When It Comes To Tech Funding, Venture Capital Becomes Less Venturesome

So what happens when everyone wants the same return on the sure thing? 

Jacky Wong reports in the Wall Street Journal:

Globally, the number of private equity-backed fundraisings of over $100 million, known as mega-rounds, jumped 62% last year, exacerbat(ing) the trend of recent years toward fewer but bigger fundraisings in tech. That reflects the “winner-take-all” nature of the internet economy. Venture-capital firms, seeking surer bets, are favoring late-stage unicorns. What’s left for early-stage startups? As big fundraising deals soared last year, the number for seed-stage companies slumped by 29% globally
Masayoshi Son is at it again: Not content with one $100 billion tech fund, the SoftBank 9984 0.44% founder this week said it’s “just a matter of time” before he launches another.
If and when that happens, it’s likely to widen the gap between the haves and have-nots in the tech sector.

The Japanese company’s $97 billion Vision Fund, launched last year, has already had a deep effect on how venture-capital firms finance tech startups. The vast sum it’s deploying has tempted companies into bigger financing deals: Globally, the number of private equity-backed fundraisings of over $100 million, known as mega-rounds, jumped 62% last year to 258, according to data from PricewaterhouseCoopers and CB Insights.
SoftBank was involved in two of the biggest: a $5.5 billion round for Chinese ride-hailing company Didi and one that raised $4.4 billion for office-space-sharing company WeWork. This year, it has already sunk nearly $8 billion into Uber.
The Vision Fund’s emergence has exacerbated the trend of recent years toward fewer but bigger fundraisings in tech. Partly, that reflects the “winner-take-all” nature of the internet economy, in which companies like Facebook or Google have become so dominant. Venture-capital firms, seeking surer bets, are favoring late-stage unicorns—private companies worth over $1 billion—that already have big user bases. Uber and Didi are good examples.
But with tech unicorns sucking up so much of the available cash and entrenching their market-leader positions, what’s left for early-stage startups? As big fundraising deals soared last year, the number for seed-stage companies slumped by 29% globally, according to consulting firm Delta Partners.
Another consequence is ever larger valuations for some of the bigger unicorns. A warming IPO market has added fuel, as investors pile into later-stage names in hopes of quick profit from new-listing pops. This has been a key factor in the ever-escalating valuations of pre-IPO Chinese companies like Ant Financial and Xiaomi over the past year or so.
As venture capital for the tech sector become less adventurous, those who already have the means have all the advantages.