LONDON- Sovereign wealth and public pension funds are piling into venture capital mega-deals beyond Silicon Valley even as frothy valuations raise fears of overheating among a surging number of unicorns.
The promise of returns at multiples of equity markets’ has made venture capital increasingly inviting for state-owned investors, while their deep pockets make them enticing backers for cash-hungry start-ups.
In the first nine months of this year, state-owned investors made $14.9 billion in venture capital investments, up from $8.9 billion across all of 2020, data from Global SWF showed.
Participation by sovereign wealth funds and other government funds in US venture capital deals by value reached a five-year high as of the end of June, according to PitchBook data.
While the US represented almost half of all capital flows by sovereign investors into venture capital in 2020, it accounted for only a third of the deals seen in 2021, according to Global SWF, with China and India sucking in more flows to capture 40 percent of the 2021 total.
“Technology, as a whole, is everywhere, from food, to transportation, energy to logistics.
Now it is seen as a good opportunity to diversify a portfolio,” said Javier Capape, director of sovereign wealth research at the IE Center for the Governance of Change.
“There are enough investable projects globally and more established teams around the globe to identify them. The (COVID-19) pandemic has not stopped this trend, and virtual pitching has overcome it successfully.”
While the venture capital arms of Abu Dhabi’s Mubadala and Canadian pension fund OMERS loom large in funding circles alongside Singapore’s Temasek Holdings, either under its own name or that of its VC arm, other players are dipping toes in through VC firms or directly.
In a deal typical of recent trends, Indian cloud kitchen company Rebel Foods this month raised $175 million in a Series F funding round, led by Qatar Investment Authority (QIA).
Along with several other state-owned investors, QIA also invested in a $3.6 billion deal for India’s Flipkart.
Having made a $1.2 billion investment in India’s Jio Platforms last year, Mubadala is eyeing more opportunities in Southeast Asia, Ibrahim Ajami, its head of ventures and growth, said on a recent company podcast. – Reuters