PitchBook News - VC valuations extend slump

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The Daily Pitch: VC

May 11, 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:

Down rounds crept higher as startup valuations continued to ebb in Q1, according to our latest US VC Valuations Report.

After buying Silicon Valley Bank, First Citizens joined the ranks of the top 20 US banks. Now it needs to retain its SVB client base.

Private market insiders discussed democratization, AI and fossil fuels at the recent Milken Institute Global Conference.

Today's Top Stories

US VC valuations extend slump as down rounds creep up in Q1

VC valuations continued their descent in Q1. The dearth of IPO exits, a pullback from nontraditional investors, and ongoing economic headwinds have all contributed to lower valuations and smaller round sizes for all stages except seed.

Not only did valuations drop, but the share of down rounds as a percentage of all deals began to creep higher, according to our Q1 2023 US VC Valuations Report, sponsored by Morgan Stanley At Work. Our analysts estimate the market environment has become the most investor-friendly in nearly a decade. Other takeaways include:

Pressures from a lack of capital availability also trickled down to earlier stages of the venture ecosystem.

The median deal size for late-stage rounds fell 25% to $6 million, the lowest figure recorded since Q2 2017.

Pre-money valuations for venture growth-stage companies fell to a median of $90 million, a nearly 75% decline from the 2021 full-year record high of $355 million.

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First Citizens vies for SVB client base as it pulls in $9.5B profit

(JHVEPhoto/Shutterstock)

First Citizens' deposits jumped from $89 billion to $140 billion in Q1 following its purchase of collapsed Silicon Valley Bank, catapulting the lender into the ranks of the top 20 US banks

The lender's acquisition was a "home run financially," CEO Frank Holding said.

Now, First Citizens is on a mission to retain its client base of SVB customers and capture a market share of the venture lending industry.

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A Message From G-P

Successful leadership strategies for remote teams

When the pandemic began, several organizations were faced with stagnation, budget, and staff cuts—leading to generally low morale. With employees now dispersed and remote, companies like Lego sought to rejuvenate and empower their workforce through leadership.

Rather than stick with what the C-suite thought leadership should look like, Lego polled their entire organization and discovered common themes not previously considered. NASA faced similar issues and redefined leadership as an act, not a supposition, developing an entire leadership program to reflect these values.

At the core, great leadership in a remote environment requires leaders to prioritize two-way communication, proactive and inclusive decision making, and agility. To learn how you can revitalize your leadership strategies, read our blog The Key to Successful Remote Work Leadership.

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Reporter's notebook: Democratization, divestment, AI at Milken conference

Pimco CEO Emmanuel Roman spoke about his expectations for generative AI during the conference.
(PATRICK T. FALLON/Getty Images)

In the five-minute lulls between headline-dominating finance trends, private market executives at the recent Milken Institute Global Conference addressed themes bubbling beneath the surface.

The democratization of the private markets, the impact of AI and the energy transition were among key concerns for industry players in attendance.

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First Republic soft landing unleashes demand in high-grade bond market

(Kowit Lanchu/Shutterstock)

Companies in the riskier, more-volatile reaches of the US capital markets weren't the only potential debt issuers spooked by the recent bank failures. Issuers of higher-rated, investment-grade bonds hit the brakes as well.

That changed as the calendar turned to May—and as regulators provided a soft landing for First Republic Bank depositors. On the first day of the month alone, nearly $23 billion in high-grade bonds were issued, the most since February, according to LCD.

For more on this high-profile segment, which is often a leading indicator in the capital markets, check out LCD's Investment Grade Wrap. It details yields, marquee deals, returns by asset class and more.

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Trouble ahead for European fintech valuations

(JUSTIN TALLIS/Getty Images)

VC valuations for Europe's fintech startups are still on the rise, but a turn for the worse may be on the horizon.

Recent months have shown internal markdowns for several companies and a significant decrease in dealmaking.

