Tech startup funding in the United States has seen an increase of over 800% in financing over the $100 mark since 2016, according to a report by the Wall Street Journal.
With some of the world’s largest investment funds showing an increasing interest in tech startups in Silicon Valley and elsewhere in the US; traditional venture capitalists have seen their relevance in the industry reduced.
Let by these new and hungry investors, startup financing in the US during the first half of 2021 hit a record $150 billion. This milestone achieved during only 6 months is enough to completely eclipse all of the funding received by tech startups during periods of 1 year before 2020.
Unlike venture capitalists, large assets firms have fewer demands when it comes to funding startups, which makes them more appealing to funders as they are offered more freedom when it comes to deciding their startups’ future.
According to the report, half of the top 10 investors in startup by dollar volume are non-traditional venture investors, with the number of startups relying only on nontraditional VC investors has doubled over the past 10 years.
Venture Capital firms have started relaxing their requirements when it comes to auditing, in an attempt to adapt to the changing landscape in the United States. While there is more money than ever before when it comes to startup funding, the quick change experienced by the industry has made it difficult for investors to adapt efficiently.
However, founders have continuously gained more leverage when it comes to negotiating, which has leveled the field in some regards. Andy Boyd, a Fidelity Investments executive referred to this shift by stating:
“I have to be flexible and give much more than I used to: insights, data, connections and to make these connections prior to any investment opportunity.”
The impact of nontraditional investors in the tech startup industry (especially fintech) has also resulted in deals led by them resulting in valuations that are five times higher on average than those led by traditional venture capitalists.