Austin's big year for VC funding

·3 min read

Data: PitchBook & NVCA; Chart: Baidi Wang/Axios

Despite the pandemic and labor shortages, Austin's venture capital industry in 2021 continued to boom.

The big picture: Startup funding flowed in Austin last year, delivering 387 deals valued at a record-setting $4.9 billion — or 211% growth compared to the previous year — per data from PitchBook.

  • The investments range from seed money to later stage rounds, a sign Austin serves to benefit brand-new startups as well as growing companies.

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By the numbers: The $4.9 billion raised by local startups is significantly higher than the $2.26 billion local companies raised through 2020.

  • In the fourth quarter alone, Austin saw $924 million invested in 95 deals.

What they're saying: The city's rapidly growing tech scene has driven more VC firms to the area and increased entrepreneurial exits, said Mike Smerklo, managing director of Austin-based venture capital firm Next Coast Ventures.

  • "I actually think it was the most pivotal year for Austin in terms of entrepreneurship and ecosystem," he said. "It was a little bit of a perfect storm of a lot of really good things happening that I think are highly sustainable."

Austin's previous pressure points, such as a lack of later stage funding, are no longer a problem for startups trying to raise capital here, Smerklo added.

  • "The late stage funding was a story from four or five years ago that’s completely gone," he said. "I fundamentally believe that every growth equity firm out there is now looking to markets like Austin for emerging growth, and because the ecosystem's better, it's just easy to send those along.”

Zoom out: Austin still lags behind the Bay Area, New York, Boston and Los Angeles — the country's four largest markets for venture activity — when comparing overall financing.

  • The top four markets control more than half of venture capital deal counts, and the Bay Area raked in one-third of all deal value in 2021.

  • Austin deals made up just 2.5% of the country's overall transactions in 2021. Plus, Austin startup fundraising made up just 1.5% of the country's overall dollars for deals, PitchBook data shows.

Flashback: Austin became one of the top beneficiaries of pandemic-era reshuffling of tech entrepreneurs, investors and workers, Axios' Kia Kokalitcheva wrote last year.

  • Investors on the coastal hubs became eager to meet and back startups in Austin.

The big picture: It's a good time to be an entrepreneur in Austin, with more opportunities for VC firms, shorter funding cycles and bigger checks.

  • "If I had one prediction, I think 2022 is going to be another great year for Austin," Smerklo said.

Austin's biggest deals of 2021:

  • Homeward raised $371 million in series B funding.

  • Workrise raised $300 million in series E funding.

  • ICON Technology raised $207 million in series B funding.

  • Everly Health raised $200 million in series E funding.

  • ZenBusiness raised $200 million in series C1 funding.

  • The Zebra raised $150 million in series D funding.

  • CrowdOut Capital raised $150 million in later stage funding.

  • Ambiq raised $145 million in later stage funding.

  • Elligo Health Research raised $136 million in series E funding.

  • Outdoorsy raised $100 million in series D funding.

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