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Recommended Reads

Brookfield Asset Management predicts consolidation in the private capital industry as smaller managers struggle. [Financial Times]

Technology and powerful genetic techniques are making it more feasible to improve the taste of vegetables. [Scientific American]

PE firms with women owners are more likely to focus on impact strategies, research shows. [Institutional Investor]

Since yesterday, the PitchBook Platform added:

18

VC valuations

2046

People

588

Companies

16

Funds

See what our data software can do

The Daily Benchmark:
2013 Vintage European PE Funds

Median IRR

10.60%

Top Quartile IRR

19.10%

0.96x

Median DPI

Select top performers

TDR Capital III

Synova Capital Fund II

Mandarin Capital Partners Fund II

*IRR: net of fees

21 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Credit card company Petal has secured $35 million in a round led by Valar Ventures.

Clothing startup Stio has secured $20 million in debt and equity led by Lago Innovation Fund.

Triumph, a startup that helps game developers monetize their products, has launched with $14.1 million, including a $10.2 million Series A led by General Catalyst.

Montreal-based soil science startup ChrysaLabs has raised $11 million from investors including Telus Ventures, BDC Capital and Leaps by Bayer.

EcoSpirits, which is working to eliminate packaging waste in the premium spirits supply chain, has raised a $10 million Series A led by Closed Loop Partners.

Climentum Capital has led a €5 million round for Fermify. The startup's automated platform is designed to produce proteins for make animal-free cheese at scale.

Voltfang, a German provider of green energy storage systems, has secured €5 million in a round led by PT1.

Web3 observability platform Blocktorch has raised $4.2 million in a round led by Ideo CoLab Ventures.

Farmless has raised €1.2 million in a round led by Revent, Nucleus Capital and Possible Ventures. The startup is developing fermentation technology that uses carbon dioxide and renewable energy to produce proteins for food.

PE Deals

Nasdaq-listed Syneos Health has agreed to a $4.4 billion take-private deal by Elliott Management, Patient Square Capital and Veritas Capital. The deal values the biopharmaceutical company at $7.1 billion.

Franchise Group has agreed to a $2.6 billion take-private deal with a consortium that includes B. Riley Financial and PE firm Irradiant Partners. The Nasdaq-listed company owns various franchised businesses.

Blackstone has inked a deal to acquire a 70% stake in TPG-backed Care Hospitals, a hospital chain in Asia, in a deal valuing the company at $800 million, The Economic Times reported. TPG will retain a 30% stake.

Maven Capital is part of a group that has invested £2.5 million in UK-based carpooling technology provider Liftango. The funds will be used to accelerate the company's global growth ambitions.

Ambienta has acquired Italian plastic recycling company Previero. The founding family will retain a stake in the business.

Px3 Partners will acquire the Ireland-based division of Celeros Flow Technology that provides consumable, industrial filtration systems.

Portfolio Companies

Microsoft has agreed to purchase energy from Helion Energy's first fusion power plant, which is expected to be operational by 2028. Helion has raised funding from investors including Capricorn Investment Group and Mithril Capital.

Fundraising

InfraVia Capital Partners is launching a €2 billion fund dedicated to critical materials, Reuters reported. The French PE firm expects to reach a first close of €1 billion by the end of the year.

Middle-market firm LightBay Capital has closed its second fund on $1.04 billion, exceeding its target of $800 million.

One Equity Partners has closed a $1 billion continuation fund co-led by The Carlyle Group subsidiary AlpInvest Partners and HarbourVest Partners.

Investors

Investment platform Titanbay has partnered with Swiss-based wealth management software services company Evooq to provide private markets access to private banks and wealth managers.

Corporate M&A

Australia-based lithium miner Allkem has agreed to an all-stock merger with US lithium company Livent, forming a combined company with a value of $10.6 billion.

Chart of the Day

Source: PitchBook's Q1 2023 US PE Breakdown

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PitchBook News - VC valuations extend slump

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