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PitchBook News - How to play the PE game without a fund

Plus: Retail fintech shops for opportunities, a new fund performance scorecard, LPs' shift toward private debt & more
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The Weekend Pitch
August 27, 2023
Presented by RSM
(Joey Schaffer/Pitchbook News)
In 1998, Scott Dickes left his job as a vice president at a private equity firm and embarked on the quixotic journey of a fundless sponsor.

A fundless sponsor (or "independent sponsor," per a more recent conceptual rebrand) is an investor that pursues a deal without the security of the committed capital in a PE fund. A typical timeline for an independent sponsor starts when a PE professional spins out of an established investment shop, spots an asset that shows some potential, negotiates the acquisition, and scrambles to get the equity financing and leverage later.

An independent sponsor bypasses the woes (and stability) of a commingled fund, taking on a single or handful of investors—usually another private market firm or a family office—for a single deal.

Turns out you don't actually need a fund to play the private equity game.

This is the Weekend Pitch, and I'm Jessica Hamlin. You can reach me at jessica.hamlin@pitchbook.com or @jessicaAhamlin.
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A message from RSM  
Minimize your global tax exposure. Maximize your tax position.
Innumerable international tax changes have made the pursuit of global expansion increasingly more challenging for private equity firms. Navigating requirements in multiple jurisdictions involves risks and challenges, especially for businesses unfamiliar with global taxation issues such as transfer pricing, value-added tax, and the developing global minimum tax initiative. Understanding the rules upfront provides an opportunity to take action and position the business for a more efficient tax outcome.

Managing your global tax exposure is critical to creating value for any transaction.
  • Leverage tax-efficient structuring techniques for seamless cross-border deals.
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  • Develop strategies to prepare for future tax law changes.
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Trivia
Retail fintech startups are getting inspiration from layaway programs to build "save now, buy later" options for consumers. In what era did layaway programs become popular?

A) Gilded Age
B) Great Depression
C) Era of Good Feelings
D) Cold War era

Find your answer at the bottom of The Weekend Pitch!
 

Retail fintech shops for new opportunities

(B4LLS/Getty Images)
Retail fintech's slowdown has continued, as detailed in our latest Emerging Tech Research on the sector. VCs invested $1.9 billion across 188 deals in the latest quarter, declines of 33.4% and 0.5% respectively from the previous period. But not all is doom and gloom. Emerging opportunities in the space include "save now, buy later" programs that have their roots in layaway programs of the past. Generative AI also has the potential to re-energize the space.
 

Keeping score on fund performance

(Ditto/Getty Images)
The number of GPs has ballooned from 3,700 to 13,000 since 2007, and they now manage more than 20,000 fund families. It's hard for LPs to sift out top-performing fund managers from the sea of options.

Our latest Allocator Solutions report applies PitchBook's new Manager Scoring framework to determine whether fund family performance persistence can really be relied on when doing due diligence.
 

Global fundraising data shows LPs' shifting appetite

(Martin Barraud/Getty Images)
Private capital fundraising has been declining since Q4 2021. An anemic exit environment may be thwarting LPs' ability to back new funds from distributions of existing vehicles, but GPs are also slowing their demand for capital by making fewer investments.

Despite the decline, allocators are not walking away from private assets because a down market has historically resulted in the best-performing funds. So far this year, private debt has made gains relative to other strategies, while VC and real assets have fallen from favor, according to our Q2 2023 Global Private Market Fundraising Report.
 

Quote/Unquote
"The failure to successfully implement new technologies in our processors could have a material adverse effect on our business, competitive position, results of operations, financial condition and prospects."

—SoftBank-backed Arm, in a filing to go public on the Nasdaq, writing that it runs a risk if it cannot keep pace with the generative AI trend
 

Recommended Reads
Economists watch Jackson Hole the way filmmakers follow Cannes. Here's why the annual conference became an obsession. [The New York Times ]

"Don't you remember me?" The crypto hell on the other side of a spam text. [Bloomberg]

Fossil-fuel-owning alts managers have become green-energy leaders, buying up polluters and promising to scrub them clean. [Institutional Investor]
 

Stay tuned
Keep an eye out for these insights and research reports coming out this week:
  • Q2 2023 Gaming Report
  • Q2 2023 Clean Energy Tech Report
  • Q2 2023 Public PE Roundup
 

Trivia
(fstop123/Getty Images)
Answer: B)

Layaway programs started during the Great Depression era. You can read more about the "save now, buy later" options startups are offering in our latest Emerging Tech Research on the retail fintech space.

This edition of The Weekend Pitch was written by Jessica Hamlin, Jacob Robbins, Claire Simpson and Marina Temkin. It was edited by Heather West and Ron Prichard.

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Older messages

Predicting performance

Saturday, August 26, 2023

Also: Private debt funds make fundraising gains, while VC and real assets have fallen; New fintech, crypto, supply chain tech, and gaming research... Read online | Don't want to receive these

Is fund family performance hereditary?

Friday, August 25, 2023

Generative AI's drug discovery potential; the end of VC overcapitalization; Q&A: BlackRock investor talks European private debt growth prospects Read online | Don't want to receive these

Supply chain tech's road to stability

Thursday, August 24, 2023

New SEC rules could empower LPs; carbon tech's recycling makeover; debt costs slow PE deals in healthcare services Read online | Don't want to receive these emails? Manage your subscription.

The path ahead for retail fintech

Wednesday, August 23, 2023

LPs ask GPs to bet fees on impact goals; VC valuations start to stabilize; European venture-backed IPOs near decade lows Read online | Don't want to receive these emails? Manage your subscription.

Private fundraising's changing tastes

Tuesday, August 22, 2023

Chipmaker Arm files for long-awaited IPO; Q&A: Startup-to-startup M&A begins to simmer; healthcare specialist GPs defy fundraising slump Read online | Don't want to receive these emails?

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