When the venture capitalist Aileen Lee coined the term unicorn, in 2013, there were 39 of them—roughly four minted every year. So far in 2021, 264 companies in the United States have reached such valuations. Around the world, multiple startups turn into unicorns every single day.

The staggering rate at which companies reach billion-dollar valuations is just one of the ways that venture capital has busted charts this year. “We’re looking at $240 billion invested in VC-backed companies this year, which would have seemed outrageous a few years ago,” says Kyle Stanford, a senior analyst at Pitchbook. “There is more capital and more interest in the venture space than there has ever been.”

Between July and September, more than $82 billion poured into American startups, according to a new report on Q3 data from Pitchbook and the National Venture Capital Association. That’s about as much as venture capitalists spent in all of 2017—which was, at the time, the high-water mark for venture capital spending since the dotcom boom of the early 2000s. Globally, Crunchbase found the Q3 total was $160 billion, a new record high for any quarter in history. Deal sizes have also gone up: The average early-stage deal in the US is now $20 million.

This money is pouring into all parts of the startup world, from angel investments to late-stage deals, from enterprise software to financial technology. More interest is coming from what Pitchbook calls “nontraditional” investors: those in private equity, hedge funds, or corporations, which have deeper pockets than the average fund on Sand Hill Road. These investors have elbowed their way into venture capital to try to get a piece of the excellent profits. Across the market, exit value—the amount a company is worth once it goes public or gets acquired—is at an all-time high, surpassing $500 billion for the first time in a single year (with one quarter still to go). That’s already double the record from last year.

Investors, of course, are all chasing the pot of gold at the end of the rainbow. “Everyone is coming to venture, because it’s been one of the best performing asset classes over the past few years,” says Stanford. In the past year, a number of companies have gone public with valuations of $10 billion or higher, including Coinbase, UiPath, and Toast.

These huge returns for investors have amplified the VC cycle, says David Hsu, who researches venture capital at the University of Pennsylvania’s Wharton School of Business. Investors see big exits, which “fuels VC appetite to invest in tomorrow’s startups.” Hsu also noted that new pathways to liquidity, including SPACs, have made it possible for more startups to go public quickly.

Hsu believes that nascent technologies, like blockchain and AI, have led to a number of new startup innovations. “Other companies benefited from the Covid economy, such as some areas of ecommerce and deliveries,” he says. While those startups may be receiving more attention than ever from VCs, Hsu cautions that the durability of their business models remains to be seen.

Others are even less optimistic. “It’s very frothy out there. People are just throwing money around,” says Carey Smith, the founder of Unorthodox Ventures, an investment firm in Austin. Smith disagrees that the current VC bonanza is driven by startup innovation, which he thinks has remained more or less flat over time. “I would guess that not even 1 percent of today’s startups are viable businesses,” he says. Smith says that while VCs expect for many of their investments to be duds, founders can get screwed in the process. Raising a ton of capital at an inflated valuation carries its own risks: If you don’t live up to that standard, future investors may reevaluate your company downward and dilute your equity.