Why Strategic Venture Capital Thrives in the Founder Market


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We have seen that 2021 is a banner year for investments in startups and private companies funded by VC. This vast global liquidity has caught the eye of non-traditional investors, including sovereign wealth funds and limited partners, both of which seek to increase returns with direct investments. This makes it a buyer’s market for startups, and the best entrepreneurs have access to what seems like unlimited capital.

Let’s take a closer look at why strategic capital thrives in today’s venture capital environment, how startups can benefit from strategic capital, and how business leaders investing in startups can make their organizations more innovative.

Related: What every investor should know before 2022

Record investments

2021 turned out to be a good year for entrepreneurs and investors. We are seeing record levels of investment with numerous deals across the world, spanning a variety of technology sectors. Activity appears to be robust at all stages of investing, with significant activity from traditional venture capitalists and corporate investors – not to mention mutual funds, private equity and hedge funds. Startups and investors benefit from a robust IPO and M&A market.

the NVCA Venture Monitor Pitchbook Report stresses that the venture capital industry is resilient and contributes greatly to the country’s economic recovery. The US public market is healthier than ever. A strong third quarter of 3,518 deals generated $238.7 billion invested year-to-date. The report says public venture capital-based listings generated $513.6 billion in exit value; in fact, venture capital-backed IPOs accounted for more than two-thirds of total U.S. listings year-to-date, underscoring the importance of venture capital to our economy.

Why Strategic Capital Thrives

More than ever, it makes sense for startups to raise funds by seeking strategic capital, including venture capital. An increasingly popular investment model – known as venture capital as a service – is used by Pegasus Tech Ventures. This model allows companies to outsource their start-up investments by partnering with an experienced venture capital firm.

By connecting startups to businesses, startups gain financial capital and, just as importantly, they gain access to an experienced network of business leaders. These investors have the knowledge and experience to help startups grow their business smartly. Corporate investors – who have sometimes avoided early-stage investing in the past – are now investing through a range of stages. Investing allows them to introduce technological innovation into their businesses; such innovation is difficult to create or find without a venture capital partner.

Related: 5 ways this crisis is changing venture capital investment strategy

How investors add value

Given the recent hype in the market and the influx of investors, we advise entrepreneurs to be selective and investors to do their due diligence. Investors should strive to stand out and add value to the startups in which they invest. This means helping startups with staffing, positioning, decision-making, and launching products or services. Investors – including those using the venture capital-as-a-service model – should offer their knowledge and experience to benefit the startups in which they have invested.

Corporate investors have solid experience, so they are perfectly placed to advise startups at every stage of their journey. Offering advice and sharing connections helps entrepreneurs avoid mistakes that startups often make. At Pegasus, since we manage investments on behalf of companies, we strive to schedule regular meetings with our business partners, usually with the CEO’s office or the innovation office. Understanding their vision and focus areas helps us find the right kind of startups for investment.

Investment in various sectors

We have seen a wide range of sectors attract investment in 2021. This includes life sciences, wellness, space exploration, quantum computing, artificial intelligence, metaverse, food technology, agricultural technology and entertainment. According to the Pitchbook NVCA report, Software performed particularly well with 156 releases during Q3 2021, just slightly less than Q1 (163 releases) and Q2 (171 releases).

As global concerns about climate change grow more serious, we’ve seen startups and investors focus more on hydrogen fuel cell technology, battery technology for electric transportation, climate technology and cleantech. . Climate technology is generally defined as technology that addresses climate change and mitigates the impacts of global greenhouse gas emissions. Clean technology refers to technology that increases production performance or efficiency while minimizing negative environmental impacts.

Related: Why is it time to invest in climate technology

The impact of SPACs

The main attraction of SPAC – Special Purpose Acquisition Companies – is that they avoid many of the costs and complications of traditional IPO and listing processes. They can reduce the time and cost of private company acquisitions and IPOs. Although SPACs have been around since the early 2000s, they had a growing impact during the third quarter of 2021.

Pitchbook and NVCA report that 413 SPAC vehicles have raised $109.4 billion through Q3 2021, and the mergers are still happening. However, the report indicates a large sell-off since February 2021, which, combined with the underperformance of SPACs, raises doubts about the long-term performance of these vehicles as an alternative to IPOs. The recent actions of US Securities and Exchange Commission are likely to have a chilling effect on SPACs, so we don’t necessarily expect their role in the market to continue to grow.

What awaits us?

Now is the time for entrepreneurs and investors to ride the wave of prosperity. We’ve seen $96 billion raised by venture capitalists in the past nine months, and there’s no clear sign of it slowing down. We recommend that startup founders think carefully about how much investment they need and what kind of investors. Despite the strength of the market, it’s still essential to refine your business positioning, thinking carefully about your unique value proposition and how your product or service benefits customers. This helps ensure the success of startups and investors.


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