Decentralization continues to be the theme of conversation in the venture world. Despite Web3, crypto, and blockchain deals only accounting for 5.7% of all venture deals in Q4, founders across the globe are deliberating how to leverage this evolving technology to capitalize on an entirely new customer base (persona virtual likeness)

Another quarter, another funding record. Driven by the continued influx of capital into the market, more entrants into the VC space (9,244 investors in Q4 2021, 8,634 in Q4 2020), and the explosion of companies popping up in all corners of the globe, Q4 was the largest year by deal volume on record. Across the US, Europe, and LatAm investors poured $125B+ into private startups. This amounted to a 6.2% QoQ volume increase. However, Q4 saw 5,443 total deals, a 12.5% decrease compared to Q3 (more contributing evidence to the growing size of late-stage VC deals).

Of the $125B invested by VC funds in Q4, 63.5% of it was allocated to the top 3 leading industries. TMT led the way with $37.4B deal volume, followed by fintech ($23.21B), and AI & ML ($18.3B). TMT saw median deal valuations at $70M, fintech at $73.7M, and AI & ML was close behind at $52M. This story of these industries leading the way is consistent over previous quarters and sends a broader message to the larger market: 3 sectors are heavily favored by investors due to the value they produce and scalability of business models.

Brazil is becoming a gold mine for investors and founders. Brazil combines many attractive market features from an investment perspective. Brazil has a population of ~220M and growing and boasts 8 cities with over 1M people (São Paolo has 12.4M and Rio de Janeiro has 6.7M). Importantly, mobile phone and internet usage adoption is high (65% and 73%, respectively), however software deployment and investment levels nowhere near match the infrastructure deployed to leverage it. For these reasons and many others, Brazil saw a jump in VC investment from $547M to $2.6B from Q4 2020 to Q4 2021 (372% growth). YoY growth was a staggering 272%, climbing to $7.3B deployed into Brazilian startups in 2021.

Over the past year, Brazil has seen massive innovation across a broad range of sectors. However, a few stand out and have become the envy of many VCs around the world. As one would expect, as a country moves into the digital age industries like information services, media, and business software become more commonplace. However, the massive winners and lion’s share of funding has gone to fintech and financial services software, and it’s not even close. Of the $7.3B invested into Brazilian startups in 2021, $5B went to the financial tech sector. The most notable Brazilian company of 2021 (arguably) is NuBank, a Brazilian neobank that IPO’d in December 2021. The future is bright for Brazil and fintech is leading the way.

Miami is becoming a startup and VC magnet. The combination of the excellent weather, favorable business climate, and nucleus of Web3 talent makes Miami one of the fastest growing startup hubs in the world, and the capital is quickly following. Major events being located in Miami like Miami Hack Week, Miami Tech Week, Art Basel, and Bitcoin 2022 are evidence that the startup community, particularly crypto/web3 community, is converging upon Miami. Look out for more funding records and exciting startups coming out of Miami.

Startups with one or more female founder raised $56B in 2021 across 1,202 deals, $33B more than 2020, amounting to a 143% YoY increase. Startups with only female founders raised $6.4B across 217 deals, an 84% increase YoY.

Q4 looks similar to Q3: matching funding levels at $14.8B. However, this figure was achieved over less deals, raising the average deal size from $16.2M to $18.3M QoQ. All indicators point to female founding teams continuing to blaze a strong path in the startup and VC ecosystems. 

To put these figures in further context: 18.8% and 6.5% of all deals in 2021 were represented by female and male and female-only startups, respectively. When comparing the deal count to deal volume figures, not only are female founders receiving drastically lower levels of funding compared to their male counterparts, but also at smaller average deal sizes. TheVentureCity proudly boasts two female GPs, and continues to monitor and support the growth of women in the early-stage space. 

Venture capital’s fund structure has stayed relatively the same over the past two decades. The standard playbook: raise a large fund from a small number of limited partners (typically personal relationships), charge management and performance fees to keep the lights on and realize huge gains upon successful exits, and restrict access to VC-profile companies to wealthy institutions and angels.

The drive for the public to own their own access to capital is the driving force, and that vision is starting to take shape. Large VC crowdfunding platforms exist such as Republic and Microventures, but they still allow centralized organizations to take transaction fees and gate keep access to certain investments.

Venture funding has traditionally been in the form of equity from investors seeking outsized risk-adjusted returns for investing in companies very early on. However, venture debt is quickly becoming a popular financing option for founders. An early leader in the space was Silicon Valley Bank, who famously, as a FDIC-registered bank, became one of the first of its breed to lend to startups. Other large players have entered the space, such as OnDeck. Going forward, fintech players that play in tangential verticals like Brex and Mercury (banking for startups) are entertaining the venture debt space.

The bulk of seed deals are getting done in the $1M - $5M (618) and $5M – $10M (236) ranges. In general US seed deals tend to be on the larger side, compared to Europe and LatAm. These round windows combine for 68% of the total Q4 2021 seed deal count. To put this in perspective, these windows represented 56% and 53% of the total seed deal count for 2020 and 2019, respectively. Looking out to 2022, the venture industry braces itself for more expensive valuations and solid companies at attractive valuations becoming more elusive.

Today, “early-stage” companies are often raising their 3rd, 4th, or even 5th financing round and scaling quickly. For that reason, the names in the space have changed and the most active investors align with later stage VC. For perspective, Tiger, a16z, and Alumni Ventures were the most active early-stage investors in Q4 with 32, 26, and 20 investments respectively. In Q4 2017 Kima Ventures, Bpifrance, and Hemisphere Ventures led the pack with 14, 12, and 12 investments respectively. VC is quickly changing, and the names associated with it are as well.

We wanted to bring you the most notable late-stage deals to monitor (that we haven’t mentioned already), as many of these companies you can expect to continue making headlines in the future. Notable companies like Lacework (cloud security platform), Thrasio (ecommerce brand roll-up strategy), N26 (German banking platform), Better (mortgage platform), and Airtable (collaboration platform) raised a combined $4.7B in just Q4 alone. These companies, along with many others, are at the cutting edge of their respective industries.

Creators like artists, musicians, game developers, and others have long struggled to monetize their product and likeness. Historically, very few creators make a living off their work and there is a long tail of creators who fail to build significant audiences. A large reason behind this is creators are independent, distributed, and often resigned to large Web2 companies taking large take rates on their revenue streams. Web3 empowers creators by allowing them to directly reach their audiences (thus eliminating the middlemen) and offering new revenue streams to capitalize upon. These revenue streams often come in the form of digital assets or gaming. However, the opportunities are endless as more creators and use cases enter Web3.