Venture Capital, a key source of funds for developing businesses, ramped up last year to unprecedented levels.
According to the National Venture Capital Association and Pitchbook, which tracks venture capital startup funding, VC firms doled out $131 billion to 8.949 deals, breaking a record set 18 years ago, at $100 billion. That amount then helped finance the dot com era.
High valuations for today’s startups helped push last year’s cash haul to record levels. This despite a lack of startups that were launched last year, a 5 percent decline from the previous year.
“There is a lot of money competing for a finite amount of companies, and that’s pushing prices up,” said Cameron Sanfill, a analyst for Pitchbook, in an interview with business cable network CNBC.
Part of the reason for such investments is the dream of investors to give birth to potential billion dollar companies, or “unicorns.” Some investors hope for a return on investments when the company gets sold for a substantial profit. Several matured startups that have hit unicorn status, such as Airbnb, Lyft, Uber and Slack are poised to announce IPO’s this year.