PitchBook News - Analysts predict tough 2023 for PE

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The Daily Pitch: VC

December 20, 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:

The cross-border M&A market holds steady and, despite unique risks, keeps its eyes on the long game.

PitchBook analysts predict how private equity will navigate a tough market in our 2023 US Private Equity Outlook.

Chart of the day: Median time since founding for US female-founded companies to reach unicorn status.

Today's Top Stories

Cross-border activity by North American acquirers holds firm

The market for cross-border M&A, in which GPs and corporations seek new markets via acquisitions in other countries, held steady in 2022. Cross-border activity by North American acquirers has fully recovered from 2020 lows and closed slightly higher in value despite a decline in the overall M&A market.

Buying overseas companies has always involved a higher degree of risk and return due to unexpected changes in currencies and foreign regulations as well as geopolitical tensions. North American companies that successfully navigate these risks have reaped large gains, and the stability in this year's activity suggests their appetite is still intact.

In our latest analyst note, PitchBook analyst Jinny Choi takes region-by-region snapshots of the market and explores where potential headwinds could lead.

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PE returns, fundraising could falter in 2023

There's little doubt that the private equity universe will have to grapple with drooping company valuations and expensive debt in 2023. But what are the implications?

PE funds' returns will likely underperform public markets. Take-private deals should continue, but firms will probably shift gears to much smaller targets. Exits could hit a 15-year low, relative to new investments. And buyers in need of leverage are likely to tap nonbank lenders almost exclusively in coming months.

That's what PitchBook analysts think the new year will bring, and those predictions and others—such as which types of healthcare deals are poised to bounce back—are laid out in our 2023 US Private Equity Outlook.

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A Message from Coupa

Achieve greater financial resilience while scaling for growth

When is a company ready to IPO? Coupa created a five-point IPO Readiness Checklist based on years of experience in helping businesses worldwide prepare for an IPO and the results of a 2022 IPO readiness survey conducted among finance decision-makers.

Even in delaying an IPO (due to volatile economic conditions), it's crucial to get the financial house in order, prepare for compliance, and begin behaving like a public company. This undertaking takes longer than most realize, so starting earlier rather than later is pertinent.

The IPO Readiness Checklist will also help to:

Establish scalable financial processes
Mitigate risks that impact business continuity
Create a trusted IPO team
Implement clear financial controls that hinder fraud
Ensure financial processes are compliant with audits, and regulations

Get your free copy of the Checklist today

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Female founders take the good with the bad in a challenging 2022

(Drew Sanders/PitchBook News)

Companies with at least one female founder have raised about $38 billion in venture funding so far in 2022, while startups with only female founders have garnered about $4.3 billion, according to PitchBook data. These both represent sharp declines from 2021, although they are still the second-highest annual totals on record.

While funding for female-founded companies has declined year-over-year, the share of capital for female co-founded startups has ticked up to 15.4% of total US VC funding, the highest it's been since 2017.

As the VC market faced headwinds amid uncertain economic conditions, see how female founders fared in 2022.

Recommended Reads

Hundreds of companies that went public in the IPO boom have suffered such sharp reversals that their shares may never recover. [The Wall Street Journal]

Binance's corporate filings show that much about the crypto exchange remains mostly hidden from public view. [Reuters]

Years into the pandemic, it's still difficult to get a handle on what comes next for the economy by looking at examples from the past. [The New York Times]

Since yesterday, the PitchBook Platform added:

12

VC valuations

2022

People

607

Companies

41

Funds

See what our data software can do

Quick Takes

	The Daily Benchmark
	2020 Vintage Global Funds-of-Funds
	VC Deals
	CPPIB, others ink $200M Redaptive investment
	CyberCube gets $50M growth round
	Helm.ai drives off with $31M Series C
	ImagenAI lands $30M for creative AI
	Protillion Biosciences raises $18M
	Mangomint grabs $13M for salon software
	Revel raises $7.8M for NFT platform
	Foundation secures $7M
	Portfolio Companies
	Binance to buy Voyager assets for $1B
	Epic Games fined $520M by FTC
	Fundraising
	Linse Capital raises $700M
	Axelar launches $60M Web3 funding program

The Daily Benchmark

2020 Vintage Global Funds-of-Funds

Median IRR

30.89%

Top Quartile IRR

53.39%

1.26x

Median TVPI

Select top performers

Adams Street 2020 Global Fund

Balboa Ventures

RCP SBO Opportunities Fund

*IRR: net of fees

20 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

CPPIB, others ink $200M Redaptive investment

The Canada Pension Plan Investment Board has invested $200 million in Redaptive, which installs equipment that makes buildings and facilities more energy efficient, alongside new funds from the company's existing investors, CBRE and Linse Capital.

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View 12 competitors »

CyberCube gets $50M growth round

Cybersecurity startup CyberCube, which makes risk assessment technology for insurers and brokers, has raised $50 million in a growth round led by Morgan Stanley Tactical Value.

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View 5 competitors »

Helm.ai drives off with $31M Series C

Autonomous driving and robotics company Helm.ai has secured a $31 million Series C led by Freeman Group. The round valued Helm at $431 million, TechCrunch reported.

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View 4 competitors »

ImagenAI lands $30M for creative AI

ImagenAI, which is creating AI-powered photo editing tools, has raised a $30 million investment led by Summit Partners.

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View similar company »

Protillion Biosciences raises $18M

Biotech startup Protillion Biosciences, which is creating a discovery platform for protein therapeutics, has raised an $18 million Series A led by Arch Venture Partners and Illumina Ventures.

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View similar company »

Mangomint grabs $13M for salon software

Appointment booking software maker Mangomint has raised $13 million in a Series A led by OpenView Venture Partners, TechCrunch reported.

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View 14 competitors »

Revel raises $7.8M for NFT platform

NFT collecting and trading platform Revel has secured $7.8 million in a round led by Dragonfly.

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Foundation secures $7M

Crypto hardware wallet maker Foundation has raised $7 million in a seed round led by Polychain Capital.

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View similar company »

Portfolio Companies

Binance to buy Voyager assets for $1B

Crypto trading platform Binance.US has agreed to pay around $1 billion to acquire the assets of Voyager Digital, which filed for bankruptcy protection earlier this year following the collapse of Three Arrows Capital. FTX US, another crypto exchange, had planned to take Voyager private for more than $1.4 billion before it too filed for bankruptcy protection.

View details

View 40 competitors »

Epic Games fined $520M by FTC

"Fortnite" developer Epic Games has been ordered by the Federal Trade Commission to pay $520 million in penalties for violating children's privacy and misleading users into making unintended purchases.

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View 51 competitors »

Fundraising

Linse Capital raises $700M

Growth equity firm Linse Capital has raised $700 million, which will go toward its flagship fund as well as co-investment vehicles for Skydio and Verkada, two of the firm's portfolio companies. Linse Capital was started by former Kleiner Perkins partner Michael Linse and is based in Puerto Rico.

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Axelar launches $60M Web3 funding program

Crypto company Axelar has raised $60 million from investors to start an ecosystem fund for decentralized app makers that use Axelar's interchain infrastructure platform.

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View similar company »

Chart of the Day

"Among the highest-valued female-founded unicorns, the top three were founded by individuals who have founded two additional companies, highlighting how the experience of seasoned entrepreneurs can be an important asset for their companies."

Source: 2022 All In: Female Founders in the US VC Ecosystem

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PitchBook News - Analysts predict tough 2023 for PE

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Forecasting a cloudy 2023 for VC

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