PE pileup: Amid stunted exit activity, private equity funds nearing the end of their term life face a fast-approaching maturity wall. How can investors pick up the pace or extend exit timelines? Read our research.
Conference chatter: We attended Paris' recent VivaTech conference, where participants talked generative AI, valuations, and the critical factors for raising capital. Read the key takeaways.
Looking for liquidity: We hosted a webinar about private fund secondaries this week, featuring insights from professionals at Pantheon, Greenhill, and the Washington State Investment Board. Watch it here. |
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A message from Masterworks
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Portfolios that invest 5% in this asset have higher returns 98% of the time
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Research shows a portfolio that includes just a 5% allocation to contemporary art has historically driven higher returns compared to a traditional portfolio of 60% large-cap stocks and 40% bonds.1
But how is the average person supposed to get access to an asset that has been the exclusive domain of the ultra-rich for centuries?
The answer is Masterworks, an award-winning platform for investing in fractionalized works of art. It's not just easy to use—Masterworks has completed 13 exits on its artwork, all of them profitable, with the last three delivering net annualized returns of 35%, 4.1% and 325% to investors.
Today, PitchBook readers can get priority access to its latest offerings by skipping the waitlist with this exclusive link.
1: Masterworks Internal Asset Allocation Model
See important disclosures at masterworks.com/cd |
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Revisiting our VC predictions amid 2023's twists and turns
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2023 has created a VC market that is nearly the antithesis of 2021, as slower conditions make that year's exuberance seem like a distant memory.
The narrative of this year's venture ecosystem has jumped around quickly, however. Generative AI is surrounded by hype reminiscent of crypto and Web3, but on the other hand, the broader VC market is experiencing a significant lack of capital availability, with deal values down roughly two-thirds on a quarterly basis from past highs.
Some aspects of the first six months of 2023 were unsurprising, with sluggish deal activity, poor exit conditions, and lagging fundraising. Others, such as Silicon Valley Bank's collapse and subsequent acquisition, were very unexpected.
While SVB's collapse hasn't affected the market to the extent initially predicted, the pressures created by the bank's failure have quickly reshaped venture.
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| Fundraising is on pace to finish well below $100 billion. |
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Last December, our analyst team made seven predictions for the upcoming year in VC. Now that we are halfway through 2023, we wanted to check in on those outlooks and gauge how they've fared. Some have hit the mark: SPAC IPOs and mergers are well below where they were over the past couple of years, as that phenomenon seems to be wrapping up. Other forecasts have fallen short.
The next six months might not indicate how the full market reset will play out, but we can use data from the most recent period to adjust expectations and chart the new path that VC has undertaken. Venture is a much slower moving strategy than we want it to be, at least until it isn't.
To see how our analysts' outlooks on 2023 have performed, read the full report: 2023 US Venture Capital Outlook: H1 Follow-Up.
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Challenges for Emerging Managers
Emerging US VC managers secured only $2.3 billion through the first third of this year, putting them on track to close less than $20 billion in annual commitments for the first time since 2016.
Limited track records and returns have given LPs pause amid a volatile market, but will there be long-term implications for the venture market if these newer managers continue to be passed over?
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Our research breaks down emerging managers' historic performance, the factors making fundraising difficult, and the larger ramifications for the venture market as younger managers struggle to secure investor dollars: |
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How Tough Is the Fundraising Environment Actually?
There's been a melancholy mood around private market fundraising lately. In the first half of 2022, mega-funds attracted mountains of capital, depleting LP commitment budgets before a fall in the public markets triggered the denominator effect for some institutional investors. Ever since, GPs raising private market funds have lamented an apparent slowdown in commitments.
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Our analysis puts aside anecdotes to answer that recurring question through data-driven quantitative lenses. We found that even though GPs are raising billions of dollars across thousands of funds, they're having a harder time than usual: |
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Advances in computational biology and increases in computing power are unlocking novel methods of observing cellular function that will offer new strategies for preventing and treating diseases.
Our emerging space brief explores the ins and outs of spatial biology—a fast-growing field within molecular biology in which researchers analyze cells in their natural environments. Explore VC trends, the market's outlook, startups to watch, and more: |
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Dealmaking continued to decline in Q1 within the AI & machine learning vertical, when excluding Microsoft's $10 billion investment in OpenAI, but the rush of excitement around generative AI remains intact.
Spanning from training for large language models for generative AI, to chips that will power the next wave of computing, our AI & Machine Learning Report shows the range of opportunities for investors: |
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The e-commerce industry is facing headwinds. Continued deceleration in investment activity saw total deal count plummet 57% in Q1 2023 compared to the previous quarter, while deal value declined 11%, according to our E-Commerce Report.
Some VCs are betting on generative AI to be a game changer. From startups beginning to integrate AI into their applications to companies creating their own tools to court customers, e-commerce investors still have plenty of opportunities in the space: |
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| Venture investment in mobility tech startups lost momentum in Q1, but recent events are poised to drive emerging opportunities in the sector: China surpassed Japan to become the global leader in vehicle exports, and California's mandate to phase out diesel trucks shocked the industry. Our Mobility Tech Report provides an update and market map for the ecosystem: |
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Upcoming events this month:
- July 12: As distress and defaults rise, market participants in the once full-speed-ahead private credit sector are taking a far more deliberate approach. Our webinar will dive into the trends that have defined 2023 and look ahead to the coming months. Register here.
- July 26: As ESG and impact investing arrive in full force, many market participants are curious about investor behavior—and what's beyond the sensational headlines. Our analysts will discuss the data from our upcoming Sustainable Investment Survey Report. Register here.
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Senior tech analyst Brendan Burke weighs in on ThoughtSpot's acquisition of Mode Analytics for $200 million:
"This acquisition demonstrates that generative AI offers an opportunity for data analytics companies to resuscitate their market value.
"Mode last raised a priced round in 2020 and since raised debt financing yet surpassed their prior valuation in this exit. This deal offers a limited return to VC investors yet avoids the losses that similar software companies might face.
"Mode offers a user-friendly interface for SQL query generation, which is a critical function affected by generative AI. While Mode isn't natively an AI startup, the company can integrate natural language understanding from ThoughtSpot to create powerful SQL queries for data teams.
"Data science is a leading use case for generative AI investment, pushing data analytics incumbents to improve their AI capabilities and democratize analytics for business users. This acquisition continues a new trend of generative AI acquisitions, including those made by Databricks and Snowflake."
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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:
- Why Silicon Valley is bracing for a 'Darwinian moment for startups' in late 2023. [Business Insider]
- VC investment in e-commerce software startups is plummeting as online shopping reverts to pre-pandemic levels. [The Messenger]
- Venture capital investors brace for 'real toughy' of a year as interest rate pain looms. [City A.M.]
- As cash dries up in the late-stage VC market, more companies face the prospect of a down round. [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)
- Sustainable Investment Report
- PitchBook-NVCA Venture Monitor: First Look
- Anatomy of a population health program
- The state of neobanks
- Takeaways from June e-commerce deal activity
- Decentralized infrastructure networks
- Global Markets Snapshot: June
- US PE Outlook: H1 Follow-Up
- Fintech Comp Sheet & Valuations Guide
- Agtech Comp Sheet & Valuations Guide
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Since yesterday, the PitchBook Platform added:
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11
VC valuations
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2188
People
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860
Companies
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32
Funds
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