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Last chance! Our 2023 Sustainable Investment Survey is closing soon and we need your views to help inform our upcoming report. We'd greatly appreciate you taking our 10-minute survey. (We have prizes!)
What VCs think: Speaking of surveys, we've compiled the thoughts of 58 VC firm insiders on topics like technology (bullish on AI), fundraising (caution is growing), and more. To read our VC Tech Survey, click here.
Agtech gamechanger: Our new research explains how synthetic biology is revolutionizing the agriculture industry by developing new plant varietals, boosting soil health, cleaning contaminated fields, and more. Read the note.
Talking venture: Persistent market headwinds and SVB's collapse added to the pall of uncertainty in the US VC ecosystem in Q1. Our quarterly Venture Monitor webinar Wednesday will dig into it all. Register here. |
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Regulatory hurdles add to headwinds for VC's exit-starved unicorns
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The number of US-based unicorns has surged over the last decade, largely due to an influx of private capital that afforded startups the luxury of remaining private for longer.
This privacy allowed these enterprises to develop valuable IP and other organizational assets leading to a proliferation of companies with enormous valuations and lofty growth prospects.
As of Q1 2023, there are over 700 unicorns based in the US—compared to just 35 in 2013—with an aggregate value of nearly $2.4 trillion.
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| Most of the 700+ US-based unicorns were created in 2021-2022. |
Unfortunately, the economy is slowing down and cash is no longer falling out of the sky. Our data shows that the amount of capital demanded by startups far exceeds the estimated supply, even when factoring in record levels of dry powder.
Moreover, a frozen IPO market offers little relief for the growing capital supply-demand tensions observed in the venture ecosystem.
With nowhere left to turn, many of these businesses may turn their gaze toward M&A as an exit route. Unicorn acquisitions have created tremendous amounts of value over the years, and many popular products we know today have undergone an M&A transaction such as Meta's $19 billion acquisition of WhatsApp in 2014.
Unfortunately, times have changed. From Q1 2022 to the present, just $39.6 billion of US VC M&A deal value has occurred, making it the least active period since 2015.
The possibility of M&A is made worse by ongoing pressure and scrutiny from the FTC and DOJ. Recent regulatory hurdles have made pursuing acquisitions more costly and time-consuming for some would-be acquirers, particularly large tech companies like Meta and Amazon, and often these businesses may elect to forgo pursuing an M&A transaction altogether.
In an environment marked by a lethargic exit market, increased investor caution, and capital conservation, the fate of many unicorns, despite their growth and development in recent years, remains unclear.
For more data and analysis, download the free research note: The Decline of Unicorn Acquisitions in a Conservative M&A Market
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A persistently gloomy macroeconomic backdrop drove a decline in M&A activity in Q1, pushing global deal value down 32% from the peak just over a year prior.
But that deal value still topped $1 trillion for the quarter. And while certain sellers like PE firms have stepped back, lower valuation multiples are helping encourage deal flow.
Our Q1 Global M&A Report explains which deals are happening and why, diving into dealmaking trends within industries and between regions:
- Multiples on PE-led buyouts collapsed by 29% in Q1 after holding firm for two years, reflecting a shift to smaller and cheaper deals.
- Smaller companies—those worth $100 million or less—have seen their median enterprise value drop to a revenue multiple of 1.1x, trailing behind the overall M&A market's median of 1.6x.
- Founder-owned companies made up 85% of all businesses sold in Q1, their highest share of the market ever.
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Value-Based Care: An Investor's Guide
Value-based healthcare is finally viable, but is the industry ready?
In the US, healthcare models have traditionally pitted the needs of the patient against those of the provider: more visits, more procedures, more money.
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| Click to access the full VBC market map. |
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Now, payers, providers, and policymakers agree that the industry is in the early stages of a shift toward value-based care, which prioritizes preventative care and population health and rewards providers when patients stay healthy.
But any change is likely to be a long time coming.
Our research spotlights key players in value-based care, highlights investment opportunities, and unpacks some of the significant risks providers face when transitioning away from the fee-for-service model: |
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Takeaways From the 2023 HIMSS Conference
Healthcare may be on the precipice of a generative AI revolution.
That sense of AI optimism was tangible at the recent conference of the Healthcare Information and Management Systems Society in Chicago.
Academic medical centers are experimenting with technology to ease physicians' administrative burdens, but privacy and security are still huge questions for the highly regulated industry, according to our conference recap: |
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Insurtech saw huge growth during the COVID-19 pandemic as newly emerging technology startups competed with traditional insurance carriers.
Over the last 18 months, however, the vertical hasn't fared as well.
According to our 2023 Insurtech Overview, VC-backed insurtech companies raised $9.4 billion across 617 deals in 2022, a 42% decline in deal value year-over-year. Exit activity also dwindled.
The report breaks down all the data but also highlights emerging opportunities within the vertical like underwriting-focused startups and the commercial insurance segment: |
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Enterprise fintech captured the bulk of fintech funding in Q1 and appeared to rebound in deal value and activity, due in large part to Stripe raising $6.5 billion.
According to our new Enterprise Fintech Report, the space attracted $11.8 billion in investments across 336 deals. Even excluding Stripe's deal, deal value was up 7.6% on a quarterly basis.
New opportunities are also emerging in the areas of insured sweep networks and know-your-customer orchestration platforms: |
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Some upcoming events for your calendar:
- May 9: Our Tim Clarke will host a session at ACG's DealMAX examining the recent performance of and future outlook for middle market PE. Details here.
- May 10: What is the future of VC exits? How can our new VC Exit Predictor tool support your deal-sourcing workflows? Register here to learn more.
- May 11: Join us for a discussion centered on the new Morningstar PitchBook Global Unicorn Indexes. We'll cover valuation best practices, index construction methodology, and more. Details here.
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Our insights and data featured in the press:
- "We expect down rounds, especially toward the second half of this year, to really pick up." [Bloomberg]
- M&A for venture-backed startups has fallen to the lowest quarterly level in a decade. [Fortune]
- Exit value for US VC-backed companies last year was only around 10% of 2021's total. [TechCrunch+]
- Investors are continuing to back logistics tech. [WSJ]
- Data indicates that the difficult conditions for startups raising capital are not disproportionately affecting female founders. [AltAssets]
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)
- Emerging Tech Future Report: Implications of Generative AI
- Global Markets Snapshot: April
- Global Fund Performance Report
- ETR: Information Security
- ETR: Agtech
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Empower lasting investor relationships in the private markets
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Obsessed with efficiently connecting LPs and GPs, Anduin has helped onboard 25,000+ investors at 485+ funds and raise more than $45 billion globally.
A world-class investor experience begins with Anduin’s Data Room, a secure virtual promotion space that allows you to confidentially share and showcase information on your fund.
This experience continues with single-click access to Anduin’s Fund Subscription, an electronic subscription document platform with proprietary technology built to streamline onboarding and ensure seamless communication between all parties.
Learn more here |
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Since yesterday, the PitchBook Platform added:
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8
VC valuations
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1939
People
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621
Companies
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24
Funds
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