How to better understand VC dynamics with a new stage: Venture Growth

On Dec 3, 2022

The venture market has grown to a scale that was likely unimaginable a decade ago. And while doused with hyperbole, that statement is likely true for some around the industry.

In 2021, more than $700 billion was invested in global startups. At the end of the global financial crisis, annual investment had fallen below $40 billion.

The traditional risk profile of VC has also widened, allowing investors with less risky strategies to put capital to work in VC.

The lengthening of the venture lifecycle has generated a wide variation in the risks associated with what has been our late stage, which is defined by categorizing Series C+ deals into the same bucket.

But late-stage companies can be at very different phases of development, either observably or implied. Our research showed the proportion of companies going out of business after a Series F round, for example, was much lower than Series C companies, yet they both were categorized as late-stage companies.

This growth created challenges for analysis. The highest-valued companies like Stripe and Bytedance were in a much different business situation than even those around the median, which stood at $98 million in 2021.

The top decile valuation of the late stage was $130.1 million in 2009; last year that figure ballooned to $1.4 billion. The spread between the top and bottom decile valuation had become, with rounding, $1.4 billion.

To account for these changes, we have created a methodology for a new VC stage: Venture Growth.

This methodology will generate a stage that encompasses the latest deals in the venture market, sitting on top of our late stage. It also creates an area of the venture market that shows a different risk than is typical; more crossover investment occurs in this stage, and the higher valuations and deal sizes coincide with lower failure rates.

The venture growth dataset contains just over 4% of deal count on a yearly basis, but those deals account for more than 20% of deal value making it into the global startup market.

Venture growth will be incorporated into our VC reports and analyst research moving forward. It will be also included as a separate stage of VC within the broader suite of PitchBook products in the future.

Click to download the free research: Introducing Venture Growth

As always, please reach out with any questions or feedback.