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The Velocity of Money in Startupland

A venture dollar’s velocity has never been faster. The time it takes for a dollar to appear in an LP’s pocket, for the LP to wire it to a VC fund, and for the VC fund to invest can be measured in minutes. Then, hold your breath for the pre-emptive round, and you’ll have 3 term sheets before you pass out.

I’m kidding of course, but the hyperbole illustrates the velocity of money in Startupland. I’ve never seen a dollar move faster.

What’s driving this? Just look at these numbers in the exit markets.

image Startups are basking in the IPO market. They’ve raised 3x as much year-to-date in IPOs as all of 2020, which was a healthy market. Where will the tally end the year? $100B+? 120B+? See that blip in 2012? That was the Facebook IPO.

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The M&A market is not far behind; it’s on track to double 2020’s decade high of M&A value transacted.

With liquidity figures rocketing into space alongside Branson and Bezos, it’s no surprise to see the market behave this way.

VC fundraising will achieve a record. Valuations are at decade highs. There are 3-5 financings and M&A every working day. There’s an IPO every fourth or fifth day.

I wrote a post in 2015 called The Runaway Train of Late Stage Fundraising that examined the disparity between the number of growth rounds and unicorns versus the number of IPOs. If this year has shown us anything, it’s that the IPO and M&A markets have risen to the challenge; they’ve swelled to accommodate the team of unicorns born in the last decade.

And there’s nothing more enticing to an investor to double down and move money faster than gains.