It’s just dipping into private markets rather than remain in the public realm.

But some might point out that the capital from hedge funds and mutual funds isn’t really “new” or “unconventional.” Because companies are scaling faster, they’re achieving the same size in the private markets that companies would have achieved in the public markets in prior years-the money isn’t “new,” the argument goes.

Late-stage valuations have risen at a 13% compound annual growth rate since 2001, and already in 2015, as of mid-March, 10 additional companies have raised capital at valuations greater than $1.0 billion.įew would argue against the fact that late-stage financing rounds have become fiercely competitive and capital inflated. While seed and Series A prices remain slightly below their averages for the past 10 years (hovering around $10 million), the median valuation for later stage companies jumped 123% in 2014 to $270 million, according to VentureSource data. And they’ve participated in at least 37 pre-IPO funding rounds totaling about $5.6 billion from 2012 to 2014, according to IPO underwriter Pacific Crest Securities.Īs a result of delayed IPOs and additional sources of capital, late-stage startups have seen explosive valuations and large fundraises in later financing rounds. Rowe Price, Fidelity, and others traditionally invested in the public markets have been noted to pay 15-18x projected sales for the year ahead in private funding rounds, compared with 10-12x five years ago. According to Bloomberg Business, firms such as Wellington, T.

Hedge funds and mutual funds have taken notice of recent venture-backed exit payouts (see Alibaba’s record-breaking $21.8 billion IPO). Reason #2: There is a seemingly infinite amount of available private capital.

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