'Investor Confidence Is Booming': VCs Poured $69 Billion Into Startups in the First Quarter of 2021

Ben Bergman

Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.

'Investor Confidence Is Booming': VCs Poured $69 Billion Into Startups in the First Quarter of 2021

It is a great time to be a startup founder, with soaring valuations and investors tripping over themselves to get a piece of startups. As hot as the startup scene was last year, it has gotten even hotter this year, with a slew of megadeals pumping even more money into the biggest startups as they prepare to go public in the frenetic IPO market.

Overall, investors poured $69 billion into tech companies last quarter, a staggering 92.6% increase over the same quarter last year, according to data released Wednesday by PitchBook and the National Venture Capital Association.

Three-quarters of all investment flowed to late stage rounds, the highest percentage since 2010. There were 167 megadeals of $100 million or more, for a total of $41.7 billion raised in the first quarter. By comparison, megadeals accounted for $76.6 billion raised during all of last year.

In the Los Angeles area, SpaceX hauled in another $850 million in February. There was also ServiceTitan's $500 million financing last month, which makes the Glendale company that makes software for plumbers and carpenters worth $8.3 billion.

Culver City-based Sweetgreen raised $156 million in February, though the healthy fast casual chain was reportedly forced to do a flat round after the pandemic year that saw its revenues plummet.

At the other end of the startup life cycle, investors nationally focused on quality over quantity. There were only 722 first financings reported, which is a historically low number, but those deals averaged $4.7 million a piece, which was a new record high.

That benefited companies like Artie, a video game platform developer that pulled in $10 million in a seed round this February.

In total, 315 Los Angeles startups raised a total of $6.7 billion in the first quarter, a slight decrease in the number of venture investments but a 75% increase in deal value over the same quarter last year.

As has historically been the case, Los Angeles trailed not only the Bay Area in deal value ($25.5 billion) but also New York ($10.2 billion) and Boston ($7.9 billion).

The dot.LA VC Sentiment Survey also found higher valuations. Seventy-seven percent of respondents said they saw higher valuations last quarter, but that did not stop them from closing deals.

The billion dollar question is whether, with so much money sloshing around, we are in a bubble that is going to burst. That is hard to judge now; it takes years to know if startups will succeed – whether they will be the next Airbnb or the next Quibi.

But by at least one metric there are fewer quality startups to go around. Dropbox, the secure document sharing platform that many startups use to share pitch decks, said this month the demand for decks continues to outpace the number of investment opportunities that are available. Founders are also shopping their decks around more, which is an indication they have more options of where to get capital and can be choosy.

In other words, it is very much a founder's market.

"We knew the first quarter would represent the beginning of a rebound, but I don't think anyone expected VC and startup activity to be this high; investor confidence is booming and beginning to outpace the supply of startups seeking fundraising," Russ Heddleston, DocSend co-founder and CEO, said in a post sharing the data.

However, investors contend that the market frenzy is not just driven by a flood of capital but also dramatic shifts in consumer behavior over the past year.

"In 2020, consumers spent over $860 billion online with U.S. merchants, an astonishing 44% year-over-year increase," said Deborah Benton, founder and managing partner of Willow Growth Partners, an early-stage VC firm that invests primarily in digital first brands that are benefiting from an accelerated shift to online shopping.


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Genies Wants To Help Creators Build ‘Avatar Ecosystems’

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Genies Wants To Help Creators Build ‘Avatar Ecosystems’

When avatar startup Genies raised $150 million in April, the company released an unusual message to the public: “Farewell.”

The Marina del Rey-based unicorn, which makes cartoon-like avatars for celebrities and aims to “build an avatar for every single person on Earth,” didn’t go under. Rather, Genies announced it would stay quiet for a while to focus on building avatar-creation products.

Genies representatives told dot.LA that the firm is now seeking more creators to try its creation tools for 3D avatars, digital fashion items and virtual experiences. On Thursday, the startup launched a three-week program called DIY Collective, which will mentor and financially support up-and-coming creatives.

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Here's What To Expect At LA Tech Week

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Here's What To Expect At LA Tech Week

LA Tech Week—a weeklong showcase of the region’s growing startup ecosystem—is coming this August.

The seven-day series of events, from Aug. 15 through Aug. 21, is a chance for the Los Angeles startup community to network, share insights and pitch themselves to investors. It comes a year after hundreds of people gathered for a similar event that allowed the L.A. tech community—often in the shadow of Silicon Valley—to flex its muscles.

From fireside chats with prominent founders to a panel on aerospace, here are some highlights from the roughly 30 events happening during LA Tech Week, including one hosted by dot.LA.

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Inflation Reduction Act Officially Passes the Senate, Revamping Electric Vehicle Pricing

David Shultz

David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.

The Capitol at Sunset
Courtesy of Mike Stoll via Unsplash

Over the weekend Senate Democrats officially passed the Inflation Reduction Act in what amounts to President Biden’s biggest legislative win so far. The bill includes a host of broad-spectrum economic policy changes and completely reworks the subsidies for electric vehicle purchases. The law still has to get through the House, but this should be a much smaller hurdle.

dot.LA covered the bill in depth as it neared the goal line at the end of July, and the final iteration doesn’t change much. To recap:

1. The rebate total stays $7,500 but is broken into two $3,750 chunks tied to how much of the car and its battery are made in the US.

2. The manufacturer caps are eliminated, meaning even EV companies that have sold more than 20,000 vehicles are once again eligible.

3. Rebates will now only apply to cars priced below $55,000 and trucks/SUVs below $80,000

With the new system placing a renewed emphasis on American manufacturing and assembly, the calculus of which vehicles cost how much is still being worked out. The most comprehensive (but unofficial!) list I’ve seen has come from Reddit user u/Mad691.

In addition to the EV rebate program, the bill also includes a number of economic incentives aimed at curbing emissions and accelerating the country’s transition to electric vehicles.

There’s $20 billion earmarked for the construction of new clean vehicle manufacturing facilities and $3 billion will go help electrify the USPS delivery fleet. Another $3 billion will go to electrifying the nation’s ports. Then there’s $1 billion for zero-emission trucks and buses.

Now that the bill is about to be codified into law, VC investment in the sector might heat up in response to the new money flowing in.

“I do anticipate more climate funds standing up to invest in EV infrastructure,” says Taj Ahmad Eldridge, a partner at Include Ventures and the director at CREST an ARES Foundation initiative with JFF/WRI that aims to provide training for people in the new green economy. “However, we do see funds being a little more thoughtful on diligence and taking their time to fund the right investment.”

The sentiment seems to be shared across Southern California. ChargeNet CEO and Co-Founder Tosh Dutt says the Inflation Reduction Act “super charges” the company’s effort to build infrastructure across the country.

“This investment accelerates the transition to renewable energy and gives companies like ChargeNet Stations the confidence to expand more rapidly, especially in underserved communities,” says Dutt.

For Rivian, the bill’s passage has left would-be customers in a sort of limbo. Because many of their models will exceed the $80,000 cap for trucks and SUVs after options, customers who’ve preordered are scrambling to sign buyers’ agreements to take advantage of the current EV rebate scheme which doesn’t include price caps. As I noted in the previous article, if you buy an EV before the bill is signed, you’re eligible for the current rebate system even if the vehicle isn’t delivered until 2023. Any existing contracts under the current system will remain valid.

With the legislation seemingly on the fast track to become law, it’s unclear whether or not Rivian will expedite the purchasing process to allow customers to sign the buyers’ agreement before the new rebate program becomes the law of the land. Tick tock!