The new trend in startup fundraising: fewer, larger rounds

Last year, Uber raised two rounds of funding, each
exceeding a billion dollars. During that time, Airbnb
convinced investors to pony up $475 million for its
hotel alternative, and Lyft closed a $250 million
round to take on the aforementioned on-demand
car service.

For late-stage startups, 2014 was a very good
year for raising money. According to research firm
Pitchbook, the median round for series D or later
was $29 million, an 80% spike from $16.1 million
in 2013. Earlier fundraising rounds—seed, series A,
series B, and series C—saw gains as well.

Cumulatively, startups raised $87.74 billion
globally last year, about $30 billion more than
2013, but there were also fewer deals overall. In
2014, Pitchbook recorded about 7,700 fundraising
deals, about 1,700 fewer than the year prior.
Senior analyst Andy White says this shift can be
partially attributed to non-traditional players
betting on startups. “Big asset managers are
participating in huge rounds, typically pre-IPO in
order to get their foot in the door before the
company goes public,” he tells Quartz, noting this
is a relatively new trend. Fidelity, for example, led
Uber’s $1.2 billion series D round in June.

Biotech and pharmaceuticals companies are further
pushing the trend toward larger late-stage rounds.
Developing drugs “is extremely expensive, so they
need a ton of capital up front,” he says. “For the
most part, no one’s ever heard of these companies unless you work in
the space.”

While they pale in name recognition to Pinterest
($200 million raised last year) or Instacart ($210
million), their numbers are similarly impressive.
The bigger biotech deals of 2014 include Pathway
Genomics ($500 million), Moderna Therapeutics
($450 million), and Intarcia Therapeutics ($200

Author : Alice Truong



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