PitchBook News - Are down rounds really company killers?

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The Daily Pitch: VC

October 7, 2022

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

Global private debt fundraising has slowed from last year's record pace.

PitchBook analysts take a look at what's in store for companies taking down rounds in the current market.

Our latest market map explores the changing outlook for AI and machine learning.

Today's Top Stories

What do down rounds really mean for companies?

The swift decline of the public markets has left many private startups with extended valuations and no exit opportunities in sight. In such an inhospitable market, many companies will be coming face-to-face with down rounds. But what do down rounds really mean for founders and investors in the long run?

Our recent analyst note dives into the data on post-down round exits, difficult IPO markets and investment returns to determine what's in store for companies taking down rounds in the current market. Key takeaways include:

Just 13% of companies raising a down round from 2008 to 2014 were unable to raise a new round or exit immediately after the down-valuation investment.

The majority of down rounds occur at the late stage, where there is ample room to adjust valuations that have grown enormously over the past decade.

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Market Map: Economic volatility reshapes the outlook for AI & ML

(Jenna O'Malley/PitchBook News)

Ongoing economic turbulence has changed outlooks on AI and machine learning's growth.

Cloud computing costs are coming under scrutiny, and general economic volatility is favoring startups that prioritize efficiency over those that focus on model accuracy and complexity.

Explore our AI and machine learning market map to see where investors are putting their money.

explore the data

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Charting private debt fundraising trends

(StacieStauffSmith Photos/Shutterstock)

Global private debt fundraising has slowed down slightly this year, tailing off from last year's record-setting pace.

In the first six months of 2022, 66 private debt funds raised a total of $82 billion—compared with the roughly $93 billion collected across 130 vehicles in the same period a year ago, according to our recent Global Private Debt Report.

Direct lending, the largest private debt category, represented over a third of capital raised in the first six months of this year. Other strategies—in particular credit special-situations and real-estate debt—also received strong investor interest during that period.

Recommended Reads

Companies routinely destroy millions of used hard drives in the name of data security—but industry insiders say they could be reused instead. [Financial Times]

A new macroeconomic era is emerging. What will it look like? [The Economist]

Hopes of a sustainable recovery for San Francisco's economy are being dragged down by a glut of unused office space, accelerating tech layoffs and a downturn in VC investment. [San Francisco Chronical]

Since yesterday, the PitchBook Platform added:

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Quick Takes

	The Daily Benchmark
	2017 Vintage Global Real Estate Funds
	VC Deals
	Altana Technologies banks $100M
	Electra picks up $85M to decarbonize iron
	Alkymi raises $21M Series A
	Mithril Capital leads $17.5M round for Genetesis
	Revelio Labs secures $15M
	Gather AI nabs $10M
	Fundraising
	Tiger Global eyes $6B fund

The Daily Benchmark

2017 Vintage Global Real Estate Funds

Median IRR

14.47%

Top Quartile IRR

19.90%

1.39x

Median TVPI

Select top performers

Penwood Select Industrial Partners V

Realterm Logistics Fund II

Principal Strategic Real Estate Equity Fund II

*IRR: net of fees

73 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Altana Technologies banks $100M

Altana Technologies has raised a $100 million Series B led by Activate Capital Partners. Based in New York, the company offers a supply chain visibility platform.

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View 5 competitors »

Electra picks up $85M to decarbonize iron

Electra, a developer of technology that uses renewable electricity to make carbon-free iron, has raised $85 million. The Colorado-based company is backed by investors including Breakthrough Energy Ventures, BHP Ventures, Temasek and S2G Ventures.

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Alkymi raises $21M Series A

Alkymi has raised $21 million in a round led by Intel Capital. Based in New York, the company is the developer of a workflow automation platform designed to manage unstructured data.

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View similar company »

Mithril Capital leads $17.5M round for Genetesis

Genetesis has raised a $17.5 million Series A led by Mithril Capital. The company's biomagnetic imaging technology diagnoses cardiovascular dysfunction.

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View 4 competitors »

Revelio Labs secures $15M

Elephant Partners has led a $15 million Series A for Revelio Labs, the developer of an HR analytics platform for workforce data.

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View 83 competitors »

Gather AI nabs $10M

Gather AI, a developer of supply chain robotics designed to help warehouse operators manage inventory, raised a $10 million Series A financing round led by Tribeca Venture Partners.

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View 8 competitors »