Mega Rounds of 100M or More Are Now Rare in Venture

Rounds with $100M raised are now rare across venture - why should we care?

First, the stats.

Across all startups on Carta, there were 157 rounds of $100M or more raised in Q4 2021.

That number for Q3 2023 was 13 - not awesome.

Btw, there are many more companies on Carta now than in 2019—so the percentage of mega-rounds is even smaller.

Now I can hear many of you offering good reasons why this a welcome change or perhaps a "return to normal". Yes—things got too hot in 2021, the number of major rounds was unreasonable, and we shouldn't necessarily even want to return to that fever pitch anytime soon.

But early-stage startups are impacted by the lack of these mega-rounds in a myriad of ways.

𝟭) 𝗨𝗻𝘂𝘀𝗲𝗱 𝗗𝗿𝘆 𝗣𝗼𝘄𝗱𝗲𝗿

By some estimates, there is around $250 billion in committed capital just waiting to be deployed into startups. Well, you can't deploy that level of firepower into seed-stage companies. The math just doesn't work.

You need large, late-stage rounds to be happening at a healthier pace in order for that dry capital to become working capital.

𝟮) 𝗙𝗼𝗹𝗹𝗼𝘄-𝗢𝗻 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀

VCs at the early stages are making calculated bets on companies and founders, sure. But they are also taking into account the market potential for various sectors. If a part of the venture market is missing (eg. growth rounds) for a specific industry, early investors will be less likely to take bets on companies in that industry. DTC is a perfect example.

Some may say (and in this instance I agree) that most DTC businesses shouldn't be taking venture capital in the first place. But there's no denying that a lack of growth capital hinders even early stage startups in a given sector.

𝟯) 𝗘𝘃𝗲𝗻𝘁𝘂𝗮𝗹 𝗜𝗣𝗢𝘀

I recently took a look at the rounds raised by companies who went on to IPO from the Carta dataset. 46% of eventual IPO companies had a round of at least $75 million in their history (about 30% had a $100M round).

Major late-stage rounds are a pretty good sign of becoming a player in the public markets - seems obvious. The lack of exits in today's climate are putting a cap on venture as whole and these mega-rounds returning may signal the impending return of useful IPOs (or maybe vice-versa).

It's possible that the structure of VC is changing so much that mega-rounds like these will become dinosaurs as companies take in less outside capital and fund growth through profits more frequently. But achieving venture-scale outcomes without a lot of cash still strikes me as a remote possibility.

Rooting for the return of the mega-round!

#cartadata #venturecapital #startups #founders #fundraising #megaround