The Carta liquidity report: Q3 2021

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Venture capital funding keeps setting new records. In the first half of 2021, global VC funding reached an all-time high of $288 billion, up 61% from a previous high point in the second half of 2020. Companies that use Carta raised $84.6 billion—almost 30% of the H1 2021 total. And funding raised during the second half of 2021 is on pace to exceed the first half of the year. 

The record clip at which venture capital firms are fundraising and investing in startups is driven by several factors, including low interest rates and the trend of companies staying private longer. A longer average timeline to exit has, in turn, pushed private companies to look for new ways of bringing liquidity to their shareholders—including their employees, former employees, and investors.  

At Carta, we have a unique view into where and how capital moves across the industry. We can look at aggregated, anonymized, real-time information from the 23,000 companies that use our products. We launched the Carta Data Desk to bring these insights to the public: We believe that founders and investors deserve access to information that will help them build stronger companies and a more efficient venture ecosystem. 

Our quarterly liquidity report is part of the same effort. Industry headlines typically focus on dollars raised and deals sealed. This liquidity report instead shines a light on secondary transactions—which are now a vital mechanism for recycling capital in the venture ecosystem and for allowing shareholders to realize the value of their equity holdings.

The Carta liquidity report: Q3 2021 1

Carta’s Q3 Liquidity Report highlights the tremendous growth of tender offers across the venture sector. We’ve already seen more tender offer transactions in 2021 than in the previous two years combined. The trend extends beyond unicorns: Companies valued at less than $1B initiated nearly half the tender offers transacted by Carta this year. Geographic diversity has also expanded: Companies transacting tender offers through Carta are headquartered in 17 U.S. states, up from just eight in 2019. The median transaction size for tender offers went up for companies at every financing stage. And while secondary liquidity is up across the board, venture-backed SaaS and fintech companies are leading the way in tender offer transactions. 

The Carta liquidity report: Q3 2021 2

Several factors have converged to make tender offers so popular this year. Among them is the hot labor market. As companies compete to attract and retain talent, tender offers and other opportunities for employees to sell their shares have become another way to stay competitive. Without liquidity, equity ownership in private companies is merely a tax burden for employees. And with competition for talent rising, more founders are realizing the importance of liquidity for retaining valuable vested employees and satisfying early investors. As a result, secondary liquidity events have surged across the venture landscape. 

The sheer volume of venture capital raised in 2021 exerted the largest influence on the boom in tender transactions. Companies often hold tender offers after a primary fundraise as a way to maintain good relationships with early investors on their cap tables. As the total volume of venture capital raised continues to swell, so will venture deal flow and subsequent tender offers. 

To learn more about how the movement toward liquidity has evolved, download Carta’s Q3 2021 Liquidity Report.  

Download the report by filling out the form below

 

DISCLOSURE: This communication is on behalf of eShares Inc., d/b/a Carta Inc. (“Carta”).  This communication is for informational purposes only, and contains general information only.  Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services.  This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests.  Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor.  This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.

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