How companies can bypass venture capital funds in the fight for promising startups

Technology has been one of the factors that has led to the boom in venture capital investment of the last decade. From 2010 to 2020, tech start-ups accounted for the majority of venture capital funding for all deals from independent VC firms and corporate venture funds, according to Bain analytics based on the Startup Investment Cruncher database. Their share in total investment ranged from 61% to 72% (in 2020 it was 62%).

From 2018 to 2020, the total amount of venture capital investment in technology decreased by 13%. This happened against the backdrop of a general decline in venture capital funding - the first since 2012. However, during the covid-19 pandemic, there has been a quick and dramatic recovery in technology venture investment. Recently, we have seen a clear trend towards an increase in the share of venture capital financing attributable to technology companies. The total volume of such investments in the first quarter of 2021 grew faster than in other sectors and almost doubled compared to the same period in 2020. Tech startups accounted for almost 70% of total venture capital investments during this period.

The pandemic has also accelerated a shift in focus to later-stage deals on projects that have been in the pipeline for years. The total value of technology transactions in the Series C or later stages increased by 165% in the first quarter of 2021 compared to the same period of the previous year. So, in the first quarter of 2020 it was 51%, and in the first quarter of 2021 it was already 67%.

Investors have switched to safer bets to hedge risk and get through tough times.