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Inflection Investing

SPACs and Tiger-style growth equity are all the rage lately and that's creating a potentially underserved market in early growth equity.

Since 2015, there has been an average of 36 investments per year reaching unicorn status with a financing round of over $100M.

# of Deals Raising $100M+ with a valuation between $1B-$1.5B

Over that same time frame, "inflection" investments average 26. I defined an inflection investment as raising $50-150M on a $350M to $750M pre-money valuation.

# of Deals Raising $50-150M with a valuation between $350M-$750M

Inflection investing is difficult because it requires a secret about the market. Either you believe mass adoption is imminent, the overall market is primed for growth, or both.

When done correctly, inflection investing can return venture-like multiples. Firms that have raised "inflection" rounds include Affirm, Carta, Confluent, DoorDash, and ShipBob.

Market abnormalities make 2021 a tough year to use as a benchmark, but I'm interested to see what develops here over the next 12-18 months if valuations cool and SPACs become a less popular option among startups.