PitchBook News - A big shift for top VCs

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The Research Pitch

September 9, 2023

Presented by Citizens

VC IPO outlook: The end may be in sight for the most sluggish exit environment in a decade. We've highlighted the next steps IPO hopefuls need to consider in the current market. Read our research.

The future of freight travel? A number of startups are working to bring autonomous freight trains to the US rail network. We dive deep into this technology here.

Emerging Tech Talk: Join us Monday for a live discussion on key e-commerce trends with Drew Marconi, CEO and co-founder of Intelligems. Register here.

New credit research! We're excited to announce that, for the first time, reports from our LCD team are now available to non-clients. Check out the initial releases below:

A message from Citizens

M&A outlook: Is the market poised for recovery?

Leaders at Citizens see green shoots appearing for the remainder of the year despite lingering macro uncertainty. In this article, Citizens shares perspectives on key indicators for the middle market, including:

Four factors that could reignite dealmaking
The importance of private equity sponsors in driving momentum
Why volume trends suggest the market is reaching a tipping point after months of headwinds

What Citizens expects for M&A in the rest of 2023 and beyond

Share:

Top VCs have been shifting their early-stage bets to AI

In the second quarter of 2023, our Emerging Tech Indicator report unveiled significant shifts in the VC landscape, emphasizing a substantial tilt toward artificial intelligence.

AI & ML has clearly supplanted Web3 as the dominant force in the technological investment sphere, marking a pivotal development.

The ETI analyzes angel, seed, and early-stage investments involving a select group of the world's most successful VC firms, accounting for approximately 10% of total VC activity. The AI & ML sector led the charge in Q2, securing a considerable $646 million across 25 deals.

Source: PitchBook's Emerging Tech Indicator

This surge is largely attributed to sustained momentum in generative technologies, with notable investments in companies like Typeface and Mistral AI. Web3 & DeFi, which has experienced a noticeable downturn, secured only $159 million across five deals.

Despite a general decrease in ETI activity since the start of 2022, the recent trends hint at a return to pre-2021 levels. Q2 saw a slight uptick with seven ETI deals exceeding $100 million, a rise from the previous quarter and above the historical average of five.

This is indicative of a normalization in the number of large deals, suggesting that the market is stabilizing after previous fluctuations.

Furthermore, while the report indicates a decline in ETI deals to $3 billion over 120 deals, it remains in line with the historical average, maintaining a 10.2% share of all early-stage VC funding for the quarter.

This demonstrates resilience in the market, with potential for further growth and expansion in coming periods, especially within the AI & ML domains.

For more data and analysis, please download our new Emerging Tech Indicator.

Best,

Ali Javaheri
Associate Analyst,
Emerging Technology

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VCs are getting to the heart of cardiovascular innovation

Interest in heart health has been spiking alongside unending rising costs for chronic conditions and the rapid adoption of GLP-1 weight loss drugs.

Our new research on the landscape for cardiovascular disease investment explores the $11 billion funneled into the cardiac and heart health market since 2020.

VC investment spans across all of healthcare—and our newly launched market map shows the top cardiac startups in patient monitoring, chronic condition management, medical imaging, devices, and biopharmaceuticals.

Getting to the heart of the matter, we estimate the market size for cardiovascular care solutions at over $300 billion, and industry drivers—e.g., an aging population, demand for weight loss drugs—could bring the total direct cost of cardiovascular care to over $400 billion by 2030.

Cardiovascular diseases and related chronic conditions account for ~12% of total US healthcare expenditure, leaving the door wide open for startups to develop innovative solutions that can lower the cost burden through better prevention and treatment.

Our report also highlights key emerging opportunities in remote patient monitoring, digital hypertension management, surgical technology for outpatient care, AI image analysis, and next-gen drug treatments.

For more data and analysis, download our Cardiovascular Disease & Heart Health VC Market Snapshot.

Enjoy the report and please reach out with any feedback!

Best,

Aaron DeGagne, CFA
Emerging Technology Analyst, Healthcare

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Market Updates

With interest rates hitting a 15-year high to combat inflation, the UK private markets' ability to adapt has resulted in what is looking like a prolonged recovery.

Our new UK Private Capital Breakdown covers how PE and VC have performed during the first half of the year.

Among the findings, PE investors have tended to look for smaller UK targets, while VC exits are smaller but on par with last year's volume:

read the free report

Thematic Research

Generative AI in E-Commerce

VC is helping generative AI go shopping.

AI and e-commerce aren't a new pairing, but the latest wave of innovation with large language models has ignited a fresh spark between the two.

Our research dives into how emerging technologies are propelling these sectors forward, as VC investment in generative AI tools with e-commerce applications totaled $2.5 billion in 2022:

read a free preview

Webinars & Events

Some events to add to your calendar:

Sept. 13: We're teaming up with J. Thelander Consulting to discuss how compensation trends at VC and PE firms have changed in recent years, and what to expect going forward. Register here.

Sept. 20: Our US PE analysts will revisit their 2023 forecasts from the start of the year, covering exits, fund returns, take-private activity, and more. Register here.

Commentary

Senior tech analyst Brendan Burke weighs in on AI21 Labs' $155 million funding round at a $1.4 billion valuation:

"This deal further demonstrates that leading foundation model research labs can earn unicorn valuations before achieving commercial scale.

"Recent deals for Aleph Alpha, Cohere, Mistral AI, and Inflection show that competitive performance on LLM tasks and a roster of AI research talent are necessary criteria for mega-rounds in generative AI.

"AI21 Labs has achieved equivalent results on question answering to OpenAI's GPT-3.5-turbo model with far less investment, suggesting it can make further breakthroughs with additional capital.

"Strategic investment continues to buoy valuations as shown by Google and Nvidia's participation in this round. Foundation model competitor Together may command a similar valuation based on its progress."

Brendan Burke

Senior Emerging Technology Analyst
AI & Machine Learning

In the News

Our insights and data featured in the press:

How Tiger Global "overextended themselves into VC." [Fortune]

Third-party logistics providers and freight forwarders could boost productivity by using ChatGPT-like tools to optimize scheduling, planning, and pricing. [WSJ]

Why the Abbott-Bigfoot deal shows how diabetes tech is a hot area of investment. [MedCity News]

With its Arm IPO, SoftBank could try to sell investors on the AI computing exposure they may have missed out on with Nvidia. [Fortune]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

More of our other recent research:

Market updates

US Public PE and GP Deal Roundup
Global Markets Snapshot
Global Private Market Fundraising Report
European VC Valuations Report

Thematic research

Industry & tech research

Emerging Space Brief: Neurotechnology
Vertical Snapshot: Space Tech
Clean Energy Report
Gaming Report
Retail Fintech Report

Coming next week (subject to change)

US PE Middle Market Report
Digital Health Report
Healthcare IT Report
Foodtech Report
Examining US Investments in China
The Changing Landscape of Capital Call Facilities

Thanks for reading! Feel free to email us any time with feedback, questions, or tips!

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PitchBook News - A big shift for top VCs

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