Early-Stage Startups Funding Surge Stokes Concerns Over Valuation, Business Worth

The amount of funding going into higher-risk, early-stage startups has been notable the past year, according to The Wall Street Journal (WSJ). Investors have been looking at ways to invest in companies — even those that are so new they barely have a product yet.

For example, Blank Street, which sells coffee, has had three funding rounds in a year. It received $25 million three months ago, and it just raised another $35 million, the report stated.

The startup sector has had money coming in for the last decade, but it has usually gone to companies further developed. That is now changing as investors say they’re seeing more room for startups to grow, with convictions strengthened because of venture firms posting their best returns since the dot-com boom, according to the report. A burgeoning software sector and big profits on companies like Snowflake Inc. and DoorDash have helped.

The co-founder of Blank Street is Vinay Menda, 29, an ex-venture capitalist. He said the new world is one in which “capital is available,” the report stated. He said fundraising has become much easier as of late.

In 2021, investors put $93 billion into seed-stage and early-stage startups, compared to $52 billion in 2020 and $30 billion in 2016, according to Pitchbook data cited in the report. There has also been a rise in valuations. The median valuations for the seed- and early-stage companies was $26 million in 2021, which was up from $16 million in 2020 and $13 million in 2016.

In other news, British companies have been seeking investments from U.S. investors. There are almost 30 firms from that area that have registered for two big “over-the-counter” markets run by OTC Markets Group, which lets U.S. investors buy their shares.

Read more: British Companies Targeting US Retail Investors

This represents more than double the companies registering for the OTC in 2020. Peter Wall, CEO of London’s Argo Blockchain, said investors from the U.S. have more familiarity with tech stocks. The U.S. market also represents more of an opportunity for capital as opposed to the U.K.