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The results are in! In case you missed it, we released our popular Sustainable Investment Survey report last week, with ESG- and impact-related thoughts from hundreds of GPs and LPs. Read it here. Policy talk: Join our fireside chat Tuesday with fintech policy analysts Ryan Schoen and John Sonsalla on what to expect from policymakers in 2022 and beyond. Register here. Cash flow management: On Thursday, two of our lead analysts will be discussing best practices for managing cash flow forecasting. For tips on setting commitment schedules and better understanding liquidity needs, be sure to join us. | | | | | |
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US VC activity showing signs of distress across all stages | | Venture data continues to showcase a complicated market in the US. Q3 deal value was $43 billion less than the high figure from 2021; estimated deal count is also 20% lower than the high from Q1 of this year. Still, both datapoints are above the quarterly figures posted prior to 2021. Data has still yet to fully match up with market narratives, many of which paint a gloomier picture than the data might suggest. The lengthy nature of venture dealmaking adds a sizeable lag from when companies are looking to raise to when a deal is completed. However, Q3's data does point to an increasingly difficult raising environment, especially for more mature companies. Capital availability at both the early and late stages has fallen quickly to some of the lowest levels we've seen in recent years. | We expect the median late-stage valuation to keep falling. | For every dollar expected to be sought, there are now just six dollars available for each stage. In 2021, this ratio reached double digits. The question of where the capital has gone is important context. The dollar declines seem to have largely come from crossover and other nontraditional investors, exacerbating the challenges for companies that had ridden the wave of extending multiples into high valuations that will be unsupported in today's environment. Deal value derived from financings with crossover investor involvement fell to under $12 billion in Q3, $33 billion lower than the highest quarter. Just $20 billion in mega-deals were completed in Q3—well below the record $54 billion. Roughly 90% of these transactions include nontraditional investors, such as large crossover institutions with much larger capital bases than VCs. These drops almost fully cover the deficit the market is seeing, even if these investors aren't the sole culprits of the industry's broader decline. Adding to the riddle, median deal sizes and valuations for seed and early-stage companies have been relatively unaffected in the data so far, even increasing above 2021 levels on an annualized basis. These areas of the market are receiving the benefits of the high amount of dry powder and high number of recently closed funds that the late-stage companies—especially unicorns—aren't likely to see. For more data and analysis, click to download the free Q3 PitchBook-NVCA Venture Monitor. | | | | | | |
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After a busy start to the year, US PE dealmakers are finally feeling the bite of higher interest rates, with activity in Q3 collectively slowing across M&A, growth equity deals, and recapitalizations by more than 20% YoY. Yet what may seem like a dramatic decline could also be considered a reset. Far from being a new normal, 2021's blistering pace of activity was an aberration, making the "old normal" of the pre-pandemic years a better comparison, according to our Q3 2022 US PE Breakdown: - Deal value topped $819 billion through Q3—already the second-highest annual total on record—as PE's resilience and investors' dry powder kept dealmaking active through July despite macroeconomic headwinds.
- In the IT sector, investors closed 254 deals worth an aggregate of $57.5 billion in Q3, in line with historical quarterly averages, as declining public market valuations spark buyers' interest in high-growth companies.
- Take-privates have surpassed $100 billion for the second consecutive year. In a major departure from the past, private debt funds have stepped in where banks left off to finance these deals.
- US PE fundraising totaled $259 billion through Q3, on pace with 2021, yet with many LPs having hit allocation targets for 2022, fundraising is expected to end the year with more of a thud than a bang.
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The newest editions of our PitchBook Benchmarks have just gone live, with full data as of Q1 2022 and preliminary Q2 data in our global edition. The report offers dozens of pages of fund performance metrics like IRR quantiles, pooled horizon returns, cash multiples, and PMEs. It also features downloadable XLS tables, data visualizations, and PDFs that slice the data by strategy, vintage year, and geography. All of the following breakouts are available for free as we continually work to improve the timeliness and expansiveness of our benchmarks: - Global (includes prelim Q2 data!)
- Venture capital
- Private equity
- Private debt
- North America
- Europe
- Secondaries
- Funds of funds
- Real estate
- Real assets
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Fintech Public Company Valuation Guide Many of fintech's recent IPOs and de-SPAC transactions have not resulted in as big a payday as expected for investors, as stocks of fast-growth, low-profit companies in the sector are 60% to 80% off their peaks. | | Click to see more on fintech valuations and financials | | | | Our new valuation guide tracks stock performance, revenue forecasts, and market caps of key publicly traded fintech companies in sectors including payments, insurtech, and property tech: | | | | | |
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| Senior analyst Kyle Stanford on the big trends in VC. | | | Our insights and data featured in the press: - What is the latest US VC data showing? Why the big drop in deal value? Our US venture lead spoke with Bloomberg's Emily Chang to discuss the state of the market. [Bloomberg]
- "We're in the depths of crypto winter, so investors are not really excited about crypto, especially generalist investors." [Bloomberg]
- Borrowing helps startups avoid down rounds, but the strategy has long-term risks. [WSJ]
- "Right now, the late stage is a much more treacherous market relative to how it has been in the past." [Reuters]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team. | | | | | |
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A few upcoming events: - Oct. 26—As the leveraged loan market continues to trend toward uncertainty, investors look to factors like shifting distress indicators, rates, and volatility in an effort to anticipate future developments. Join our LCD team for a discussion on the big trends. Register here.
- Oct. 27—Join us as we discuss the key findings from our 2022 Sustainable Investment Survey, including the politicization of ESG, impact investing's increasing popularity, and challenges across the ecosystem. Register here.
- Nov. 2—We're co-sponsoring and will be participating in the Intelligent Applications Summit 2022 in Seattle. The event will bring together leaders who are building and enabling intelligent applications in the business and life science sectors. To request an invitation, click here for more details.
- Nov. 8—Our latest Venture Monitor webinar, presented in sponsorship with Insperity and J.P. Morgan, will cover the US VC market's current trajectory, key trends to watch, and what to expect in the future. Register here.
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Highlights from our other recent research: Market updates Thematic research Emerging Technology Research Coming next week (subject to change) - Diving into the sustainable packaging sector
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Preferred Return Podcast: The Rise of Operator Investors | | Isn’t it strange that a startup’s likelihood of failure hardly changes as they mature from Series A to Series B and beyond? Kjael Skaalerud, CRO at Altvia, is joined by Mark Roberge, Co-founder of Stage 2 Capital. Stage 2 is fixated on reducing failure rates as a firm scales by leveraging an LP base made up of renowned GTM leaders to inform when to scale, and how fast. Mark himself is the former CRO of HubSpot, where he helped lead the firm from pre-revenue to IPO. Click here to listen to the episode | | | | | | |
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| Since yesterday, the PitchBook Platform added: | 97 Deals | 372 People | 109 Companies | 20 Funds | | | | | |
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