

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.