VCs face pressure in information security

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The Daily Pitch: VC

May 9, 2022

Like our newsletter? The data comes from the PitchBook Platform — our data software for VC, PE and M&A

In today's Daily Pitch, you'll find:

Our latest Emerging Tech Research provides an update on the information security sector as startups stare down another bear market.

Many VCs are struggling to raise funds, in large part because LPs are overwhelmed by the sheer number of firms seeking capital this year.

Israel has seen record VC deal activity as the country cements itself as a world leader in tech innovation. We explore the most active Israeli VC investors.

Today's Top Stories

Information security becomes leading IT priority in 2022

Digital transformation and geopolitical risk have combined to move the information security sector to the top of IT agendas, pushing it past other categories of enterprise software. Ransomware has become a prevalent issue for many organizations, with security software spending on track to reach $114 billion in 2022. Meanwhile, startups are staring down another bear market, which could propel consolidation among the recent wave of cloud and endpoint security leaders.

Our Q1 2022 Emerging Tech Research Report on information security provides an update on the industry, exploring emerging opportunities in cloud-native application protection platforms, security service edge and threat intelligence. The report also includes a market map that helps visualize the various sub-segments of the industry, from application security to identity and access management. Other key takeaways include:

VC investment in the information security space faced pressure from declining share prices of high-growth incumbents, dropping 35.8% quarter-over-quarter to $5.1 billion.

Median late-stage valuations took a hit, dropping 26.1% from 2021. Early-stage VC investment remains robust, though a slowdown may be on the horizon as market conditions remain depressed.

An overall tech market slowdown put the IPO market on ice with no listings recorded for Q1.

Web3 security remained a driving theme for VC funding despite a bear market for cryptocurrency.

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VCs hit with 'fundraising pain' as LPs deal with venture overexposure

(Mykyta Dolmatov/Getty Images)

Limited partners are overwhelmed by an unprecedented number of VC firms that came back to market with new and, in most cases, larger funds this year.

They are responding to the onslaught by walking away from some existing relationships or reducing check sizes, even for solid performers.

Many VC firms, including several major names, are having doubts they will be able to close new vehicles at their original target.

Recommended Reads

Repairing Scotland's extensive peatlands could help confront climate change. It could also make a fast-fashion billionaire even richer. [The New York Times]

Heart attacks remain the world's leading cause of death, despite decades of promising drug development. One company is proposing a radical new solution: altering the genome. [Bloomberg]

Why corporate boards are getting more involved in tech investment decisions. [Fortune]

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Quick Takes


	The Daily Benchmark
	2020 Vintage Global Secondaries Funds
	A message from Grant Thornton
	Improving data and analytics in private equity
	VC Deals
	Brookfield leads Material Bank's $175M Series D
	Pachama collects $55M for carbon credit platform
	Haun Ventures backs Zora in first NFT bet
	Backflip secures $35M in equity and debt
	Tomorrow Farms grows with $8.5M seed

The Daily Benchmark

2020 Vintage Global Secondaries Funds

Median IRR

93.69%

Top Quartile IRR

112.96%

1.64x

Median TVPI

Select top performers

RCP Secondary Opportunity Fund III Overage Fund

Coller International Partners VIII

Dover Street X

*IRR: net of fees

12 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

A message from Grant Thornton

Improving data and analytics in private equity

Rapid growth and change in private equity investing have heightened the importance of in-depth data and analytics. To compete, private equity fund managers need high-quality technology solutions that sharpen their insight and streamline their workflows across the full fund lifecycle. Learn how firms can better manage data for strategic advantage.

Find out more

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VC Deals

Brookfield leads Material Bank's $175M Series D

Brookfield Growth has led a $175 million Series D for Florida-based Material Bank, a marketplace for architectural, design and construction materials. The round, which also received support from VCs like Fifth Wall and General Catalyst, brings Material Bank's total funding to some $325 million.

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Pachama collects $55M for carbon credit platform

Pachama has raised a $55 million Series B led by Future Positive. The San Francisco-based startup uses satellite imagery, remote sensing and machine learning to measure carbon stored in forests, providing guidance to organizations who want to purchase carbon credits. Pachama has reviewed more than 150 forest projects globally.

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Haun Ventures backs Zora in first NFT bet

Zora has raised a funding round led by Katie Haun's new crypto-focused firm, Haun Ventures. The company offers tools that enable artists and developers to create NFT collections and marketplaces. The $50 million financing, which values Zora at $600 million, is the first led by Haun Ventures, according to reports.

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Backflip secures $35M in equity and debt

Backflip has raised $8 million in a seed round led by Vertical Venture Partners and LiveOak Venture Partners. The Denver-based company, which offers a real estate investment platform to help entrepreneurs acquire and renovate single-family homes, also secured $27 million in debt funding.

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Tomorrow Farms grows with $8.5M seed

Foodtech company Tomorrow Farms has raised $8.5 million in a seed round led by Lowercarbon Capital. The startup partners with food science companies to build sustainable food and beverage brands.

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Chart of the Day

"Real estate appears to be consolidating into fewer and much larger funds. That said, while there have been few funds over $5 billion in capital raised, the main focus of LP commitments was funds between $500 million and $5 billion."

Source: PitchBook's H2 2021 Global Real Estate Report