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PitchBook News - US PE faces a regime change

Energy crisis fuels climate tech; Sarah Guo leaving Greylock to start own fund; Branch lands $147M; CareBridge raises $140M
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The Daily Pitch: VC
June 9, 2022
The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data
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In today's Daily Pitch, you'll find:
  • Our latest Quantitative Perspectives Report delves into the key elements of a new, inflation-fueled regime that could impact the US private equity market.

  • Public PE firms struck a cautious tone in their first-quarter earnings reports, reflecting a more challenging economic environment.

  • Climate tech startups had a strong start to the year and could draw sustained interest as the ongoing energy crisis spurs investment in green technologies.
 
Today's Top Stories  
How a new regime could impact the US PE market
If recent market movements and economic data are any indication, a shift in the underlying investment environment means private equity is in for some significant changes.

The asset class is entering a new regime, highlighted by high inflation, that has put policymakers in a difficult position and will likely result in less support of economic growth and financial markets. PE dealmaking will be bolstered in the short term by near-record amounts of dry powder and a strong funding market, but investors will face challenges such as rising interest rates and decreased liquidity for exits.

Our Q2 2022 Quantitative Perspectives Report delves into the key elements of this new regime and how it could affect the PE market, exploring everything from valuations to recession and inflation risks. Highlights include:
  • Based on data through the end of May, our economic modeling indicates only a 19% chance of a recession in the next 18 months.

  • Deal activity decreased in Q1 but remained well above short- and long-term trends. Meanwhile, exit activity slowed dramatically, with deal value hitting just $66.7 billion for the quarter.

  • After a modest decline in Q2 2020, PE fund returns were exceptionally strong, driven mainly by unrealized gains that may not materialize given the market's reassessment of asset valuations.

  • During the last six years, PE managers have moved away from commodity-focused businesses and turned their focus to the tech sector.
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Ongoing energy crisis fuels strong 2022 for climate tech companies
(Norbert Hentges/Getty Images)
Global climate tech startups have already raised $13.7 billion so far this year and could draw sustained VC interest as the ongoing energy crisis spurs investment in green technologies.

VC investors are broadening their scope beyond EV and battery makers to encompass companies that offer carbon capture tech, lithium mining and indoor vertical farms.
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Public PE firms strike a more cautious tone in Q1
Publicly traded private equity firms shifted to a different mood in their first-quarter earnings reports compared with 2021. Inflation and higher interest rates were discussed at length on many of the calls, as analysts attempted to gauge the impact on each manager and business line, from fund performance to fundraising.

Our latest analyst note explores the more challenging economic climate that PE firms faced in Q1. Among the takeaways:
  • The PE fundraising environment is perhaps the most crowded it has been, with myriad managers returning to LPs for re-ups—many far sooner than anticipated.

  • Fundraising from retail investors remains a key pillar for nearly all firms. Blue Owl is bringing in a significant proportion of fundraising through the channel, but Blackstone leads the overall figures—amassing $4 billion to $5 billion in capital per month from retail.

  • Strategy expansion remains an important growth engine for all public managers, especially with some firms seeing smaller step-ups in their flagship funds as sizes crest the $25 billion mark.
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European edtech gets a boost with Multiverse's Series D
(SEAN GLADWELL/Getty Images)
Online apprenticeship platform Multiverse has joined Europe's unicorn club with a $220 million Series D.

