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The Daily Pitch: VC

July 13, 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:

The PitchBook-NVCA Venture Monitor reflects how even seed funding is scarce

US PE portfolio markdowns aren't as steep as some expected—but they're not over yet

PE investment in European renewables has cooled after hitting its peak last year

Today's Top Stories

Startups, VC investors tighten belts another notch

The Q2 2023 PitchBook-NVCA Venture Monitor, sponsored by Insperity, J.P. Morgan, and Dentons, captures how investors and founders are reshuffling their priorities to buy time and identify high-impact innovations as the market tightens further.

Raising capital is now markedly more difficult even at the seed stage, where quarterly deal value declined 26.3% from Q1.

Trapped capital continues to build in mature startups: Just $12 billion of exit value was realized in the first half of the year, with Q2 deal value coming in at a decade low.

There are now 50,000 VC-backed companies, double 2016 levels, demonstrating the risks of a prolonged capital shortage.

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PE's portfolio markdowns show no signs of letting up

(a1vector/Shutterstock)

Private equity firms are continuing to mark down the value of their portfolios in the second half of 2023.

Even as public markets experience a bull run, PitchBook data shows that US PE firms are continuing a slow campaign of markdowns amid persistent financing challenges and dwindling exit opportunities.

In Q1 2023, the six largest public PE managers generated a median quarterly return of 2.4%, lagging the S&P 500 by 5.1 percentage points.

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A message from Ansarada

5 sustainability lessons from digital winners (and losers)

In the early 2000s, companies hired web developers to embrace the digital revolution.

Today, the approaching sustainability revolution is forcing businesses to rethink their approach to environmental, social & governance (ESG) factors.

Digital technologies have completely transformed operations across industries over the last two decades. For companies to stay relevant and future fit, sustainability requires the same.

The world is on the precipice of a tipping point. Attitudes are shifting, and it's widely recognized that business as usual isn’t good enough. History has proven repeatedly that all business models will eventually be disrupted by something new and more relevant.

In its latest report, Ansarada explores five lessons to take from digital era winners (and losers) to stay ahead of the sustainability revolution.

Download the report

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Nonprofits offer unlikely source of VC funding for climate tech

(Olga Danylenko/Shutterstock)

In a tough dealmaking environment, climate-tech companies may be able to lean into a source of capital not available to other startups: blended finance funds.

Climate nonprofit Prime Coalition just closed a $239 million fund run by Azolla Ventures to invest in climate-tech startups with a mix of market-rate capital and charitable capital. It's a model we may see more of in the future.

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It's chilly out there, but private market fundraising hasn't frozen over

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.

Our recent analyst note 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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PE investment in European renewables begins to cool

(TebNad/Shutterstock)

The war in Ukraine sparked a European energy crisis early last year that led to calls for greater investment in renewables and less reliance on fossil fuels.

While the number of deals is not as high as it was this time last year, the renewables sector is still seeing a considerable amount of PE investment when compared to previous years.

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Turning credit cycle poses fresh test for private debt

(Yuriy K/Shutterstock)

As investors bask in private credit's "golden moment," market participants are watching for signs of stress in loan portfolios.

In recent years, private credit providers have stepped up to finance deals that may have been done in the syndicated loan market or the bond market in the past.

Now, borrower companies of private credit loans are feeling increasing strain due to higher interest costs. Loans placed in 2018-19, in particular, are being watched, as credit market conditions were strong at the time.

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Recommended Reads

Why private equity is chasing plumbers and lumber yards. [Bloomberg]

Is big business really getting too big? [The Economist]

The microplastic crisis is getting exponentially worse. New research shows that even the Arctic is increasingly contaminated. [Wired]

Since yesterday, the PitchBook Platform added:

19

VC valuations

2036

People

637

Companies

44

Funds

See what our data software can do

The Daily Benchmark:
2015 Vintage US PE Funds

Median IRR

19.20%

Top Quartile IRR

27.37%

1.01x

Median DPI

Select top performers

Oaktree Power Opportunities Fund IV

Centana Growth Partners

New State Capital Partners Fund

*IRR: net of fees

78 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

AlphaSense, an AI-powered data company, is raising new funding at a $2.5 billion valuation, Bloomberg reported. The company most recently raised $100 million at a $1.8 billion valuation in April.

