A Predictable Downturn in the Economy
The Role of Venture Capital
"Despite all the economic downfall, the current state of the VC industry is growing and healthy."
The Potential of Venture CapitalIn the past couple of years the number of limited partners, LPs, has increased due to the observation that this asset class can drive outsized returns. Essentially, this means that when VCs make the right decisions and choose the correct company, the returns can be huge for investors. A lot of capital has really come into the market and continues to grow more globally. The pandemic caused many market disadvantages, but it also shined the light on the fact that great innovation can happen anywhere in the world. Successful companies that are worth tens of billions of dollars can be built on a global basis. Over $612 billion in venture capital activity was invested globally in 2021—a 108% increase from the year before. This excitement about the VC industry is occurring because data from the initial public offering market, the S&P 500, and the public markets reveal that startups which began 10 years ago are now worth tens of billions, or even sometimes hundreds of billions. These trends really show what a company or startup can be when things go right. Not coincidentally, as reported by Haley Brian in her 2021 report on the VC industry, the number of VC-backed companies - in the world - reaching more than $1 billion in post money valuation has substantially increased in recent years.