2020 proved to be a record year for the VC industry, positioning the industry to start 2021 on a strong footing. The industry did not disappoint as Q1 investment, exit, and fundraising activity all exceeded first-quarter results from last year. Investors deployed $69.0 billion into VC-backed companies in Q1, an increase of 92.6% compared to last year’s first-quarter investments.

Late-stage investments comprised the highest proportion of deals than at any point since 2010, with 75.2% of all investment dollars allocated to this investment stage. Despite this drop in the share of total investment, angel/seed and early-stage investment remained robust. The trend toward ever-larger deals continues, with median and average deal sizes for angel/seed, early-, and late-stage investments last quarter all higher than their respective annual counterparts for 2020. The 722 first financings reported is a historically low figure, but the associated $4.7 million per deal is among the highest quarterly figures on record.

At the other end of the spectrum, 167 mega-deals ($100 million+) accounting for some $41.7 billion closed in Q1. For context, mega-deals accounted for $76.6 billion raised during all of last year. The focus on late-stage investments may be the harbinger of a surge in exit activity with many portfolio companies possibly ready to go public or be acquired. Ebullient public markets may play a role in any such enthusiasm among investors and founders. The Dow, S&P 500, and Nasdaq all reached record highs in February or March, and valuations for public equities remain strong. So far, 50 venture-backed companies have been listed publicly this year; between 2015 and 2020, the number of first-quarter IPOs only ranged from 9 to 21 public listings in any single quarter.

Not to be outdone by investment and exit performance, fundraising during the first quarter also proceeded at a record-setting pace with $32.7 billion raised across 141 funds. For perspective, $79.8 billion was raised in 2020, the current annual record. The very largest funds continue to grow. Funds sized $1 billion or larger that closed in Q1 accounted for $14.7 billion, or nearly 50% of all capital raised, the highest quarterly share of total capital raised by funds of this size over the last 16 years. The growing size of deals may, over time, be a consequence of larger and larger funds closing, as bigger checks must be written to obtain the same rate of return, all else being equal. The boom in the life sciences sector continued unabated with a record high invested in Q1, building on the renewed interest in vaccines and antivirals. The tech sector is also prospering:

The $57.0 billion invested in Q1 is the highest quarterly amount invested on record. As well, corporate venture capital investment, growth equity investment, and deal participation by non-traditional investors all continue to grow. These are promising trends and speak to the overall health of a VC industry still weathering the effects of a global pandemic, but not everything came up roses in the first quarter. The share of female-founded companies as a proportion of total US VC deals, measured by both deal count and dollar volume, continued its downward trajectory. And SPACs also remain something of a question mark with regard to the impact on VC.

The SPAC market started off with a bang in 2021 with $83.0 billion raised in newly registered vehicles, already exceeding the total amount raised in 2020. But questions remain about investment returns, regulatory scrutiny, and sufficient numbers of merger targets, all of which will be key to the success of this market. While the shadow of COVID-19 has not yet been fully lifted, the national vaccination campaign is well underway, and the economy has started its road to recovery with unemployment falling to 6.0% and two consecutive quarters of strong GDP growth. With luck, things will continue in this vein, contributing to another strong year for the VC industry