The investment comes amid an increase in edtech funding. This year, European startups have already collected more than half the amount raised in 2021.
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Recommended Reads
TSMC chair Mark Liu on how the world's largest chipmaker is reimagining the semiconductor industry. [Fortune]

Why private credit may not be the best choice for short-term investors. [Institutional Investor]

The SEC's proposed changes to US stock trading rules are facing criticism from Wall Street. [The Wall Street Journal]
 
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Quick Takes  
  The Daily Benchmark  
  2018 Vintage Global Real Estate Funds  
  People  
  Sarah Guo leaves Greylock to start own fund  
  VC Deals  
  Insurtech startup Branch lands $147M  
  CareBridge raises $140M  
  Immuta nabs $100M in Series E funding  
  London's Codat snags $100M  
  LibLab secures $42M in Insight Partners-led round  
  Thrive Capital leads $40M round for Nava Benefits  
  Encamp picks up $30M  
  CareAcademy books $20M  
  Fundraising  
  Vale launches $100M mining tech fund  
 
 
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The Daily Benchmark  
2018 Vintage Global Real Estate Funds
Median IRR
11.24%
Top Quartile IRR
14.40%
1.15x
Median TVPI
Select top performers
Invesco Strategic Opportunities III
LEM Multifamily Fund V
TPG Real Estate Partners III
*IRR: net of fees
82 Funds in Benchmark »
Check out the latest version of PitchBook Benchmarks
 
People  
Sarah Guo leaves Greylock to start own fund
Sarah Guo is stepping down from her position as a general partner at Greylock Partners to launch her own fund. Guo joined Greylock in 2013 and led investments in companies including Awake Networks and Cleo.
View details
 
 
 
VC Deals  
Insurtech startup Branch lands $147M
Branch has raised a $147 million Series C led by Weatherford Capital, valuing the company at $1.05 billion. Launched in 2019 and based in Ohio, Branch is a provider of home and auto insurance products.
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View 2 competitors »
 
CareBridge raises $140M
CareBridge has raised $140 million in a round led by Oak HC/FT. Based in Nashville, the company is a provider of value-based healthcare services for individuals receiving home and community-based care.
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View similar company »
 
Immuta nabs $100M in Series E funding
Boston-based Immuta has raised $100 million in a round led by NightDragon. Founded in 2015, the data automation company helps organizations discover, protect and monitor sensitive information. Immuta has now raised around $267 million in total private funding.
View round
 
View 50 competitors »
 
London's Codat snags $100M
Codat has raised a $100 million Series C led by JP Morgan Growth Equity Partners, with support from investors including Canapi Ventures and Plaid. The company's API enables software providers and financial institutions to build integrated products for small and medium-sized businesses.
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View 30 competitors »
 
LibLab secures $42M in Insight Partners-led round
LibLab has raised a $42 million Series A led by Insight Partners. The company offers developer tools intended to automate the development, production and maintenance of software development kits.
View round
 
View similar company »
 
Thrive Capital leads $40M round for Nava Benefits
Nava Benefits has raised a $40M Series B led by Thrive Capital. The benefits brokerage helps employers compare health plans from more than 600 providers.
View round
 
View similar company »
 
Encamp picks up $30M
Encamp has raised a $30 million Series C led by Drive Capital. Based in Indianapolis, the company offers an environmental compliance and reporting platform.
View round
 
View 9 competitors »
 
CareAcademy books $20M
CareAcademy has raised $20 million in a round led by Goldman Sachs Asset Management. Based in Boston, the company offers a training platform for home-care professionals and family caregivers.
View round
 
View 14 competitors »
 
 
Fundraising  
Vale launches $100M mining tech fund
Brazilian mining giant Vale has launched a VC arm with $100 million. Vale Ventures will invest in startups that reduce waste and carbon emissions in the mining process, as well as those working to increase the supply of metals needed for energy transition.
 
Chart of the Day  
Source: PitchBook's Q1 2022 European Venture Report
 
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Who's in the newsletter today?
People
Sarah Guo
Investors
Canapi Ventures
Drive Capital
Goldman Sachs Asset Management
Greylock Partners
Insight Partners
JP Morgan Growth Equity Partners
NightDragon
Oak HC/FT
Plaid
Thrive Capital
Vale
Weatherford Capital
Companies
Awake Networks
Branch
CareAcademy
CareBridge
Cleo
Codat
Encamp
Immuta
LibLab
Nava Benefits
 
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