The future of gaming: How is VC activity trending in the gaming industry? What implication could the rise of generative AI have for content creation? We just published our new Gaming Report where we analyze all the latest data and trends: Read it here.
Leveraged finance analysis: A recap of this week's articles involving leveraged loans and private credit:
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Medtech: Healthcare's innovation engine
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From wearable glucose monitors to cardiac devices and contact lenses, medtech plays an important role in everyday life and fuels innovation across the health ecosystem.
Our latest research on the VC and PE investment landscape explores the $26 billion of funding that investors have poured into medtech over the past three years.
PitchBook clients can access the full version of our debut Medtech Report; non-clients can download a free preview.
Medtech startups face strong, well-capitalized incumbents and this dynamic creates a high bar for innovation. Still, there can be a bright light at the end of the tunnel for successful startups, with high-margin recurring business models and plenty of exit opportunities from incumbents looking to stay ahead of the competition.
Startups can stand out from peers with patent-protected innovation and our research shows startups with patents receive the lion's share of total investment dollars:
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| Patents are an important consideration for medtech innovation. |
Medtech enjoys large market opportunities across its many sub-markets, and while existing markets are already massive, we see emerging opportunities in the areas of personalized medicine, liquid biopsies, medical aesthetics, and portable therapies.
Our report also identifies and explores the path forward for the largest medtech unicorns including cardiac imaging juggernaut HeartFlow, surgical robot maker CMR Surgical, genomic sequencing challenger Element Biosciences, and Elon Musk's Neuralink.
Download a free preview of our Medtech Report.
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Founder-owned companies make attractive M&A targets while sellers remain on strike
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This week we tried to solve one of the riddles in today's M&A market.
While deal value is down sharply, 32% from the quarterly peak set in Q4 2021, the correction in deal count has been much milder. In fact, global M&A deal activity logged its second-best year ever in 2022.
At the same time, large corporates and financial sponsors—while all lining up to buy—have withdrawn as sellers for the most part. Which begs the question: Who has been doing the selling to support this near-record M&A activity?
Our analysis shows that private, non-backed founder-owned businesses have been the main feedstock, a trend that gained traction gradually over the last seven years and then surged in the last two. The share of M&A deals with founder-owned companies as targets reached 61.5% in Q1 2023, a 15-year high.
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| Non-backed private companies number in the tens of millions. |
Founder-owned companies have always been attractive targets for corporate and sponsor acquirers for a number of reasons, the latest being the low inventory of motivated sellers. But even before that, they have been prized acquisition targets owing to their high potential for operating improvement.
As they have received no previous funding from financial sponsors or other outside sources of capital, they come with a clean slate and are easier to professionalize and effect change through a value-creation plan.
Moreover, they are much more plentiful and diverse. While the number of backed companies is in the tens of thousands, the number of non-backed private companies is in the tens of millions, providing corporate and sponsor buyers with an abundance of supply and variety.
What's motivating founders to sell non-backed companies may come down to the fact that many of them are aging out and succession plans have a high failure rate. PE buyers are particularly adept at managing successions and achieving a better outcome for all involved.
With plenty of PE dry powder on the sidelines—$1.2 trillion globally as of Q1 2023—and corporate balance sheets flush with cash as well, it's still a good time for founders to consider the option of selling, especially while other sellers remain on strike and the inventory remains relatively thin.
For more on the dynamics that go into the acquisition logic for founder-owned businesses, see our note: Founder-Owned Businesses Are Attractive M&A Targets
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Enjoy the read!
Tim Clarke
Lead Analyst, Private Equity |
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2023 is tracking well behind last year's pace for private market fundraising.
VC has experienced one of the steepest declines over the past year, dropping 38% on an annual basis.
Only one strategy—secondaries—managed to boost fundraising, and that's thanks to one firm's mega-fund closures in January.
Our Global Private Market Fundraising Report dives deep into the data across seven key strategies, including insight into how emerging managers are faring: |
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2022 was the second-biggest year for funding in the enterprise SaaS sector, which focuses on software services for businesses.
But signs of a slowdown continue in 2023, in line with broader market trends.
We launched full-time analyst coverage of the vertical this week, and our debut Enterprise SaaS Report maps out the key trends, subsectors, investors, companies, and more.
Among the most active segments? Enterprise resource planning, customer relationship management, and business analytics: |
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With rising geopolitical tensions and government acquisition reforms, investment in defense tech is on track to surge to nearly $185 billion by 2027.
Our new research dives into the industry drivers and the startups poised for liftoff, as renewable energy and biotech rank as the top defense tech segments by deal flow.
We also explore the various challenges, including the "valley of death" funding gap, government bureaucracy, and specialized talent shortages: |
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Generative AI is no longer a futuristic vision.
The new technology has captured the public's imagination and has the potential to revolutionize numerous industries.
On June 14, our senior analyst Brendan Burke will host a live discussion breaking down generative AI's various applications and the key trends and opportunities within this emerging space. Madrona investor Palak Goel will join him. Register here.
- June 28: Senior VC analyst Kyle Stanford will be speaking to VC trends in turbulent times at the Collision Conference in Toronto. More details here.
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Senior tech analyst Brendan Burke weighs in on Snowflake's acquisition of AI search startup Neeva:
"This acquisition reinforces neural search's position as the leading enterprise use case for generative AI.
"Neural search enables natural language queries of semantic spaces generated by large language models. Startups facilitating neural search have achieved outstanding user growth after the initial wave of ChatGPT's launch as evidenced by significant rounds raised by Pinecone, Qdrant, and Weaviate.
"Snowflake has lagged its competitor Databricks in AI functionality and can use neural search to displace LLM applications built on top of its database. Neeva has stood out in the neural search market for optimizing response time to a similar experience to Google, yet failed to scale its paid search business.
"Given the pressure Neeva faced to pivot from a B2C business model, we expect this acquisition did not offer a significant return to Series B investors, demonstrating the barriers to competing with Microsoft's Bing and Google search for startups.
"Neural search can supplant SQL as the primary interface with structured databases and Snowflake may be future-proofing its business against this possibility."
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Brendan Burke
Senior Emerging Technology Analyst
AI & Machine Learning |
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Our insights and data featured in the press:
- "We believe the IPO market may reopen in 2024, in time for early-stage biotechs to go public on the standard timeline. This is likely to draw many would-be late-stage investors toward earlier stages." [Fortune]
- The estimated market for surgical devices and imaging tools will reach $110 billion and $12 billion by 2030, respectively. [Institutional Investor]
- Anthropic's $450 million raise shows that OpenAI is not the only player in generative AI: "It's still a very competitive space." [CNBC]
- Four of the top 10 VC deals in AI and machine learning in 2023 are for two companies. [Axios Pro]
- 2023 is unlikely to set any records for private capital fundraising. [Institutional Investor]
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)
- Global Markets Snapshot: May
- Healthcare IT Report
- France Private Capital Breakdown
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Since yesterday, the PitchBook Platform added:
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21
VC valuations
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1831
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580
Companies
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24
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