For years, the venture sector was a place where huge rewards on tech investments were often overshadowed by substantially more unsuccessful bids. But as The Wall Street Journal reported on Wednesday (April 28), the past few months have seen “an unusually large” number of venture investments reaping multi-billion-dollar profits, “setting many firms up for their greatest returns since the dot-com boom of the late 1990s.”
The Journal story uses the example of Sutter Hill Ventures, which invested less than $190 million on the cloud computing company Snowflake Inc. and got back nearly $12 billion, “one of the most profitable investments ever in venture capital.”
Venture firms typically hold onto a bulk of their investments until companies go public, then sell or transfer shares to investors once the post-listing lock-up period expires. Others keep their investments in place in hopes that the stock will go up. Many funds have yet to sell or move their stock. If they did, the Journal says, “the gains would eclipse several of the best-ever venture investments in U.S. companies in overall dollars, including Accel’s more than $5 billion profit on a $15 million early investment in Facebook Inc. and Kleiner Perkins’ $7 billion profit on a $3 million investment in Juniper Networks Inc. in the dot-com boom.”
What’s fueling this new boom? Interest in fast-growing companies, especially newly listed tech firms, helped along by low interest rates, government stimulus payments and new amateur investors getting into the market.
As PYMNTS reported last month, investment in private startups in the first two months of the year came in at more than $460 billion, nearly 40 percent greater than the peak seen in that sector three years earlier. This push was led by larger firms like Coatue Management and Tiger Global Management. Tiger, which oversees $50 billion in assets, came close to doubling the pace of its investments between 2020 and 2021.
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