$100 Million Was Once Big Money for a Start-Up. Now, It’s Common.
In late April, when Mike Massaro set out to get $40 million to $75 million in funding for his payments startup, Flywire, he contacted a small group of investors he already knew. But word quickly got around, and other investors flooded his inbox with $200 million of investment offers, half of which he turned down.
Gusto, a payroll and benefits software company, raised $140 million in July, but could have done five times that, according to Joshua Reeves, its chief executive and founder.
Convene, a real estate services startup, recently obtained $152 million and turned away more than $100 million of additional investment. Soon after, another wave of hopeful investors called, asking if the company would be looking for more financing, according to Ryan Simonetti, Convene’s chief executive.
Startups raising $100 million or more from investors ― known as a mega-round in Silicon Valley ― used to be a rarity. But now, they are practically routine, producing a frenzy around tech companies with enough scale and momentum to absorb a large check.
The jump in oversize investments is led by relatively new investors, including the Japanese conglomerate SoftBank, Chinese companies and sovereign wealth funds. They see a chance to capitalize on tech’s incursion into just about every industry, and want to put their money down before the young companies go public.
By entering the tech market, they have all but eliminated talk in Silicon Valley about an investment bubble ― a leading concern a couple of years ago ― because the money now seems almost limitless.
For the startups, the pots of money are changing the normal way of building a tech company. They must move even faster, expand their ambitions and collect more investment money than ever ― even if they might not be ready. They risk becoming too reliant on funding and never finding a path to profit.
“If your competitor is going to raise $150 million and you want to be conservative and only raise $20 million, you’re going to get run over,” said Bill Gurley, a managing partner at Benchmark Capital.
基准资本(Benchmark Capital)负责管理的合伙人比尔・格利(Bill Gurley)说：“如果你的竞争对手要筹集1.5亿美元，而且你想要保守行事，只筹集2000万美元，你就会遭到碾压。”
Investors participated in a record 273 mega-rounds last year, according to the data provider Crunchbase. This year is on pace to easily eclipse that, with 268 completed in the first seven months of the year. In July, startups reached more than 50 financing deals worth a combined $15 billion, a new monthly high.
In the last 10 days, Letgo, an online classifieds ads company, raised $500 million. Actifio, a data storage company, took in $100 million. MyDreamPlus, a coworking space startup, secured $120 million. And Klook, a travel activity booking site, got $200 million.
These mega-rounds have become so common that CB Insights, which tracks startup investments, has even debated lifting its definition of a mega-round to $200 million or more, according to Anand Sanwal, the firm’s chief executive.
这些过亿轮已经变得如此普遍，以至于跟踪初创公司投资的CB Insights甚至在讨论要不要把“过亿轮”的定义提升至2亿美元以上，公司首席执行官阿南德・桑瓦尔(Anand Sanwal)说。
Many of the new investors, including SoftBank’s $93 billion Vision Fund, manage funds so large they dwarf the entire traditional venture capital market in the United States. These giant funds are looking for startups that can take large sums of money with one shot. Writing lots of small checks is too time-consuming, and the returns from small bets will not make a difference for a such a big fund. So investors are competing to back any startup that shows promise and the ability to put $100 million or more to use.
“As soon as they feel like they have a winner, they will really put a lot of resources behind it,” said Sanwal of CB Insights.
SoftBank’s deal-making has affected every part of the venture capital market. The arrival of its Vision Fund, which has a minimum investment size of $100 million, has prompted a number of traditional venture capital firms, including Sequoia Capital, to build larger pools of money to compete. Funds from seven different firms are raising capital, according to the data provider Pitchbook.
But the Vision Fund is not even the most active mega-round investor. In the first seven months of 2018, Tencent Holdings participated in 31 rounds of funding of $100 million or more, compared with 18 for SoftBank, according to CB Insights. GIC and Temasek Holdings, investment funds associated with the government of Singapore, as well as Alibaba and Sequoia Capital China, have also been among the most active mega-round investors this year.
但愿景基金甚至不是最活跃的大型投资者。根据CB Insights的数据，在2018年的前七个月，腾讯控股参与了31个1亿美元或更多的融资轮次，而软银参与了18个。与新加坡政府有关的投资基金新加坡政府投资公司(GIC)和淡马锡控股(Temasek Holdings)，以及阿里巴巴和红杉资本中国，也是今年最活跃的过亿轮投资者。
As a result, early investors must make sure their portfolio companies are friendly with the large funds, laying groundwork for a potential investment in the future.
“It feels like there is a bit of a beauty pageant that early-stage investors put on for the megafunds,” said Patricia Nakache, a general partner at Trinity Ventures.
“感觉就像早期阶段的投资者为巨额资金举办了一场选美大赛，”圣尼资集团(Trinity Ventures)的普通合伙人帕特里西亚・纳卡什(Patricia Nakache)说。
The hot funding market is pushing high-growth startups to change their plans. Flywire was not going to pursue more investment money until next year. It still had $15 million in the bank from a previous funding round. But the company saw “investment heat” in the payments industry and Massaro thought more money would help Flywire grow even faster.
Few venture investors foresee a slowdown in the pace of mega-rounds. Those who once cautioned of a tech bubble and subsequent crash have given up on their warnings. In 2015, Gurley of Benchmark predicted “dead unicorns,” referring to startups valued at $1 billion or more. But since 2015, the number of startups worth $1 billion or more has ballooned to 258 from 80, according to CB Insights. Excess funding is tied to inflated valuations, which may create problems when overvalued companies eventually try to go public.
Gurley said he was done trying to sound the alarm. “You have to adjust to the reality and play the game on the field,” he said.
Annie Lamont, a managing partner at the venture fund Oak HC/FT, expected a drop-off in startup valuations and funding three years ago, but it never happened. Now, she expects more of the same, partly because most the companies can easily get more money and few are worried about a downturn.
三年前，风险投资公司Oak HC/FT的管理合伙人安妮・拉蒙特(Annie Lamont)曾预计，初创公司的估值和融资将会下降，但这种情况并未发生。现在她的预期跟大家没什么不同，部分原因是大多数公司可以轻松获得更多资金，很少有人担心出现下滑。
“The fear of a correction is not occurring,” she said. If any startups do “vaporize,” she said, “I think people are going to ignore them and roll right on to the next one.”