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Succession plans aid in attractive GP stakes

Saudi Arabia bolsters VC market; US PE middle market a mixed bag; Opto emerges from stealth with $145M; Lerer Hippeau raises $230M across two funds
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The Daily Pitch: VC
September 21, 2022
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In today's Daily Pitch, you'll find:
  • Some investors indicate that solid succession plans are a key factor when considering GP stakes in PE firms.

  • Middle-market dealmaking stayed steady in H1, but fundraising was another story, according to our new US PE Middle Market Report.
 
Today's Top Stories  
Succession plans emerge as a key part of GP stakes investing
(Andrey_Popov/Shutterstock)
Behind the scenes of the recent wave of investment in GP stakes in PE firms, some partners bringing in new capital have another crucial concern in mind: succession planning.

In addition to fund expansion and growth initiatives, PE firms often seek minority capital to facilitate succession planning. At the same time, some investors mulling a stake in a firm want to see a solid succession plan in place before making a commitment.
read more
 
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Saudi Arabia's efforts to draw startup investment are paying off
Riyadh (Bayan Alkurbi/Getty Images)
Venture-backed startups in Saudi Arabia have been bolstered by a confluence of favorable trends in recent years—including low interest rates, increasing urbanization, demand for online groceries, pro-business reforms and a sharp rise in oil revenues.

The momentum has catapulted VC deal value in the region, reaching more than $425 million so far this year, on pace to surpass the record levels of 2021, according to PitchBook data.
read more
 
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A message from West Monroe  
How to protect your portfolio companies against cyber attacks
Companies acquired by private equity firms are quickly thrown into the spotlight and become an increased target for cybersecurity attacks given their public exposure, deep financial resources, and low cybersecurity maturity.

There are an abundance of cybersecurity attack types to prevent against, and knowing where to focus your portfolio company's time, resources, and investments can be challenging.

A good rule of thumb? Companies should focus their efforts on cybersecurity controls that would help prevent against today's most prevalent attack types: ransomware, data breaches, impersonation attacks, and business email compromises.

Read more to learn what actions you should take to protect your portfolios against a cyber-attack.

Read More Here
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Dealmaking holds steady, fundraising slows in US PE middle market
PE deal activity in the US middle market totaled $228.2 billion in H1—a sharp drop from 2021's record but on pace for a healthy year nonetheless. Firms have abundant dry powder, and large GPs averse to making massive bets in the current environment have eagerly turned their eyes to smaller investment opportunities.

Yet the middle market's size advantage in the dealmaking space proves a hindrance when it comes to fundraising, according to our Q2 2022 US PE Middle Market Report, sponsored by Antares Capital and Baker Tilly. Among the takeaways:
  • The crowded fundraising landscape is expected to have its biggest negative effect on the middle market, as LPs pushed near their allocation limits prioritize relationships with larger, more-established fund managers.

  • Add-on activity accounted for 73% and 62.5% of deal count and value, respectively—both all-time highs.

  • Deal sizes have trended downward, with middle-market deals over $500 million making up their lowest share of count and value in at least a decade.

  • Exit activity in Q2 fell for the second consecutive quarter, with the cumulative value of $35.6 billion falling below the average quarterly value for the five years pre-pandemic.
read it now
 
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Blackstone's Bourne Leisure to exit holiday group Butlin's
(Sarnia/Shutterstock)
Blackstone has agreed to sell UK resort group Butlin's back to its original owners less than two years after buying parent company Bourne Leisure.

The deal, which is reported to be worth £300 million (about $341 million), adds to another £300 million generated by the sale of some of Butlin's real estate assets in July.
read more
 
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Recommended Reads
Calpers, the biggest public pension plan in the US, says putting its PE program on hold for 10 years cost it up to $18 billion in returns. [Financial Times]

Having a good climate plan, and following through on it, could help tech companies attract top talent. [Protocol]

Some PE firms are disputing the findings of a new report grading them on their oil and gas holdings, highlighting the lack of readily available information on a huge industry. [Institutional Investor]
 
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Quick Takes  
  The Daily Benchmark  
  2015 Vintage North American VC Funds  
  A message from Apex Group  
  Fund managers benefit from $3.8M savings with Apex Group  
  VC Deals  
  Opto Investments emerges from stealth with $145M  
  Zopper secures $75M  
  Fraud prevention startup Sardine raises $51.5M  
  Classiq extends Series B to $49M  
  Scratch Financial banks $35M  
  4M Analytics brings in $30M  
  ImmunoScape collects $14M  
  Battery Ventures leads $14M round for Higlobe  
  Fundraising  
  Lerer Hippeau raises $230M across two funds  
  Avanta Ventures collects $225M  
  Investors  
  Chamath Palihapitiya scraps two SPACs  
 
