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2021 half year capital raising numbers and trends

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Our venture capital lawyers in New Zealand and Singapore have had a busy first half of the year again, as venture capital funding for technology businesses continues its incredible growth despite the tumultuous last 18 months.

A recent article by Crunchbase indicated that global venture capital funding in the first half of 2021 has shattered records with more than US$288 billion invested worldwide (compared to the US$110 billion record only just set in the second half of 2020). This reflects what we have seen in the jurisdictions where we advise tech companies and investors.

deal activity so far

In the first half of this year, we helped companies or investors close 66 fundraising transactions across both NZ and Asia. Our experience is that the number of transactions tends to increase in the second half of the year, so we expect to comfortably top 100 capital fundraising deals for the third year in a row.

Of the deals completed so far in 2021, 39 were fundraisings involving Southeast Asian startups, with 27 from NZ. This reflects what we have seen in the last few years and the fact that Southeast Asia is the larger market. Many countries in Southeast Asia have of course experienced significant Covid lockdowns whereas the main problem for NZ startups has been the ability of their key people to travel and engage with overseas markets.

Approximately 17% of the financing rounds in NZ used convertible notes compared to 56% in Southeast Asia. This represents somewhat of an increase from normal in Asia. Along with the usual small investment rounds, several of those convertible notes in Asia represented substantial bridge financings in the USD5-10million range, as investors supported existing portfolio companies.

On around 15% of our deals so far this year we advised on the investor side. This has helped us gain further insights into the latest approaches on term sheet presented by investors, who in the main, have not looked to impose materially more onerous financing terms on startups.

What is more challenging currently are the discussions between companies and existing investors for those companies that have been impacted significantly by the pandemic and its restrictions, and who may not be facing a forced exit or financings at a down round.

themes emerging in 2021

SaaS remains a huge part of the NZ tech ecosystem, with around one-third of our deals being in that vertical. Though NZ exporters battle the challenge of distance from larger markets, the country’s remoteness doesn’t play the same factor for its SaaS businesses – IT services exports in the year to May were reportedly in excess of $4billion, with key markets in the US, Australia and Europe.

In Southeast Asia, many of the companies we’ve advised so far this year on financing rounds operate in e-commerce, logistics, healthtech, and fintech. Companies from Singapore and Indonesia are getting the lion’s share of the funding, with the latter seeing some major funding rounds in particular.

We suggested last year that equity financing deals might take longer to close. That trend has continued in 2021 too. Companies are often opting to close initially with a lead investor, and fill the rest of the round via a rolling, or second, completion.

The use of SAFEs is on the increase in NZ and particularly in Southeast Asia where they are now almost as popular as traditional convertible notes. The principles of the YC’s post-money SAFE also seem to have become the market standard.

Our data continues to show that despite the pandemic, fundraising into disruptive technology has boomed despite partially or fully closed borders. It’s an exciting time to be working in the tech space.

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