Can startups grow into their valuations?

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The Daily Pitch: VC

January 25, 2023

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 era of large take-private PE deals is waning as market conditions turn sour.

Investors were hoping that startups could grow into their sky-high valuations, but even those with lots of runway may struggle to catch up.

A look at five charts that showcase how European VC performed in 2022.

Today's Top Stories

Even startups with runway probably can't grow into sky-high valuations

(heychli/Shutterstock)

Valuation multiples may have fallen too far from their 2021 peaks for many late-stage companies to catch up to their last price as quickly as investors initially hoped, according to Pitchbook calculations using data from VC firm IVP.

The median valuation for late-stage SaaS deals has expanded more than seven times between 2017 and 2021, IVP data shows. But in recent months, that multiple seems to be reverting back to 2017 levels.

Our analysis finds that even startups that are growing healthily and have a couple of years of runway left are likely on course for a down round.

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Why PE's take-private joyride is downshifting

(ANGHI/Shutterstock)

Buying a public company on the cheap has been a popular strategy for private equity firms in the past two years.

Buyout firms spent a record $195.1 billion to acquire US public companies in 2022, PitchBook data shows. Several transactions fetched a valuation at or above $10 billion, with the average take-private coming in at $4.15 billion.

However, with favorable market conditions—including an easy fundraising market and the availability of cheap debt—enjoyed by PE funds falling away, dealmakers are souring on large take-privates and favoring smaller transactions instead.

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A message from Litera

Return to Normal: Resilience and Resetting

With year-end M&A numbers coming in, it appears that 2022 was a more resilient year than expected. But momentum has declined in recent months, and 2023 begins with less momentum—and more headwinds—than a year ago. But investors and strategic buyers have faced headwinds before, and silver linings remain abundant in 2023.

In partnership with PitchBook, Litera has released Return to Normal: Resilience and Resetting. The report includes trends in global M&A and private equity transactions, valuations, cross-border transactions, and payment types. It also includes an interview with global law firm Goodwin Procter, with insights on deal de-risking, adaptations and technology for due diligence, and aspects of dealmaking that will see resetting in 2023.

To download the report, click here

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5 charts showcasing European VC trends in 2022

(Markus Pfaff/Shutterstock)

European venture capital dealmaking, exits and fundraising in 2022 fell short of previous records as global economic headwinds caused a slowdown.

Take a look at these five charts for a closer look at how the asset class performed in 2022.

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Tranch's $100M round signals VCs shift to BNPL for business

Tranch co-founders Philip Kelvin and Beau Allison
(Courtesy of Tranch)

Buy now, pay later startup Tranch has secured $100 million in equity and debt.

The BNPL space has seen a significant fall in venture funding since its peak in 2021, but investors are predicting more resilience on the B2B side.

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Recommended Reads

Carolynn Levy shares how she wrote the five-page document that underpins much of early-stage venture capital today. [Meridian]

Replacing street parking with bike lanes can be quite good for business. Will store owners believe it? [Wired]

How SEC scrutiny is blocking some crypto companies from going public. [The Wall Street Journal]

Since yesterday, the PitchBook Platform added:

31

VC valuations

1935

People

506

Companies

16

Funds

See what our data software can do

Quick Takes

	The Daily Benchmark
	2015 Vintage Global Debt Funds
	VC Deals
	Quantum computing startup Pasqal nets $109M
	DailyPay raise tops $260M
	QuickNode lands $60M
	Cygnvs gets $55M led by a16z
	Scythe scores $42M
	Fundraising
	Cowboy Ventures closes $260M across two funds
	Investors
	Henry Kravis among group investing $175M in Thrive Capital

The Daily Benchmark

2015 Vintage Global Debt Funds

Median IRR

8.60%

Top Quartile IRR

11.38%

1.23x

Median TVPI

Select top performers

HarbourVest Credit Opportunities Fund I

ICG Europe Fund VI

TA Subordinated Debt Fund IV

*IRR: net of fees

79 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Quantum computing startup Pasqal nets $109M

Pasqal, a Paris-based developer of programmable quantum simulators and computers, has raised €100 million (about $109 million) for its Series B. Singapore's Temasek led the round.

View round

View 9 competitors »

DailyPay raise tops $260M

Fintech startup DailyPay has secured a $260 million investment, split between debt and loan funding. The debt was provided by Barclays and Angelo Gordon, while the loan was backed by SVB Capital and Neuberger Berman.

View details

View 18 competitors »

QuickNode lands $60M

Blockchain infrastructure startup QuickNode has closed a $60 million Series B led by 10T Holdings, with participation from Tiger Global and Seven Seven Six.

View round

View similar company »

Cygnvs gets $55M led by a16z

Cyber-crisis management platform provider Cygnvs has launched from stealth with a $55 million Series A led by Andreessen Horowitz.

View round

View similar company »

Scythe scores $42M

Autonomous electric lawnmower startup Scythe has raised a $42 million Series B. Energy Impact Partners led the round.

View round

View similar company »

Don't miss our upcoming webinar

Join PitchBook in examining the EU's new Sustainable Financial Disclosure Regulation, which will require private market investors to disclose ESG performance starting in June 2023. A panel of ESG experts will provide an overview of the requirements and how they will affect investors and portfolio companies. Key topics include:

What is SFDR (SDR-, UK- and their related disclosure requirements), and who will be most affected by its conditions?

What are the differences between SFDR Articles 6, 8 and 9? What are the implications of nonadherence and avenues of collecting data to become compliant?

What is the burden on portfolio companies? How long is the process of becoming compliant?

Register now to secure your spot.

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Fundraising

Cowboy Ventures closes $260M across two funds

Cowboy Ventures has raised $260 million across two new funds, TechCrunch reported. The firm raised $140 million for its fourth flagship fund, while its first opportunity vehicle garnered $120 million.

View details

View 99 investments »

Investors

Henry Kravis among group investing $175M in Thrive Capital

Thrive Capital has agreed to sell a 3.3% stake in the VC firm to a group of five investors for $175 million, The Wall Street Journal reported. The investors are KKR co-founder Henry Kravis, Disney CEO Robert Iger, Reliance Industries chair Mukesh Ambani, Brazilian investment banker Jorge Paulo Lemann, and French executive Xavier Niel.

View details

View 187 investments »

Chart of the Day

Source: PitchBook's Q3 2022 Global Real Assets Report

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large takeprivate PE deals The Daily Pitch

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