 
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The Daily Benchmark  
2015 Vintage North American VC Funds
Median IRR
26.15%
Top Quartile IRR Hurdle Rate
37.31%
2.39x
Median TVPI
Select top performers
Kingfisher Equity Partners II
Outlander 1 Archimedes
G Squared III
*IRR: net of fees
55 Funds in Benchmark »
Check out the latest version of PitchBook Benchmarks
 
A message from Apex Group  
Fund managers benefit from $3.8M savings with Apex Group
Forrester Consulting has recently released its independent study, having interviewed key decision makers across a number of large Apex Group clients, and the findings in its Total Economic Impact™ study of Apex Group are compelling:
  • Around $5.4M in cost benefits
  • $2.75M Net Present Value over three years
  • 105% return on investment ROI
To find out more about the benefits and savings that Apex Group's single-source solution can provide, download Forrester's Total Economic Impact™ report on Apex Group here.

Apex Group's transformation over the past few years has been driven by the Group's founding vision—to deliver service in a better way, in a way that no one else can.
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VC Deals  
Opto Investments emerges from stealth with $145M
Opto Investments has raised a $145 million Series A led by Tiger Global, with support from investors including 8VC and Clocktower Ventures. The New York-based company's platform offers private market access to independent investment advisers.
View round
 
View similar company »
 
Zopper secures $75M
Zopper has raised a $75 million Series C led by Creaegis, with support from investors including Bessemer Venture Partners and ICICI Venture. Based in the New Delhi area, the company helps B2B and B2C customers offer insurance products.
View round
 
View 14 competitors »
 
Fraud prevention startup Sardine raises $51.5M
Sardine has raised a $51.5 million Series B led by Andreessen Horowitz. Based in the Bay Area, the company provides fraud prevention products to fintech and Web3 companies.
View round
 
View similar company »
 
Classiq extends Series B to $49M
Awz Ventures has led a $13 million Series B extension for Classiq, bringing the round's total to $49 million. Based in Tel Aviv, the company is developing quantum computing software for commercial applications.
View round
 
View similar company »
 
Scratch Financial banks $35M
Scratch Financial has raised a $35 million Series C led by Norwest Venture Partners. Scratch helps patients and healthcare providers access financing tools and manage payment options.
View round
 
View 2 competitors »
 
4M Analytics brings in $30M
4M Analytics has raised $30 million in a Series A extension co-led by Insight Partners and ITI Venture Capital Partners. The Tel Aviv-based company provides mapping technology for underground infrastructure.
View round
 
View similar company »
 
ImmunoScape collects $14M
ImmunoScape has raised $14 million in a round led by Anzu Partners. The company is the developer of a drug discovery platform for the treatment of solid tumors.
View round
 
View 2 competitors »
 
Battery Ventures leads $14M round for Higlobe
Higlobe, the developer of a payments platform designed to facilitate cross-border transfers, has raised $14 million in a round led by Battery Ventures. Founded in 2020, the Palo Alto-based company is backed by investors including FJ Labs and TTV Capital.
View round
 
View similar company »
 
 
Fundraising  
Lerer Hippeau raises $230M across two funds
Lerer Hippeau has raised a total of $230 million for its eighth pre-seed and seed fund and its fourth select fund, which invests in companies from Series A to C.
View fund
 
View 419 investments »
 
Avanta Ventures collects $225M
Avanta Ventures has raised a $225 million early-stage fund. The Mountain View, Calif.-based firm seeks to invest in sectors including fintech, cybersecurity, smart home and applied AI.
View fund
 
View 22 investments »
 
 
Investors  
Chamath Palihapitiya scraps two SPACs
Chamath Palihapitiya has announced plans to shut down two blank-check companies after they failed amid the downturn to find acquisition targets, Bloomberg reported. The SPACs, Social Capital Hedosophia VI and Social Capital IV, had raised $1.15 billion and $460 million, respectively.
View details
 
View 49 investments »
 
 
Chart of the Day  
Source: PitchBook's Q2 2022 US PE Middle Market Report
 
Who's in the newsletter today?
Investors
8VC
Andreessen Horowitz
Anzu Partners
Avanta Ventures
Awz Ventures
Battery Ventures
Bessemer Venture Partners
Chamath Palihapitiya
Clocktower Ventures
Creaegis
FJ Labs
ICICI Venture
ITI Venture Capital Partners
Insight Partners
Lerer Hippeau
Norwest Venture Partners
TTV Capital
Tiger Global
Companies
4M Analytics
Classiq
Higlobe
ImmunoScape
Opto Investments
Sardine
Scratch Financial
Social Capital Hedosophia VI
Social Capital IV
Zopper
 
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