PitchBook News - Building GP stakes funds to last

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The Daily Pitch: VC

June 8, 2022

The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data

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

GP stakes investors have had a very active year. Our analyst note breaks down fund portfolio construction, covering return composition, volatility and more.

Investor appetite for real estate strategies like GP co-investment is holding strong through rising inflation.

We spoke with one LP about how VCs have recently adopted a more conservative approach to early-stage deals amid market turmoil.

Today's Top Stories

How portfolio construction can affect returns for GP stakes funds

GP stakes investors have had a very active year of fundraising, capital development, monetization and more. Alternatives firms are increasingly choosing to sell stakes in their management companies to fund growth initiatives. More GP stakes deals are expected to be on the way, and a weakened stock market could push managers to pursue private financing.

We break down fund portfolio construction by return composition, volatility and more in a recent PitchBook analyst note on GP stakes. Some key takeaways include:

GP stakes investment returns vary by the target GP's strategy. Unsurprisingly, a GP's return profile tends to look a lot like the strategy with which it invests.

Well-rounded portfolios mix private equity, credit and real assets, as these are likely to perform best through all market conditions.

Higher inflation and interest rates are poised to most negatively affect buyout and growth equity managers while providing a tailwind to credit and real assets because of stepped-up LP demand.

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The market correction has come for Series A and seed startups

(DNY59/Getty Images)

After months of relative immunity to market turmoil, Series A and seed deals are starting to feel pricing pressure.

Valuations for best-in-class Series A deals have dropped as much as 58% in recent months, according to Michael Kim, an LP whose firm Cendana Capital invests in dozens of prominent seed funds. Seed-stage startups are likewise seeing valuation declines.

VC firms, including Sequoia, are also starting to demand that companies show more robust revenue before seeking a Series A round.

But pricing for crypto and Web3 deals remains high. "On the crypto side, it's crazy," Kim said.

Recommended Reads

As the business of book buying has migrated online, it's gotten harder to sell works by lesser-known authors. Some startups are trying to reproduce the serendipity of walking into a bookstore and discovering something new—with mixed results. [The New York Times]

How some real estate companies are competing to sell buyers on a fractional lifestyle. [The Information]

The surreal case of one hot-headed coder who's been accused of exposing the CIA's hacking arsenal. [The New Yorker]

Since yesterday, the PitchBook Platform added:

19

VC valuations

2131

People

574

Companies

25

Funds

See what our data software can do

Quick Takes

	The Daily Benchmark
	2017 Vintage Global PE Funds with more than $1B
	A message from Clari
	Lessons from a CEO: 4 ways to protect revenue during a downturn
	VC Deals
	Envision Digital secures $210M
	Pintu banks $113M Series B
	Nfinite brings in $100M Series B
	Bicycle Health bags $50M
	Ion Storage Systems picks up $30M
	Hammoq raises $24M in equity and debt
	Dvele lands $15M

The Daily Benchmark

2017 Vintage Global PE Funds with more than $1B

Median IRR

24.41%

Top Quartile IRR

35.66%

1.50x

Median TVPI

Select top performers

Great Hill Equity Partners VI

Blackstone Capital Partners Asia

Clearlake Capital Partners V

*IRR: net of fees

55 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

A message from Clari

Lessons from a CEO: 4 ways to protect revenue during a downturn

Take action now to protect your revenue and get ahead of the market:

Create an impact thesis about how macroeconomic conditions impact the most important dimensions of your revenue.
Look for signals for downward pressure on your renewals and churn.
Calibrate the 3 C's: Coverage, Capacity, and Conversion.
Pressure test your big deals. Move now on the sequence of events for your make-or-break deals to assess risk and upside against the plan.

Read 4 CEO Lessons on How to Protect Revenue During a Downturn to get the detailed playbook.

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VC Deals

Envision Digital secures $210M

Envision Digital has raised a $210 million Series A led by Sequoia China, with support from GIC. The Singapore-based company offers an AI and internet of things operating system for customers to manage smart devices and reduce their carbon footprints.

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View similar company »

Pintu banks $113M Series B

Pintu has raised $113 million from investors including Lightspeed India, NorthStar Capital and Pantera Capital. Founded in 2020, the Jakarta-based company offers a cryptocurrency exchange platform.

View round

View similar company »

Nfinite brings in $100M Series B

Nfinite has raised $100 million in a round led by Insight Partners. The company offers a 3D merchandising platform for brands to display and manage product visuals.

View round

View 3 competitors »

Bicycle Health bags $50M

Bicycle Health has raised a $50 million Series B led by InterAlpen Partners. The Boston-based company offers virtual care for opioid use disorder.

View round

View 2 competitors »

Ion Storage Systems picks up $30M

Ion Storage Systems has raised a $30 Series A million led by Clear Creek Investments, VoLo Earth Ventures and Alsop Louie Partners. The company is a manufacturer of solid-state lithium metal batteries.

View round

View 19 competitors »

Hammoq raises $24M in equity and debt

Hammoq has raised $24 million in an equity and debt round led by Sierra Ventures. Based in Phoenix, the company offers a platform designed to help ecommerce sellers digitize resale operations and automate online listings on marketplaces.

View round

View 4 competitors »

Dvele lands $15M

San Diego-based modular home builder Dvele has raised $15 million in a round co-led by Crescent and Marvin. The company plans to use the funds to complete its automated homebuilding technology.

View round

View 3 competitors »

Chart of the Day

"Carveout activity ballooned in Q1, with €20 billion invested, which is pacing to be a record year by some distance. Q1's carveout deal value has already eclipsed all annual figures except for 2018, and we still have three quarters of the year left. The two largest deals of the quarter certainly buoyed carveout deal value, however, the trends of portfolio revamps, redefining core competencies, reducing leverage, and exiting non-core assets will continue to accelerate in this more hawkish policy environment."

Source: PitchBook's 2022 France & Benelux Private Capital Breakdown

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PitchBook News - Building GP stakes funds to last

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Supply chain tech tries to tame chaos

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IPOs stall and valuations fall

First-time funds in a crisis

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