Start-ups raked in $836 billion in 2021, shattering funding records

The US accounted for about half of the world's funding total, with start-ups in the country raising about US$311 billion (S$418.7 billion). PHOTO: AFP

NEW YORK (BLOOMBERG) - Start-ups raised more venture capital funding than ever last year and more cities around the world started to look like tech hubs - although Silicon Valley remained firmly in the lead.

In 2021, investors more than doubled the amount of cash they handed out to start-ups, hitting US$621 billion (S$836 billion) globally and shattering the previous year's record, according to new data from research firm CB Insights.

The United States accounted for about half of the world's funding total, with start-ups in the country raising about US$311 billion, according to the report. The Silicon Valley region and New York retained their top spots for both the most money raised and the most deals completed.

Those tallies were helped along by a few big funding rounds for established companies. But the CB Insights data also showed an uptick in early-stage deal activity for cities that were not traditional tech hubs.

There were no figures for start-ups in Singapore but data shared by Enterprise Singapore in November showed that these firms raised more than $11.2 billion in the first nine months of 2021 - more than double the $5.5 billion secured in the same period in 2020.

Several Singapore start-ups, including logistics player Ninja Van and fintech company Nium, reached unicorn status.

Early-stage funding is an indicator of a healthy, growing start-up scene. CB Insights' research found that the portion of early deals shrank slightly in both Silicon Valley and New York last year, landing at 57 per cent of the total in both regions - their lowest points since at least 2015, when CB Insights began tracking the metric.

The percentage of early-stage deals in Austin, Texas, slipped for the second consecutive year, also landing at 57 per cent.

Meanwhile, Philadelphia's early-stage start-ups represented 63 per cent of total deals, up from 51 per cent. In Los Angeles and Dallas, which reached new funding highs last year, the numbers climbed to 62 per cent and 55 per cent respectively.

It is "not surprising" that founders are launching start-ups in more varied locations, said Mr Bilal Zuberi, partner at Lux Capital, which backs early- to growth-stage companies. The boom in remote work has made companies' home towns less important, he said, and the ease of video calls has made the process of deciding whether to back a start-up faster.

"If you're linked to New York, Austin or Silicon Valley, then it doesn't matter if you're based in Montana," Mr Zuberi said. "What matters most is what ecosystem a founder can tap into for executives and employees."

Miami was another city that boomed in 2021, helped along by several high-profile figures who fled Silicon Valley for warmer climes. Miami start-ups raised US$4.6 billion in 2021. That is more than double the previous year's total and a ninefold increase from 2015. The share of early-stage start-ups capturing deals in the city has also increased in recent years, hitting a high of 50 per cent for the first time in 2021.

The trend also extended to hiring. Stripe, the world's third-most valuable tech start-up, said about three-quarters of its hiring during the last three months of the year was outside the San Francisco Bay Area and Seattle, up from 39 per cent in early 2019. Cryptocurrency exchange Coinbase said 89 per cent of its recruits were outside the Bay Area during that period, up from 30 per cent in early 2019. Airbnb said it saw a similar pattern.

In terms of start-up funding, investment gains went far beyond US cities. For the first time since CB Insights started tracking the data, there were more funding rounds in Asia than any other region, with 12,485 deals - though the US was still the leader in terms of the dollar value. Start-ups in Silicon Valley alone raised US$105 billion last year, making it easily the world's top metro for funding.

Aspects of life in the Valley cannot be easily replicated, said Ms Nina Achadjian, a partner at Index Ventures.

"Silicon Valley still remains a centre of gravity due to its strong density of tech talent, the world-class research labs at top universities and the physical location of some of the world's (venture capitalists), who despite opening offices on the East Coast are still are headquartered in Silicon Valley," she said.

• With additional information from The Straits Times

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