The total valuation of late-stage, venture-backed private companies in the UnitedStates and Europe has exploded from a few dozen startups worth acollective $40 billion in 2010 to hundreds of firms thattogether are now worth almost $500 billion, according to a report released Thursday.
The numbers show the magnitude of the recent trend in which the biggest Silicon Valley startups raise hundreds of millions or even billions of dollars from hedge funds, mutual funds and other private investors while delaying their entrance into public markets.
There are now 471 late-stage private companies – defined as firms that have raised at least $75 million through at least three rounds of financing – with an approximate valuation of$490 billion, according to the report from Scenic Advisement, aSan Francisco-based investment bank that facilitates secondary stock transactions.
As recently as 2014, there were only 171 such companies collectively valued at $100 billion, according to the report.Late-stage companies include well-known consumer names like UberTechnologies Inc, Airbnb Inc, DropBox Inc, WeWorkCompanies Inc and Pinterest Inc as well scores of more obscurecompanies in fields such as cybersecurity, cloud computing andgenomics.
Looking specifically at unicorns, which are defined as private companies that carry valuations of more than $1 billion,Scenic Advisement found that there are now more than 100 – upfrom just six in 2010. The data includes companies in the UnitedStates, Europe and Israel, but excludes the many late-stagecompanies in Asia.
The dramatic growth of high-valued private companies ismainly a consequence of a huge influx of money into what areseen as big opportunities in the tech sector, combined withregulatory changes that have made it easier for companies tostay private longer.
“We’re going to continue to see the majority of the value inprivate companies accrue while they’re private, not once theyare public per the prior tech wave,” said Minal Hasan, general partner of K2 Global, a venture capital firm. “As a result, moremoney will continue to flow into private tech companies.”
Hasan and others note that a lack of liquidity, paucity offinancial information and uneven corporate governance at private companies can create a lot of risk. The largest of all theunicorns, Uber, currently faces a string of problems that havecalled its $68 billion valuation into question.
Yet there are few signs of a slowdown in the private tech markets. Just last month, Japanese tech entrepreneur Masayoshi Son announced he had raised more than $93 billion for the Softbank Vision Fund, making it the largest tech fund inhistory.
“We may see some moderating of some of the extreme valuations,” said Peter Christiansen, head of research at Scenic Advisement. “But as far as the trends driving this, I don’t see anything on the horizon that would mitigate what’s driven this asset class over the last few years.”