PitchBook News - VCs decide startups' fates

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The Weekend Pitch

February 5, 2023

Presented by Masterworks

(Jenna O'Malley/Shutterstock)

About a year into the downturn, the VC-backed universe looks relatively unscathed.

Sure, there were some large-scale layoffs at companies that overstretched during the bull cycle as well as spectacular failures in the highly speculative crypto industry, but judgment day has yet to come for most startups.

That day is still coming however, and in many cases, companies' existing investors will play the role of God in deciding their fate.

This is the Weekend Pitch, and I'm Marina Temkin. You can reach me at marina.temkin@pitchbook.com or on Twitter @MTemkin.

In recent weeks, VCs have been getting louder and more candid about the impending reckoning.

You already know how this chapter began. Many startups raised capital at insanely high valuations when money flowed freely during the pandemic years. Then the US Federal Reserve decided to raise interest rates to combat inflation and tech stocks tanked. As a result, startups' implied values plummeted. VCs responded by advising their portfolio companies to make their cash last as long as possible.

Startups obliged—some more, some less. But for most early-to-mid-stage companies, all the cost-cutting is probably insufficient to get them to profitability. They'll need another infusion of capital.

A message from Masterworks

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At NYC's mega-auctions, contemporary art sales totaled $2.3 billion in one week—an all-time record—and prices climbed +16.5%.

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See important Regulation A disclosures.
*data from The New York Times

Trivia

While it seems like demand for information security has only grown as more cyberattacks are publicized, deal value actually dropped in 2022 compared with 2021. By what percentage did deal value fall in 2022?

A) 45.7%
B) 66.1%
C) 26.5%
D) 11.7%

Find your answer at the bottom of The Weekend Pitch!

Quote/Unquote

"I think it would be very premature to declare victory or to think that we've really got this. Our goal, of course, is to bring inflation down. … But so far, we don't see that. And I think until we do, we see ourselves as having a lot of work left to do."

—Federal Reserve Chair Jerome Powell's latest remarks on inflation and raising interest rates

When debt comes due

(Rawpixel.com/Shutterstock)

Leveraged loans may have had a good start to the year, but the low default rate could only be masking signs of trouble to come.

The "In Visible Capital" podcast is back with an episode on the US and European leveraged loan markets. LCD researchers Rachelle Kakouris and Taron Wade size up the impending maturity wall, introduce LCD's restructuring watchlist, discuss key indicators to track going forward and much more.

Catch up on our industry reports with all the 2022 data

Information Security

Healthcare Services

Rising through the ranks

(Cagkan Sayin/Shutterstock)

While private debt returns dipped into negative territory in Q2 2022, preliminary data shows the strategy rebounding to 1.3% in Q3. While that figure doesn't sound too promising, it actually ranks private debt as the third-best performing private markets strategy in the quarter—sitting behind funds-of-funds and secondaries.

While this is unfamiliar territory for private debt, it may need to get comfortable at the top of the charts. Read more about how private debt is replacing traditional lenders in financing leveraged buyouts in our latest Global Funds Performance Report.

Stay tuned

Keep an eye out for these insights and research reports coming out this week.

Introducing PitchBook Patent Research

Q4 2022 Agtech Report

Q1 2023 Quantitative Perspectives: US Market Insights

2022 Annual US VC Valuations Report

Trivia

(deepadesigns/Shutterstock)

Answer: C)

In 2022, deal value dropped 26.5% in the information security vertical, according to our latest Information Security Report.

This edition of The Weekend Pitch was written by Marina Temkin, Jacob Robbins and Emily Burleson. It was edited by James Thorne and Sam Steele.

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Key phrases

speculative crypto industry US Federal Reserve The Weekend Pitch

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PitchBook News - VCs decide startups' fates

Trivia

Quote/Unquote

When debt comes due

Catch up on our industry reports with all the 2022 data

Rising through the ranks

Stay tuned

Recommended Reads

Trivia

Key phrases

Older messages