American startup investors don’t base financial decisions on who sits in the Oval Office. Still, election-year uncertainty appears to be weighing on investment data.
This was A’s general finding Crunch Base a study of U.S. startup financing over the last six presidential election cycles. The data showed that total investment across stages rose moderately to sharply in the 4 years after the election.
To illustrate this, we have charted below total investment over the last six election cycles, showing data for the election yr and post-election yr.
Gains after the elections
The biggest jump got here in 2021, the first yr of 2020 Biden government, while global investment greater than doubled year-on-year to an all-time high of $345 billion. This yr’s investing frenzy coincides with a red-hot IPO market, soaring technology valuations and society returning to some sense of normality as pandemic disruptions subside.
The next largest jump occurred in 2017, the first yr of 2017 Trump administration, as funding increased 26% year-over-year to a total of $98 billion. It was also a yr that saw several large final rounds for outstanding startups, including WeWork, Uber AND Lift.
The not-too-distant third was 2013, the first yr of the presidency Barack Obamasecond term, when investments increased by 20%, reaching $48 billion. This was the yr when billion-dollar startups became increasingly popular. It ended in entry the term “unicorn” to explain this group, which included well-known names corresponding to Pinterest, Whine AND Palantir.
Decline after the election
Our research found two years after the election in which funding declined: 2001 and 2009. This coincided with two major shocks to the economic system: the rupture web bubble and The Great Recession.
The biggest decline occurred in 2001, when investment fell sharply, accompanied by a sell-off in technology and Internet corporations. Shares fell even further in the wake of the September 11, 2001 terrorist attacks. Although it was also the first yr of the presidency George W. Bushfirst term, plainly market dynamics, fairly than a change in the presidential administration, contributed to the declines.
The same appears to be true of 2009, when Obama began his first term in the wake of the housing market crash and shocks to the economic system that sent markets spiraling downward. This yr, investment in startups fell 13% year-over-year and amounted to roughly $26 billion.
Usually funds increase
Historically, the up years in enterprise capital financing outnumber the down years.
This makes sense because total enterprise investment in the U.S. has increased over time. While there are some declines in economic times, most years we see funding increases.
In this context, it is not surprising that we see higher total funding in post-election years. At times, we may have seen additional momentum following elections, as these periods can signal a shift in cultural sentiment in addition to the introduction of policy priorities that favor greater investment in specific sectors or asset types.
Looking to 2025, you do not have to be wildly optimistic to predict funding growth. In particular, if the still dormant tech IPO market revives, we could expect to see more large pre-IPO rounds. While we may not find a way to repeat the highs of 2021 for some time, there is still loads of room for growth.