Food supply chain company Silo Technologies has raised a $32 million Series C led by Koch Disruptive Technologies. Silo also secured $100 million in debt from First Citizens Bank.

Wellness brand Hyperice has secured a more than $100 million growth capital facility from Atlas Credit Partners.

Belgian agtech startup Aphea.Bio has secured €70 million in a Series C led by Innovation Industries.

Prolific, a London-based behavioral research platform, has raised $32 million from Partech and Oxford Science Enterprises.

Ocean mapping startup Bedrock has raised $25.5 million. The Series A was led by Northzone and Primary Venture Partners, TechCrunch reported.

Microoled, a French provider of microdisplays for mobile near-to-eye viewing devices, has secured €21 million in a round led by Jolt Capital.

Zurich-based autonomous indoor drone startup Verity has added an additional $11 million from Qualcomm Ventures to its Series B, bringing the round's total to $43 million.

Blackfinch Ventures has led a £2.3 million investment in UK-based mobility startup RideTandem.

PE Deals

Singapore's Quadria Capital will invest $155 million in India's Maxivision Eye Hospital.

Ancor Capital Partners and Merit Capital Partners have invested in DisplayIt, a marketing agency that specializes in designing and installing structural branded environments.

Bessemer Venture Partners' PE strategy BVP Forge has invested in Radformation, a healthcare software provider for radiation oncology clinics.

Cinven has been considering selling a minority stake in UK-based wealth manager True Potential to a pension fund or sovereign wealth fund, Reuters reported.

Exit & IPOs

Singapore sovereign wealth fund Temasek has halted plans to sell PSA International's 20% stake in CK Hutchison's ports business, for which it had sought about $4 billion, Bloomberg reported.

Angelo Gordon has been considering selling US restaurant chain Benihana, which serves Japanese food, for about $600 million including debt, Reuters reported. TPG agreed to acquire Angelo Gordon in May.

US-listed chip-maker Nvidia is in talks with SoftBank-backed Arm to be an anchor investor as the UK chip designer plans for its IPO in September, the Financial Times reported.

The Riverside Company is selling UK hospitality software company Guestline to Hg-backed software provider Access Group.

Fundraising

Cinven is looking to extend this month's deadline for closing its €12 billion flagship fund to January, Bloomberg reported.

General Atlantic plans to raise $6 billion across several VC funds targeting technology and healthcare startups, The Wall Street Journal reported.

Healthcare and technology PE investor Welsh, Carson, Anderson & Stowe has closed its latest fund, WCAS XIV, on more than $5 billion.

Alpine Investors has closed its ninth flagship fund on $4.5 billion, double the size of the software and services-focused investor's prior fund.

WindRose Health Investors has closed its sixth fund on $1.4 billion in LP and GP commitments, reaching its hard cap. The firm primarily invests in North American services companies in the healthcare industry.

Sapphire Ventures will direct more than $1 billion from its existing funds to AI startups through direct investments and investments in early-stage AI-focused VC funds, Reuters reported.

RCP Advisors has closed its RCP Secondary Opportunity Fund IV on $797 million. The fund targets investing via secondary transactions in PE funds focused on LBOs, growth investments or restructuring.

Niche asset investor Cordillera Investment Partners has raised $443 million for its third fund. So far, the fund has invested in Galway Sustainable Capital, Suntex Marina Investors and Made In Network, as well as whiskey barrels and wireless spectrum licenses.

Investors

Saudi Arabia's sovereign wealth fund, PIF, declared a nearly $11 billion loss in 2022, Bloomberg reported. In 2021, the fund recorded a $19 billion profit.

Corporate M&A

Microsoft has won its case against the US regulators trying to block its $75 billion acquisition of Activision Blizzard. The Federal Trade Commission may yet appeal the case while the deal is still subject to a formal block by the UK's competition watchdog.

Chart of the Day

Source: 2023 Sustainable Investment Survey

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PitchBook News - Venture capital builds in the dark

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