Although, the COVID-19 pandemic led to significant fluctuations in various industries, the North American venture capital deal values witnessed positive growth in 2020. The total deal value reached USD 182 billion by 2021’s end, up 29% from 2020, with an annual average growth rate of 14% since 2016. However, while total deal value increased compared with 2020, the number of transactions declined. About 6,564 venture capital deals were completed in North America during 2020, down 5% from 2019, and down further from 2014’s peak of nearly 9,000 deals.
The early part of the year played out as expected venture capitalists shied away from the riskier ends of the deal spectrum as the initial uncertainty of the COVID-19 pandemic took hold. There were fewer deals in the earlier seed and angel stages, with a shallower decline in later-stage capital injections.
As expected, COVID-19 did hit the VC investment landscape. Over the course of the past three months, only 541 VC deals were made in the seed to Series B stages, compared with 964 deals in the same period in 2019, 44 percent decrease in deals. The change varies across investment types, having the biggest impact on seed-stage deals, which dropped by 57 percent, down from 483 deals in 2019 within the three-month time period, to 209 deals in the March - June 2020 period.
North American venture funding went to the more ‘pandemic-friendly’ sectors. Biotechnology companies, for example, attracted USD 23 billion in funding last year, up 74%. Some of the more forward-looking industries also received significant shares of capital. As in the two years prior, software companies attracted the most venture capital last year, at USD 51 billion, primarily because of the sector’s diversified nature. Other large-ticket deals also related to self-driving cars, as well as secure payment processing and online gaming. On the surface, these deals may seem a response to the challenges that COVID-19 has created, but in reality they’re building on pre-pandemic trends, which will continue long after the virus is under control.
Canada closed out 2021 with its second-highest level of venture capital investment ever. USD 3.8 billion was invested in Canada in 2021, a 22 per cent decline from the record-smashing USD 4.9 billion in 2020, but strikingly 15 per cent above USD 3.3 billion in 2019.
Business-to-business (B2B) solutions were suddenly in high demand to meet the needs of companies looking for ways to better connect their remote workforces and improve or provide online sales or digital service capabilities.
Fintechs, especially in payments and lending services, gained even more traction when consumers and businesses wanted to avoid handling cash and shifted to e-commerce. The sudden shift to remote teaching and online learning also sparked interest in Edtech firms. Funds poured into this previously underappreciated asset class. Financial services companies are striving to digitize their operations and implement new technologies to better collect and collate data on their customers, identify and monitor for fraud and money laundering, and make their operations more efficient.
Among the top exits in 2021, several other mid-cap Canadian companies in the biotech and pharmaceutical sectors went public in 2021, all on the Nasdaq. The trend points to Canadian companies bypassing the Canadian market and listing directly in US exchanges and highlights the need for participation from large banks and investment firms to finance and support growing Canadian deals.
U.S. fintech funding in 2021 outpaced 2020 in both amount raised and volume of transactions, despite the COVID-19 pandemic. Though the virus wreaked economic havoc in 2020, interest rates remained relatively low, consumers embraced digital channels and the routes for venture capital firms to exit their investments, be it public offerings or M&A, remained open. Each of these factors likely contributed to the USD 17.8 billion that investors poured into private U.S. fintech companies in 2021, via 681 transactions, up from USD 14.8 billion and 539 transactions in 2020. Investors likely sensed that the pandemic could end up benefiting fintech companies, as consumers suddenly needed to do financial transactions online.
By fintech sector, investment and capital markets companies garnered the most funding in 2021, with Robinhood contributing about 27% of the total. Insurtech companies and payments companies were also popular targets for VCs, with each sector raising upwards of USD 4 billion. The United States FinTech market is growing at an incredible pace. Digitally aware and active consumers are becoming more and more open to adopting FinTech into their daily lives.
North America venture capital market is highly competitive, with the presence of both international and domestic players. The market studied presents opportunities for growth during the period, which is expected to further drive the market competition. With multiple players holding significant shares, the market studied is competitive.
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The early part of the year played out as expected venture capitalists shied away from the riskier ends of the deal spectrum as the initial uncertainty of the COVID-19 pandemic took hold. There were fewer deals in the earlier seed and angel stages, with a shallower decline in later-stage capital injections.
