Investors including corporations, hedge funds and mutual
funds, as well as private-equity and venture firms, poured $52.12 billion into
private companies last year. Of that total $31.35 billion went to finance
mature businesses that would have been considered ripe for an initial public
offering by the standards of 15 years ago. Late-stage investment surpassed the
$28.45 billion that went into later rounds in 2000, during the dot-com bubble,
according to industry tracker Dow Jones VentureSource. Overall venture
investment remained well shy of the record $94.17 billion invested in 2000.
The more-mature companies that dominated 2014’s
venture-capital investment, such as car-hailing service Uber, database-software
company Cloudera Inc. and room-rental website Airbnb Inc., had spent years building
businesses and had received several rounds of venture funding. In the past,
including during the Internet bubble, such companies already would have gone
public. Instead, they are staying private, finding ample opportunity to raise
capital for growth.
Many fast-growing companies have turned away from
the public markets. The 105 IPOs by venture-backed companies in 2014 were the
most since 2000, but they were still just half of that year’s total of 210. The
year before, in 1999, there were 256 venture-backed IPOs.
In October, The Wall Street Journal reported that at least
49 venture-capital-backed companies in the U.S. had a valuation of $1 billion
or more—a milestone marking them as IPO candidates—yet they remained private.
That topped the previous peak of 28 such billion-dollar companies at the end of
2013 and substantially exceeded the 10 such companies that were still private
in 2000.
Uber, which does business world-wide, was the fundraising
heavyweight last year, raising two separate $1.2 billion rounds of later-stage
financing. Investors included sovereign-wealth fund Qatar Investment Authority,
mutual fund manager Fidelity Investments and BlackRock Private Equity Partners.
Financings ranging into the hundreds of millions were the
province of a select group of companies. The median later-stage financing last
year was $13 million, up from $10 million a year earlier but easily below the
$20 million median investment in 2000.
The hot market is driving up valuations, however. The
median valuation for all venture financings last year was $40 million, up from
$20 million in 2013 and higher than the $25 million for 2000, according to
VentureSource. Uber’s latest round of funding, in December, pushed its
valuation to $41 billion, the highest for any company currently backed by
venture capitalists.
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