Q4 2020 Was the Best Quarter on Record for Early-Stage Startups

In September we hinted that venture capital appeared to be rebounding from a historically bad second quarter and in October we were able to confirm that early-stage venture capital activity had rebounded in the third quarter to appear rather typical.

Now we are able to report that the momentum from the third quarter more than carried over into the fourth quarter. By several measures the fourth quarter of last year was the best quarter on record for early-stage startups. More than 80% of startups that changed valuations in Q4 were marked up, according to AngelList investments into 3,449 active startups.

The following figure shows the count of all of the startups we track on AngelList that changed value on a price-per-share basis in the quarter, with that value change being either positive (black) or negative (purple). Since valuation changes are typically spaced out, we consider only active startups where our investments have “seasoned” for at least six months before the start of a quarter. For the 4Q20 data this was 3,449 startups. Note that for the first time, our startup tracking took into account the performance of investments made by AngelList Rolling Funds.

Since the count of active startups that AngelList has seasoned investments into continues to rise over time, we should expect to observe a natural increase in the number of startups that get marked up or marked down each quarter. In this sense, the first three quarters of the year represent a dramatic lowering of venture activity, since the count of startups changing valuations was less than the high-water mark for activity set in 4Q19. In contrast, 4Q20 set a new high-water mark for markups and overall observed activity.