As expected, COVID-19 did hit the VC investment landscape. Over the course of the past three months, only 541 VC deals were made in the seed to Series B stages, compared with 964 deals in the same period in 2019, 44 percent decrease in deals. The change varies across investment types, having the biggest impact on seed-stage deals, which dropped by 57 percent, down from 483 deals in 2019 within the three-month time period, to 209 deals in the March - June 2020 period.
North American venture funding went to the more ‘pandemic-friendly’ sectors. Biotechnology companies, for example, attracted USD 23 billion in funding last year, up 74%. Some of the more forward-looking industries also received significant shares of capital. As in the two years prior, software companies attracted the most venture capital last year, at USD 51 billion, primarily because of the sector’s diversified nature. Other large-ticket deals also related to self-driving cars, as well as secure payment processing and online gaming. On the surface, these deals may seem a response to the challenges that COVID-19 has created, but in reality they’re building on pre-pandemic trends, which will continue long after the virus is under control.
Key Market Trends
Canada VC Growing Market
Canada closed out 2021 with its second-highest level of venture capital investment ever. USD 3.8 billion was invested in Canada in 2021, a 22 per cent decline from the record-smashing USD 4.9 billion in 2020, but strikingly 15 per cent above USD 3.3 billion in 2019.
Business-to-business (B2B) solutions were suddenly in high demand to meet the needs of companies looking for ways to better connect their remote workforces and improve or provide online sales or digital service capabilities.
Fintechs, especially in payments and lending services, gained even more traction when consumers and businesses wanted to avoid handling cash and shifted to e-commerce. The sudden shift to remote teaching and online learning also sparked interest in Edtech firms. Funds poured into this previously underappreciated asset class. Financial services companies are striving to digitize their operations and implement new technologies to better collect and collate data on their customers, identify and monitor for fraud and money laundering, and make their operations more efficient.
Among the top exits in 2021, several other mid-cap Canadian companies in the biotech and pharmaceutical sectors went public in 2021, all on the Nasdaq. The trend points to Canadian companies bypassing the Canadian market and listing directly in US exchanges and highlights the need for participation from large banks and investment firms to finance and support growing Canadian deals.
US Fintech Boost
U.S. fintech funding in 2021 outpaced 2020 in both amount raised and volume of transactions, despite the COVID-19 pandemic. Though the virus wreaked economic havoc in 2020, interest rates remained relatively low, consumers embraced digital channels and the routes for venture capital firms to exit their investments, be it public offerings or M&A, remained open. Each of these factors likely contributed to the USD 17.8 billion that investors poured into private U.S. fintech companies in 2021, via 681 transactions, up from USD 14.8 billion and 539 transactions in 2020. Investors likely sensed that the pandemic could end up benefiting fintech companies, as consumers suddenly needed to do financial transactions online.
By fintech sector, investment and capital markets companies garnered the most funding in 2021, with Robinhood contributing about 27% of the total. Insurtech companies and payments companies were also popular targets for VCs, with each sector raising upwards of USD 4 billion. The United States FinTech market is growing at an incredible pace. Digitally aware and active consumers are becoming more and more open to adopting FinTech into their daily lives.
Competitive Landscape
North America venture capital market is highly competitive, with the presence of both international and domestic players. The market studied presents opportunities for growth during the period, which is expected to further drive the market competition. With multiple players holding significant shares, the market studied is competitive.
Additional Benefits:
- The market estimate (ME) sheet in Excel format
- 3 months of analyst support
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Table of Contents
1 INTRODUCTION
4 MARKET DYNAMICS
5 MARKET SEGMENTATION AND OUTLOOK?
6 COMPETITIVE LANDSCAPE
Companies Mentioned (Partial List)
A selection of companies mentioned in this report includes, but is not limited to:
- Sequoia Capital
- Khosla Ventures
- Accel
- New Enterprise Associates
- Real Ventures
- iNovia Capital
- OMERS Ventures
- Georgian Partners
- Kleiner Perkins
- Bessemer Venture
- Intel Capital*
Methodology
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