T The global investment horizon horizon at an early stage becomes more and more important. Only four years ago, investors invested less than $ 10 billion per quarter in early-stage deals (Series A and B). However, the last two quarters have all exceeded double this level. Meanwhile, the first quarter of 2018 seems to be a record, Crunchbase planning to invest $ 25 billion in the early stages of globalization.
But if the overall investment increases, the share of the United States decreases. A few years ago, North American startups reliably received at least two-thirds of early-stage global investment. No more. In the last three quarters, North America's share has declined to less than half, as illustrated by the chart below:
The rise of the startup scene in China, combined with the local investors' penchant for the A-series jumbo rounds, largely explains this change. At-risk ecosystems in Southeast Asia, Brazil and elsewhere are also growing and therefore represent a larger share of early global investments.
Huge series A towers are huge in China
Before we venture further, it should be noted that while we associate Series A with start-up companies, this is not always the case. Some of the world's largest Series A tournaments have been awarded to relatively mature companies that were previously seeded or from large companies.
Recent data shows that both the United States and China have their share of spin-out and that older firms are gobbling up the so-called first rounds. OneConnect and Ping An Healthcare, subsidiaries of Chinese insurance giant Ping An, which raised $ 650 million and $ 1.2 billion respectively, are examples of such activity.
Venture capitalists in China have also invested much more in Series A and B deals than their US counterparts. An analysis of Crunchbase News revealed that the average round of Series A for a China-based startup in 2017 was $ 32.8 million, just over three times the average size of Series A's American society.
The momentum persists in 2018. Until this year, at least 12 Chinese companies have raised rounds of financing of $ 100 million or more, totaling more than $ 4 billion (see list) . Recipients of some of the greatest towers include:
- Ziroom, a Beijing-based apartment leasing service provider, raised $ 621 million in its Series A.
- Black Fish, a consumer finance platform, raised a $ 145 million series A round.
- Pony.ai, a self-driving start-up with major operations in both Silicon Valley and China, raised a $ 112 million Series A.
U.S. is not outdone in the great tours A and B, ie
The United States also had a dozen startups (plus Pony.ai) bring in $ 100 million or more in the early rounds of this year. However, the cumulative total of these startups – about $ 1.8 billion – is less than half that of their Chinese counterparts.
As we have already mentioned, many of the most important beneficiaries of the initial phase are mature firms or mature companies. The list includes two companies founded in 2009 that have closed Series B tours of about $ 100 million this year: Joby Aviation, a developer of electric aircraft, and Vacasa, a property management company. holidays.
Health spin-outs are also attracting big dollars, including Celularity, a developer of placental stem cell therapies, and Viela Bio, a developer of therapies for autoimmune diseases.
But while big laps are still in the works, the number of preliminarily rounds of all sizes has decreased a little over the past four years. Over the last two quarters, Crunchbase plans to close less than 900 rounds of financing early in the period. On a global scale, however, the number of start-up phases tends to increase:
Part of the trend is that funding dynamics at an early stage have changed over the years. In the past, Series A and B were designed to enable startups to develop functional prototypes, target targeted market segments and attract the first customers. Scaling up nationally or internationally was generally for later stages, after a company has demonstrated a demand and operational product.
Nowadays, markets are changing faster, and it is not uncommon to see startups move in a few quarters from concept to scale. Just look at Bird, the scooter sharing company that raised $ 115 million after a few months of operation with a business model designed to
terrorize pedestrians and motorists provide a last-mile transit solution.
The entire bicycle, scooter and moped industry has flourished in a few years, with big early career tournaments. And it's an area where China was the first leader for scaling up. But fintech, biotech, agtech and other technologies also provide fertile ground for important rounds of early stage financing.
Should we worry?
So, is the declining share of early stage financing in North America a source of concern for founders and investors in the region? Or is it a predictable development following economic growth in China and elsewhere?
We will not try to answer this question here, but others have tried. Michael Moritz, of Sequoia Capital, was the subject of much criticism earlier this year for a dissertation on what he perceived as a superior work ethic among Chinese entrepreneurs compared to their American counterparts.
By simply following the money, here's what to remember: Investors globally have decided that the beginnings are far more important than they thought few years ago. And while investors are investing a little more in mature ecosystems like the US and Silicon Valley, they are investing a lot more in China and other regions with underdeveloped capital markets relative to their size. and their technology.