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A changing fintech landscape: Retail fintech activity has reverted to pre-2021 levels, with large declines in both dealmaking and exit activity. Our new research captures the high-level VC trends and also digs into new opportunities within loyalty platforms and alternative investment access providers. Read it here.
ChatGPT and beyond: Generative AI has taken the VC tech space by storm. Our premium research dives deep into the data, deals, and key players in an emerging market that's expected to grow to more than $42 billion globally in 2023. Read a free preview.
Has the VC music stopped? We got tremendous engagement on our webinar this week discussing market uncertainty that was only worsened by the sudden demise of Silicon Valley Bank. For more on the myriad factors impacting VC, watch the recording. |
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How our VC Exit Predictor can improve the investment selection process
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This week, we launched an exciting new tool for market participants in the VC space: the PitchBook VC Exit Predictor, which leverages machine learning and our vast database of information on VC-backed companies to provide insight into startups' prospects of a successful exit.
The primary goal of the VC Exit Predictor is to objectively score companies based on all relevant and available information in the PitchBook database.
These scores can then be used to improve and streamline workflow processes, such as screening a list of potential investments. It is not intended to be used as a quantitative investment strategy or replace the due diligence process.
This release comes at a time when the incredible growth in capital flowing to startups has expanded the investment opportunity set, making it more time-consuming for investors to sift through all of the potential options. In the last 10 years, the number of actively VC-backed companies in the PitchBook database has tripled to nearly 120,000 at the end of 2022.
To validate the claim that investors can use this tool to gain an edge in their selection process, we conducted a backtest that involved screening the VC-backed company universe as of February 2018.
We found that startups ranked in the top decile based on the VC Exit Predictor were 3.1x more likely to exit successfully (via M&A or public listing) than those in the bottom 90%. The conclusion that startups in the top decile were more likely to exit successfully held across broad stages, including angel and seed, early VC, and later VC.
For more information on the backtest methodology and results, download the free research note: Gaining an Edge in VC Investment Selection
You can learn more about the Platform tool here.
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Startups and investors must come together to restart the flow of VC
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As the US economy grapples with the effects of higher-for-longer interest rates and tightening financial conditions, the venture capital market is down but not out.
Our latest Quantitative Perspectives report, Putting the Pieces Back Together, offers an in-depth analysis of the current state of the US VC market and provides key insights for GPs, startups, and service providers to make informed decisions.
As we move further into 2023, a renewed sense of uncertainty is unfolding as Silicon Valley Bank's recent collapse has put the VC ecosystem on edge. Our report explores the opportunities and challenges faced by startups and GPs as they navigate the evolving landscape. Key takeaways include:
Valuation multiples: The lowest VC-backed public company multiples since 2016 have shut the public listing market. An increase in these multiples will hint at a potential opening for IPOs.
IPO backlog: We estimate that over 200 VC-backed startups are ready to go public but are stuck waiting for financial conditions to improve before taking the leap.
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| Click to see a larger version of this chart in the report. |
Capital supply-demand imbalance: Late-stage software, B2C, and healthcare services & systems are the most capital-starved segments of the market, as VC investment has dropped much more quickly than demand for the capital necessary to maintain and grow business operations built during the exuberance of 2020 and 2021.
Nontraditional investors: A shift in focus toward early-stage investments or away from venture capital entirely has hung some mature startups out to dry.
Investor-friendly deals: Startups are increasingly accepting more investor-friendly terms, and founders must be cautious of the long-term economic consequences. We break down the math of participating preferred deal terms, which have recently increased in prevalence.
Opportunities for smaller companies: As discounts in the market appear in 2023, smaller, less mature companies may offer the best returns for GPs.
To learn more about these developments in the venture capital market, download our free research: Putting the Pieces Back Together
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Private real estate funds raised just over $128 billion in 2022, the lowest figure since 2013, and did so through the fewest vehicles since 2009.
Dry powder is down, too, having fallen 13% year-over-year.
That's all despite private real estate's outperformance over publicly traded REITs, whose assets are more vulnerable to fluctuations in value.
Our Global Real Estate Report provides clarity on the opaque investing strategy, with details on fundraising and challenges in various sub-strategies. |
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M&A and CVC in an Economic Downturn
Despite challenging market conditions, not all corporations are affected equally by—or react equally to—a downturn.
In a research note this week, we compared the global financial crisis to current market conditions when it comes to opportunities and benefits of corporate dealmaking in a difficult economic climate.
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| One of the biggest stories in VC has been the fall in exits. |
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For example, valuation declines have lowered the entry cost for corporate acquirers and investors, allowing many to make strategic plays that may have previously been out of reach.
Additionally, corporations with more favorable capital structures relative to their competitors may be able to pursue innovation at a quicker pace: |
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Autonomous and Remote-Controlled Heavy Equipment
Self-driving vehicles are increasingly common on the streets, but what about construction sites?
While heavy-equipment manufacturing leaders have been exploring driverless systems for specialized use, many startups are looking to revolutionize the global construction industry and introduce solutions anywhere heavy equipment is used.
Our research note dives into how this tech could free up workers as the labor market tightens, enable more precise operation of machinery, and reduce injuries and deaths: |
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Investors are becoming more realistic about the future of autonomous vehicles.
But startups across mobility tech are bearing the brunt of investors' newfound caution, reflected in large YoY declines in VC deal count and value during Q4.
Our new Mobility Tech Report features the latest data, up-and-coming startups, and emerging areas of opportunity in electric microcars and perception software: |
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Consumer spending through e-commerce has seen explosive growth over the years, fueled by pandemic lockdowns and emerging platforms.
But from a VC perspective, various headwinds have put a pause on dealmaking growth as deal value has fallen for three straight quarters.
Our new E-Commerce Report unpacks VC trends within the vertical and highlights opportunities in the areas of B2B buy-now-pay-later startups and re-commerce platforms: |
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| Senior VC analyst Kyle Stanford talks SVB with Yahoo Finance. |
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Our insights and data featured in the press:
- Why it could ultimately be a good thing if VC funds have to go back to a slower way of making investments. [Bloomberg]
- Discussing the collapse of Silicon Valley Bank and the outlook for startups amid a slowdown in fundraising. [Yahoo Finance Live]
- PitchBook's new tool uses AI to predict which startups will successfully exit. [TechCrunch]
- Unpacking the future of the foodtech industry and where new and innovative opportunities are emerging. [AltAssets]
- "We believe that post-FTX, the regulatory environment will be much less favorable for Binance and that they will face significant regulatory pressure across multiple jurisdictions." [Insider]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team. |
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Highlights from our other recent research:
Market updates
Thematic research
Industry & tech research
Coming next week (subject to change)
- Greater China VC Report
- ETR: AI & Machine Learning*
- ETR: Insurtech*
- Emerging Space Brief: Synthetic Data
- The state of CVC in Japan
- The transient era of $1B+ VC funds
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International trade: New risks require new solutions
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Supply chain disruptions have led U.S. companies to expand their trading relationships – a prudent diversification strategy that introduces uncertainty.
The new Citizens article can help middle-market companies establish trust in their new trading partners, improve working capital efficiency and address growing levels of risk, through proven financing tools:
- Letters of credit
- FX hedging programs
- Supply chain finance programs
Mitigate Your Exposure in International Markets |
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Since yesterday, the PitchBook Platform added:
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15
VC valuations
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1821
People
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567
Companies
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35
Funds
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