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The Research Pitch

May 21, 2022

What are the odds of a recession? Our recent research put the likelihood at 20% in the US—but on the rise. To learn more about three scenarios for the future, how we got here, and what it all means for PE and VC, click here.

Private equity, anyone? Our head of fund strategies and sustainable investing research, Hilary Wiek, discussed the mainstreaming of private markets in the new Morningstar magazine. Read the Q&A.

How the market downturn and inflation are impacting private markets

Though Q1 saw a deteriorating economic situation and a slide in public equity prices, it's clear the volatility isn't over yet.

Just this Wednesday, the S&P 500 fell 4% and the Nasdaq 4.7% in a single day. Year to date, the pair of indices are down 18.7% and 28.3%, respectively.

US real GDP fell at an annualized rate of 1.4% in Q1, the first quarterly decline since lockdowns began in Q2 2020.

All eyes are on the Fed as it tries to orchestrate a "soft landing" amidst surging inflation, supply chain shortages, and the war in Ukraine.

But how does all of this affect private markets?

Will the tech sell-off bring a halt to VC financings?

How will PE firms adapt their dealmaking strategies?

Could inflation be a net positive for some portfolio companies?

How does the war in Ukraine change the perception of sustainable investing?

Our latest research, the second in an ongoing series about the current macro environment, explores how market turmoil is having vastly different impacts on various corners of private markets.

Download the free research: Key Trends to Watch as Markets Return to Turmoil

As always, please feel free to get in touch with any questions or comments about the research.

Best,

Dylan Cox, CFA
Head of Private Markets Research

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Market Updates

European VC valuations trended upward in Q1, as the full impact of macro disruptions was yet to be seen in the data.

Our report breaks down the region's activity, providing an extensive look at valuations across stages, sectors, geographies, and more. Key highlights:

Pre-money valuations across all financing stages in Q1 were above the highs seen in 2021.

The aggregate value and volume of unicorns continued to increase last quarter.

Despite a muted exit environment, the median valuation upon exit ticked up from 2021.

download the free research

Webinars & Events

We're hosting a free webinar Tuesday that will examine key influences driving PE activity in the European insurance sector.

But wait, there's more!

Given recent market volatility, we're also expanding the scope to cover additional PE topics like higher financing costs, softening valuations, and how take-private acquisitions might be a theme to watch amid persistent downside volatility in liquid markets.

For more details, click here.

May 31: As the foodtech industry grows at an incredible rate, our analysts will discuss what's behind the boom, including the proliferation of delivery apps, consumer preferences, and sustainability concerns. Register here.

Commentary

Senior analyst Robert Le weighs in on reports that European fintech giant Klarna is seeking to raise funds at a steep valuation discount:

"The Klarna valuation cut is indicative of what is yet to come for consumer fintech companies.

"Particularly, BNPL providers that underwrite customers could see their pricing and risk management models challenged for the first time in a downturn.

"These companies will be pressured to adjust their underwriting models in real-time if delinquencies and defaults start to creep up.

"We are seeing some signs of this already as Affirm's delinquencies increased to 6.3% in Q1 2022 from 4% in Q2 2021.

"Credit card delinquency rates have remained well under 3% over the past decade.

"We expect over adjustments to come, which will likely lead to more customer rejections and lower revenues."

Robert Le

Senior Emerging Technology Analyst
Fintech

In the News

Our insights and data featured in the press:

Funding is suddenly scarce as VC firms grow stingy, forcing young companies to get frugal and focus on breaking even. [WSJ]

Apollo and other PE firms are hungry for early-stage life sciences VCs. [PE Hub]

One big concern ahead of Instacart's planned IPO: "They're adding fairly significant fees in an industry where margins are already very tight." [Fortune]

As investor appetite grows for alternatives, a high level of discernment is needed as strategies and returns expectations can vary significantly. [Financial Advisor]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

Highlights from our other recent research:

Market updates

Thematic research

Emerging Technology Research

Coming next week (subject to change)

Private Fund Strategies Report
Emerging Tech Indicator
ETR: Foodtech (sneak peek!)
More reaction to the new macro environment

Thanks for reading! Feel free to email us any time with feedback, questions, or tips!

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PitchBook News - When the market turns bearish...

Older messages

Ranking the most active investors of Q1

How VC valuations are faring

PitchBook analysts' key trends to watch

European VC valuations take flight

Macro impacts on PE and VC

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