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New performance data: Our latest Benchmarks have just gone live, with dozens of pages of fund performance metrics through Q3 like IRR quantiles, pooled horizon returns, cash multiples, and PMEs sliced by strategy, vintage year, and geography. Download them all.
Quick reminder: Our 2023 Sustainable Investment Survey is now open and your views will help inform our upcoming report. We'd greatly appreciate you taking the 10-minute survey. (We have prizes!)
VC Dealmaking Indicator: The VC environment continues to grow increasingly investor-friendly, and there's now 3x more capital being demanded by late-stage companies than is being supplied. Read more.
Talking credit trends: We're kicking off a webinar series on leveraged loan and private credit trends this Tuesday with a session on the US landscape. Register here. |
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US PE passes the stress test in Q1
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It was business as usual for US PE amidst the bank drama that played out in Q1 2023.
In the seven-day span that surrounded SVB's meltdown, PE firms announced five mega-deals worth $31.3 billion, including the year's biggest: Qualtrics' take-private for $12.5 billion. PE seemed unbothered by the turbulence in banks, venture capital, and public markets at large.
There were some alterations for sure: the March batch of large LBOs in tech required 70% to 92% in equity. That compares to a historic average of 48% and reflects the scarcity of debt capital to fund mega-deals in particular.
But by and large, PE passed the stress test in Q1, and it did so on many fronts.
Deployment showed signs of stabilizing after a 38% peak-to-trough decline in quarterly value. Fundraising was also surprisingly strong at $66.8 billion in funds closed, dead even with last year. Performance seems to have steadied after two quarters of negative returns. Indicative returns from public PE managers pointed to modest appreciation in the final quarter of 2022.
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| Revenue multiples are way down this year for PE buyouts. |
Lastly, the dislocation in prices between buyers and sellers is beginning to close. Purchase price multiples paid by PE buyers are in full correction mode. After holding firm at 2.4x to 2.5x for the last two years, the median EV-to-revenue multiple has fallen to 1.7x on PE buyouts so far this year. This is good news for the recent vintage funds that are able to buy at compelling prices to augment returns and compensate for the lack of debt leverage.
Not all is rosy. Quarterly exit value continues to push lower having declined by 80% from the peak nearly two years ago. This has exacerbated an already worrisome half-trillion-dollar deficit between buying and selling. The industry will need other liquidity options to make up for the meager exits and distributions flowing back to investors.
Overall, however, the industry held up surprisingly well leading some observers to wonder if PE might end up being a net winner in the aftermath of SVB. For that reason, we include a retrospective on the role PE played in the last banking crisis, and why a PE-led acquisition this time around was not to be.
The thinking is on the right track: PE has grand designs on the $40 trillion bank-dominated debt market. It is also intent on closing the gap between AUM it has in debt versus equity, which is more than three times higher at $4.4 trillion. So even if this crisis fades, PE will likely keep chipping away at banking's market share to provide for itself and the private market ecosystem at large.
For more PE valuation data, you can access the key underlying datasets in our recently published Q1 2023 US PE Breakdown:
Download the free report
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Enjoy the read!
Tim Clarke
Lead Analyst, Private Equity |
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US VC has had a rough couple of months, to be sure.
Just when a difficult exit environment seemed like it couldn't get any worse, the sudden failure of Silicon Valley Bank further rattled investors' confidence. Deal activity dropped across the board in Q1 and fundraising momentum has evaporated.
The latest PitchBook-NVCA Venture Monitor tells the stories behind the data. Key takeaways include:
- Estimated deal count for Q1 remains above 2020's quarterly figures, despite a drop from Q4 2022.
- Late-stage deal value has plummeted to a 21-quarter low, hitting only $11.6 billion.
- Growth-stage deal count hit a low since Q3 2020.
- Fundraising has all but come to a halt, with only $11.7 billion closed across 99 vehicles.
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Chinese Tech Conglomerates' Split to Shake up VC
Last month, Alibaba announced plans to break into six standalone businesses, each with its own CEO and board of directors.
Separating the business units of one of China's preeminent companies is likely a response to continued pressure from the Chinese government on the tech industry, and each new company will be free to raise capital or go public.
So, what will this mammoth split and a similar breakup at JD.com mean for the VC and IPO markets?
Could it reinvigorate investment within the region and calm the hesitations of non-domestic investors? |
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Takeaways From the Venture Debt Conference
How has Silicon Valley Bank's failure impacted the world of venture debt?
For lenders, SVB's collapse has created a huge opportunity to take up more market share, but the question remains on whether equity investment may simply fill the void in early-stage lending.
Those are a few of our takeaways from the recent Venture Debt Conference in New York, where the prevailing sentiment from panelists was that demand for venture debt is on the up and up.
Not only does the ecosystem need lenders with high-level expertise and deep industry insights, but on the other side, the selection bar for borrowers has also risen greatly: |
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Enterprises are rushing into AI, again. Will this time be different?
Startups are giving the Big Tech giants a run for their money when it comes to the AI and machine learning field. The result has been an explosion in new AI web applications in recent months.
But skepticism of AI tools runs deep in many enterprises, and the rapid adoption of these tools is far from certain.
Our annual AI & Machine Learning Overview delves into the key opportunities and risks within this red-hot sector: |
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Hydrogen has long been viewed as a future fuel thanks to its potential to decarbonize sectors like long-distance transport and high-heat industrial processes.
But its physical properties—hydrogen takes up a lot of space—make the element difficult to store and transport.
Our latest emerging space brief on hydrogen storage details the limitations and outlook for the segment and looks into the technological approaches like compression, low-temperature liquid storage, and chemical carriers: |
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Here are some of our upcoming events:
- April 18: Senior tech analyst Brendan Burke will be moderating a virtual panel discussion on corporate venture capital and AI, featuring investors from IBM Ventures and Workday Ventures. Learn more about the free event here.
- April 25: The second part of our webinar series on leverage loan and private credit trends will focus on the European landscape. Register here.
- May 3: Persistent market headwinds, culminating in SVB's collapse, added to the pall of uncertainty in the US VC ecosystem in Q1. Our quarterly Venture Monitor webinar will dig into it all. Register here.
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Our insights and data featured in the press:
- Diving into VC's slow start to 2023. [Bloomberg TV]
- Discussing the future of VC funding, uncertainty in the startup ecosystem, inflation, and the outlook for the banking system. [Yahoo Finance Live]
- "Clearly, PE dealmakers were undisturbed by the events that preceded and followed the SVB meltdown." [Institutional Investor]
- Analyzing the differences in buyout multiples, the drivers behind returns, and how the macroeconomic environment may have an impact. [Delano]
- Crypto VC funding plunges by 80% in dire quarter for startups. [Bloomberg]
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
Public Comp Sheets and Valuation Guides
Industry & tech research
Coming next week (subject to change)
- European PE Breakdown
- European Venture Report
- The Evolution of Private Market Secondaries
- The Decline of Unicorn Acquisitions in a Conservative M&A Market
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A message from Citizens Bank
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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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20
VC valuations
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2080
People
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625
Companies
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22
Funds
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