PitchBook News - Q&A: AI investing without the hype

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The Daily Pitch: VC

February 21, 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:

Former Greylock GP Sarah Guo weighs in on the type of generative AI startups attracting the highest valuations.

Our Quantitative Perspectives report offers a bird's-eye view of US alternative markets.

Morningstar analysts surmise that promising inflation data could forecast an economic soft landing.

Today's Top Stories

VC Sarah Guo buys AI startups, but not the hype

(Chloe Ladwig/PitchBook News)

Former Greylock general partner Sarah Guo raised a $101 million fund focused on AI.

We spoke with Guo about what attracted her to AI investing, what kinds of companies are garnering the highest valuations and the defensibility of newly formed generative AI startups.

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How alternative assets are stacking up amid US recession fears

An expanding US economy in H2 2022 was met with geopolitical strife, hawkish central banks and a growth hangover, to say the least. But alternative asset investing churned on.

Through the tumult of last year, private market AUM dipped, according to PitchBook projections. Our latest Quantitative Perspectives report, with 70-plus pages of insights into the US private markets, uses our capital recycling framework to predict where that growth will lead in the short and long term. Key takeaways include:

We forecast that private market AUM will shrink in 2023, then rebound over a four-year period, sliding into 2027 with $13 trillion under management in VC, PE, private debt, real estate and real assets.

Our recession model continues to predict a downturn is more likely than not, and if the Fed can thread the needle, a soft landing is possible.

VC funds should gain more bargaining power while negotiating term sheets. Startups' demand for new capital has climbed dramatically—virtually doubling to $80 billion in two years—so they will have to work harder to attract capital.

read the report

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Information security startups adapt to dull VC market

As companies tighten their belts, one category of enterprise software holds steady in their budgets: information security. The vertical is a priority for governments as well; the US passed an act in December requiring that federal agencies prepare for attacks from quantum computers.

Even with this support, growth for information security startups has been limited, and the number of VC deals stayed flat from Q3 to Q4 2022. For now, dealmaking emphasis is on debt financing or take-private deals for proven companies.

PitchBook analysts take a snapshot of Q4 VC activity in the sector in our recent Emerging Tech Research, with an eye ahead to emerging opportunities in AI and machine learning, outsourced threat monitoring services, and quantum computing.

read the preview

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Promising inflation data could forecast an economic soft landing

(SIA Yasu/Shutterstock)

Despite improving inflation, a recession remains a risk this year, and economic growth will likely be sluggish. But brighter days are ahead.

In a recent report, Morningstar analysts anticipate that any recession will likely be short-lived—and that most of the sources of today's high inflation will abate over the next few years.

read the report

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Recommended Reads

One startup's plan to help Africa lure back its AI talent. [Wired]

Just how bad was 2022 for endowments? [Institutional Investor]

Could the return to the office could be the real reason for the slump in productivity? [Fortune]

Since yesterday, the PitchBook Platform added:

21

VC valuations

2562

People

637

Companies

20

Funds

See what our data software can do

Quick Takes

	The Daily Benchmark
	2019 Vintage European Real Estate Funds
	Exit & IPOs
	Abris Captial exits canned fish producer Graal
	Vista considering sale of Finastra
	Fundraising
	Clave Capital pulls in €50M for healthcare fund
	Investors
	Santander in talks for Abrdn PE unit
	Suma Capital opens Paris office

The Daily Benchmark

2019 Vintage European Real Estate Funds

Median IRR

6.94%

Top Quartile IRR

14.60%

1.09x

Median TVPI

Select top performers

Blackstone Real Estate Partners Europe VI

Activum SG Real Estate Fund VI

NREP Nordic Strategies Fund IV

*IRR: net of fees

8 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Quell, a London-based provider of fitness gaming technology, has raised $10 million in a round led by Tencent.

Gateway.fm, a Norwegian provider of blockchain infrastructure tools, has received $4.6 million in a round led by Lemniscap.

LocalGlobe has led a $4.5 million seed investment in Kenya-based Jumba. The startup’s platform is designed to simplify B2B purchases and the financing of construction materials.

Paris-based Carbon Maps has secured €4 million in a round led by Samaipata and Breega. The startup offers a climate management platform for the food industry.

PE Deals

A TPG-led consortium has agreed to acquire the Asia Pacific University of Technology and Innovation in Malaysia. According to Reuters, the deal could be worth over $300 million.

Stone Point Capital, with co-investors including Mubadala Investment Company, is to buy a 20% stake in US broker Truist Insurance for $1.95 billion. The cash deal values the company at $14.75 billion and is expected to close in the second quarter of this year.

DeA Capital and Alcedo have acquired Danish agricultural machinery company Dalbo. The investment was made via DeA's Taste of Italy 2 fund and Alcedo's fifth fund with each taking a 50% stake.

Exit & IPOs

Abris Captial exits canned fish producer Graal

Abris Capital Partners has agreed to sell Polish canned fish producer Graal to Lisner Holding, the fish products subsidiary of Müller Group. The deal excludes Graal's Koral fresh and smoked fish business

View details

View similar company »

Vista considering sale of Finastra

Vista Equity Partners is considering a sale London-based fintech firm Finastra, Reuters reported. It is thought the company could be worth up to $7 billion.

View details

View 67 competitors »

Fundraising

Clave Capital pulls in €50M for healthcare fund

Spanish VC Clave Capital has held a first close of around €50 million (around $53.4 million) on its healthcare-focused fund. The vehicle, which has a target of €65 million, will be used to back early-stage startups in areas including medtech, digital health and biotech.

View fund

View 101 investments »

Investors

Santander in talks for Abrdn PE unit

Spain’s Banco Santander is in talks to buy Abrdn’s private equity division, Sky News reported. It is understood the unit could be worth around £250 million (about $300.6 million).

View details

View 133 investments »

Suma Capital opens Paris office

Renewables-focused investor Suma Capital is opening an office in Paris. The firm is looking to bolster its growth outside of its home market Spain.

View details

View 34 investments »

Chart of the Day

"Add-ons are at the core of the PE buy-and-build playbook, and they go up every year as a proportion of total buyouts. Historically, that increase is one or two percentage points, but in 2022, growth was off the charts. Add-ons as a share of total buyouts moved up nearly five full percentage points from 72.8% in 2021 to 77.7% in 2022."

Source: PitchBook's 2022 Annual US PE Breakdown

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Quantitative Perspectives report economic soft landing US alternative markets The Daily Pitch promising inflation data

PitchBook News - Q&A: AI investing without the hype

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