PitchBook News - A reckoning looms for VC excesses

Plus: Churchill expects private debt to shine; Latin America's most active VCs; mobility tech shifts gears & more
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The Weekend Pitch
May 22, 2022
Presented by Masterworks
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PitchBook tracks and writes about all sorts of data points in the venture industry, from capital collected by companies to the fundraising activity of VC funds. But perhaps no data set generates as much interest from our readers as startup valuations across the venture lifecycle and within different sectors.

To outsiders, startup valuations may seem like a mystery. And while many investors will tell you that valuing a company is as much art as it is science, they will generally be able to explain why a particular valuation is reasonable and fair.

But in recent weeks, many venture capitalists, especially those investing in late-stage companies, are saying they no longer know how to gauge what businesses in the private markets are worth.

"When you have that much volatility in public markets, you don't know what the price [of a company] will be a week from now. It's difficult to figure out," said Tomasz Tunguz, a managing director at Redpoint Ventures who also writes a blog focused on SaaS metrics and valuations.

This is The Weekend Pitch, and I'm Marina Temkin. You can reach me at marina.temkin@pitchbook.com or on Twitter @MTemkin.
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A message from Masterworks
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With a 27% drop for startups in April—or a loss of $5.5 billion in funding—2022 has been a nightmare for VCs. Even the biggest tech darlings have tanked since their IPO, with losses like:
  • RBLX: -53%
  • TOST: -60%
  • COIN: -81%
Yet one asset manager has handed investors a 30% NAR in 2022. With these results, they're catching the attention of top VCs. In fact, their private offerings sell out in hours.

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Did you follow the private markets this week? Take our quiz to test your knowledge and catch up on what you missed.
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Quote/Unquote

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"We are not afraid of a recession. In fact, recessions have been beneficial to private debt, because they tend to push back some of the borrower-friendly terms that may not benefit investors."

—Randy Schwimmer, co-head of senior lending at Churchill Asset Management, Nuveen's $37 billion private capital arm.

Find out what else Schwimmer had to say in our Q&A.

Deal Flow

(Richard Drury/Getty Images)
The pandemic accelerated the adoption of digital services across Latin America, as many were forced to start doing everything from shopping to banking online. In 2021, VCs invested $16.3 billion across more than 900 deals in the region, according to PitchBook data.

While international investors like SoftBank and Tiger Global have started to invest in Latin America in recent years, local firms still tend to dominate early-stage funding rounds. Check out our roundup of the region's most active VC investors.

Did you know ...

(Feodora Chiosea/Getty Images)
... That the first quarter of 2022 saw VC investment in mobility tech companies decline 35% compared with Q4 2021?

However, autonomous driving, electric vehicle and micromobility specialists combined drove nearly a third of the total deal count in the space in Q1.

Our mobility tech market map explores the hardware behind the shift to autonomous transportation.

Datapoints

(gremlin/Getty Images)
US PE exit value dropped to an estimated $90.1 billion in the first three months of 2022, marking a 57.5% decrease from the previous quarter, according to PitchBook data.

Sponsor-to-sponsor deals, in which portfolio companies are sold between PE firms, made up 64% of exit value in Q1, while public listings accounted for only 0.6%.

Check out our Q1 2022 US PE Breakdown for a closer look at private equity trends.

Recommended reads

One writer's take on why we're not going to see a repeat of 2008, even if the US housing market has peaked. [The Atlantic]

Waste from abandoned and bankrupt mines has contaminated over 12,000 miles of waterways across the US. Now some states are seeking to extract critical elements from those waters to offset the cost of cleanup. [Washington Post]

After a challenging year, SoftBank is bracing for more pain. [The Economist]

As companies try to figure out fair pay amid increasing relocations and a tight labor market, compensation is becoming an even bigger headache. [Bloomberg]

A new report suggests that the money big tech companies keep in the banking system could have a more negative impact on the climate than the products they sell. [The New Yorker]

Many have said the music industry is what will push NFTs deeper into the mainstream. Meet the DJ and crypto startup who want to lead the charge. [Fast Company]
This edition of The Weekend Pitch was written by Marina Temkin and Priyamvada Mathur. It was edited by Chris Noble, John Moore and Angela Sams.

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