Investors don’t expect the US startup funding market to slow down

Now in the opening weeks of the third quarter, The Exchange is taking a look back at the Q2 2021 venture capital market. Data indicate that it was incredibly active, with global and regional records shattered during the three-month period.

The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.

Per data from CB Insights, for example, The Exchange reported that global venture capital activity shot to $156 billion in the second quarter, up 157% from the year-ago Q2 result of just under $61 billion. More unicorns were born in the second quarter than any similar period to date, and valuations ticked higher.

The only data that seemingly didn’t come back in superlative fashion was round counts, which failed to set all-time highs in some cases. But the general vibe of Q2 venture capital data was clear: It’s a great time for startups looking to raise capital.

To better understand what’s going on, we talked to investors from different regions to get a grip on how they view their market.

Today we’re discussing the U.S. startup world, including notes from Costanoa Ventures’ Amy Cheetham, MaC Venture Capital’s Marlon Nichols, NEA’s Vanessa Larco, and EY U.S. venture capital lead Jeff Grabow.

Why are investors writing so many checks? Let’s find out.

A boom in venture-ready startups?

Given the record capital deployed in the quarter, the fact that deal volume failed to reach all-time highs had us wondering if the market lacked venture-backable startups.

If so, the lack of possible investments would help explain both rising deal size and resulting valuations. With lots of capital provided to venture investors themselves in recent quarters, a lack of startups that fit the venture model would force investors to compete with one another fiercely, possibly leading to larger rounds and higher prices.

That’s not the case. Instead, according to NEA’s Larco, “there are more than enough venture-ready startups to fund,” adding that “the pace of innovation across all industries and geographies has been astounding.”

,What’s driving the venture capital market in the United States to be as hot as it has proven to be? FOMO, plus the constituent belief that trying to time the market is a mistake.