2 Decades of Startups in 2 Minutes
The following animation tracks the top 15 highest valued VC-backed companies over the last 20 years. Quarterly valuation changes from up rounds and down rounds creates a race-like shuffling between companies. Companies that exit (IPO, M&A, OOB) are automatically removed from the chart.
Distilling 2 decades of valuation data into a 2-minute animation shed light on the following trends:
- Winners are getting bigger. The highest VC-backed company valuation was < $1B in 2000, approximately $10B in 2010, and >$100B in 2020 (roughly 1 order of magnitude per decade). This trend is likely driven by companies staying private longer, accessing increasingly large pools of growth capital.
- Winners are winning faster. The implied conditional probability of garnering a $1B+ valuation within 2.5 years of reaching a valuation of $100M+ has increased from 4% in Q1 2010 (N=25) to 9% in Q1 2017 (N=109).
- Winners are emerging globally. Following a US-centric landscape in 2000, 40% of the top 15 VC-backed companies by valuation are now Chinese. High-flying companies hailing from Europe, India, and Israel, among other regions, have also made the list in recent years.
- The gap between big winners and really big winners is widening. The ratio of the aggregate valuations of the top-3 startups to the next 3 has doubled from 1.5× in 2000 to 3.0× today. This excludes a brief period when Facebook and Alibaba drove the ratio to 9.2× in 2011.
- Valuations of winners reacted differently to the 2000, 2008, and 2020 macroeconomic shocks. Following the dotcom bubble there was a high amount of shuffling and drop-offs among the top 15 startups by valuation. Following the GFC there was less shuffling, but the top company, Facebook, saw significant down rounds. Amid the COVID-19 pandemic, some companies have seen challenges (e.g., Airbnb) while others have raised capital at an uptick to their previous round valuation (e.g., Stripe).
In the opaque and dynamic world of private markets, answering the question “how did we get here?” often gives rise to deeper, more subtle questions. Why is the Seed round the new Series A? Why are companies staying private longer than ever before? Why are innovation hubs sprouting up around the world? These questions — each a derivative of the first — require taking a step back and observing the dynamics of the innovation ecosystem over time. “Racing bar chart” animations like the one above are effective and compact data visualization tools that help us accomplish this goal. A deeper understanding of how we got to our present state will help us better predict where we’re heading.
Sources: PitchBook Inc. Research, Joel Zief via Github, SVB Capital Proprietary Analysis. DM @DetweilerJames on how to improve the animation for future updates.