Despite economic uncertainties that marred last year, Venture Capitalists continued to put more trust in startups that have a significant value proposition. However, the funding was more concentrated in regions perceived as friendly to emerging businesses.
Data presented by Buy Shares indicates that the ten largest startups by venture capital funding raised $9.04 billion during Q4 2020. The money was raised across different series of funding. Manbang Group raised the highest amount at $1.7 billion while Relativity raised the tenth highest amount at $0.5 billion.
From the data, China dominated, taking up five positions. On the other hand, the United States accounts for 40% of the top ten most VC-funded startups of the period under review.
High VC funding despite uncertainties
The significant funding points to a recovering VC sector after a year of economic turmoil. When the pandemic began, there was speculation that there would be a slowdown in funding for the rest of 2020. Although the markets felt the pandemic’s initial shock, especially during Q1 and Q2, funding has recovered with the highlighted companies raising significant amounts.
Worth mentioning is that the VC funding was concentrated in later stages, driven mainly by uncertainties in the market. During the quarter under review, the second wave of coronavirus, the U.S. Presidential election, Brexit, and the China-U.S trade wars meant that investors were skeptical of putting more money at the initial funding stage.
Manbang was the largest funded startup, something linked to its value proposition. The company offers freight services to help connect truck drivers with shippers through mobile applications. By being a logistics company, investors are looking forward to profits as most startups in the space have indicated clear paths to profitability and access to a high customer pool. Furthermore, logistics companies received a lot of attention during the pandemic as they offered solutions to help people navigate the health crisis.
In the same perspective, startups in sectors that helped people navigate the pandemic have dominated the top ten list. The logistics, fintech, paramedical and education sectors, and online retail account for 70% of the ten most funded companies during the last quarter of 2020. These companies came in handy as most people were confined to their homes during the lockdown. Their role has led to a change in consumer behavior with investors seeking to capitalize.
Why Chinese startups are receiving VC attention
Chinese dominance of the list does not come as a surprise since the country has witnessed a startup boom in recent years. China has had a booming startup ecosystem in the previous years based on the amount of capital raised and the overall number of emerging companies. Unlike other regions, Chinese startups have strong support from the government alongside growing funding resources from the private sector and a massive talent pool. The country has therefore seen a surge in VC funding as they bet on a favorable environment.
New businesses in the Asian economic giant leverage on a conducive environment characterized by access to edge cutting technologies and innovation. Many global businesses strive to engage with Chinese startups for other reasons like new ecosystems, accelerating growth through external capacity, creating startup spinoffs, amplifying investments by accessing external resources, setting the standard in an emerging area, and becoming the perfect supplier of emerging companies.Read next
App Store Revenues Surged by 30% YoY and Hit $72.3B in 2020
Despite economic uncertainties that marred last year, Venture Capitalists continued to put more trust in startups that have a significant value proposition. However, the funding...