Last Year, US Early-Stage Startup Investment Reached 110 Trillion Won... 'All-Time High'

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Last year, the investment scale in early-stage startups in the United States reached a record high of $93 billion (approximately 110 trillion KRW), the Wall Street Journal (WSJ) reported on the 2nd (local time).

According to WSJ citing PitchBook data, as of the 15th of last month, $93 billion (approximately 110 trillion KRW) was invested in seed-stage and early-stage startups in the U.S. This amount is three times that of five years ago. The total investment in 2020 was $52 billion, and in 2016 it was $30 billion.

A representative company is the U.S. low-cost coffee chain Blank Street. Just a few years ago, low-cost coffee chains found it difficult to attract investors, but due to the recent boom in the early startup market, it secured investments three times within a year. Blank Street raised $35 million just three months after receiving a $25 million (approximately 2.97 billion KRW) investment.

Vinay Menda, co-founder and CEO of Blank Street, said, "It would not have been this easy to raise funds in the past."

WSJ reported, "Over the past year, funds flowing into high-risk early-stage startups have noticeably increased," adding, "Investments are even made before these startups hire employees or launch products."

This contrasts with previous startup investments, which were mostly made in companies that had undergone business model testing.

Although more funds flowed in, the number of startups receiving new funding did not change significantly, causing inflated company valuations. The median valuation of seed-stage and early-stage startups last year was $26 million (approximately 3.1 billion KRW), significantly up from $16 million the previous year and $13 million in 2016.

Investors see high growth potential in startups. Many venture companies are achieving the best returns since the dot-com bubble, thanks to rapidly growing software sectors and cloud-based data solution companies like Snowflake, as well as food delivery services like DoorDash.

Notably, funding for prominent companies is completed within just a few weeks.

Some voices argue that startup investment is overheated. Sam Altman, former president of Y Combinator, a leading Silicon Valley startup incubator that invested in DoorDash and Airbnb, predicted that venture capital returns in the 2020s will fall far short of those in the 2010s.

Mars Suster, partner at Upfront Ventures, said that early-stage companies he saw in the mid-2010s were valued around $15 million, but now they are about $25 million.

WSJ stated, "Investments are being made earlier and faster, mainly based on the founder's ability and the initial hires rather than product quality."

This content was produced with the assistance of AI translation services.