PitchBook News - VC returns hit 10-year nadir

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The Daily Pitch: VC

October 3, 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:

US-based VC funds posted the asset class' worst quarterly return in 10 years

How LPs can pick a winning GP from a sea of many

We break down ecommerce enablement into 23 categories and chart out VC activity for each

Where has Mideast PE activity stalled, and where is it powering on?

Today's Top Stories

VCs hope plunging IRR is behind them

(Mike Hill/Getty Images)

After about half a decade of registering double-digit percentage returns in nearly every quarter, venture capital's performance has reversed dramatically.

US-based venture capital funds' IRR fell to -16.8% in Q4 2022, according to PitchBook's latest Quantitative Perspectives report. That's the worst quarterly return the asset class posted in 10 years, and some investors think that it will likely be the worst performance for a while.

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Putting the ecommerce enablement sector under the microscope

In Q2 2023, total VC investment value in the expansive ecommerce enablement market extended a multiquarter slide to the lowest level since Q4 2018. Our latest analyst note takes a deep dive into the sector, which facilitates all steps for merchants and customers in online sales.

Looking at 23 market categories, we further break down the numbers for deal counts, deal values, pre-money valuations and more.

Three categories had median valuation step-ups of 2.8x or higher, yet 14% of all VC deals across sectors were down rounds.

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A message from Deloitte

Is the exit slump coming to an end?

After the exit boom just a couple years ago, exit activity has slowed substantially for expansion-stage companies. Just 441 exits were completed in the first half of 2023 relative to 1,246 in 2022 overall. However, this state of affairs may be shifting. Deloitte's latest edition of the Road to Next series explores exit trends in depth, with highlights including:

Analysis of key exit metrics such as median exit sizes and valuations in the context of decreased volume
Insights from Deloitte stakeholders regarding the prospect of the exit window reopening
Datasets associated with exit readiness, such as tallies of capital raised prior to exit, ages of companies currently exiting, and more

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Questions to ask to pick the right GP

For LPs, there are plenty of fish in the sea of alternative investing: almost too many GPs to choose from. Because looking at a firm's prior fund performance is not a foolproof method for picking future top performers, allocators need to pay close attention to other details.

Asking the right questions is important, but knowing what to listen for in the answers is key. Our recent analyst note covers strategies to sort through GP fundraising pitches and help LPs identify managers that can deliver on their promises.

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Catching sight of eyecare innovations

Eyeglasses and contacts might not be the most expensive part of consumer healthcare costs each year, but the ubiquity of poor vision makes the eyecare specialty ripe for VC-backed disruption.

Our recent analyst note has a clear view into the sector's next decades and its opportunities for investors. Innovations in intraocular lenses, which are implanted after cataract removal, and in childhood treatments for myopia may improve the quality of life for patients. And if federal regulations ease, more patients could get vision prescriptions without an annual visit to the optometrist.

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India VC activity pulls back to pre-pandemic levels

(Tuul & Bruno Morandi/Getty Images)

India has seen a significant decline in VC deals this year due to continued market uncertainty.

Take a look at our snapshot of India's venture ecosystem to see key trends across venture dealmaking, fundraising and exits this year.

Recommended Reads

Blue Apron's buyout offer is more than double its market value. So why does it feel like a fire sale? [Bloomberg]

From utilities to financials, a look at the most carbon-intensive sectors around the world. [Visual Capitalist]

Lego is a company haunted by its own plastic. [Wired]

Since yesterday, the PitchBook Platform added:

4

VC valuations

533

People

214

Companies

19

Funds

See what our data software can do

The Daily Benchmark:
2015 Vintage US PE Funds

Median IRR

19.15%

Top Quartile IRR

28.04%

1.06x

Median DPI

Select top performers

Oaktree Power Opportunities Fund IV

New State Capital Partners Fund

Sunstone Partners I

*IRR: net of fees

78 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Health Data Analytics Institute has raised a $31 million Series C. The company's predictive analytics platform helps clinicians quantify health risks and plan patient care.

AI Clearing, the developer of a construction progress tracking and quality control platform, has raised a $14 million Series A led by Prudence.

Autonomous farm equipment startup Bonsai Robotics has raised a $13.5 million seed round led by Acre Venture Partners.

Cultivate Power, a distributed solar and storage project developer, has raised $10 million from Generate Capital.

Biopharmaceutical specialist Mogrify has raised an additional $10 million for its Series A, bringing the round's total to $46 million. The extension was led by Astellas Venture Management and Parkwalk Advisors.

Finland's MeetingPackage, which offers venue booking software, has raised a €4.6 million Series A led by Scale Capital.

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PE Deals

Bain Capital will invest at least $200 million in Vietnamese retail platform Masan Group.

Stanley Capital has staked German AI consultancy company Roboyo, joining existing PE investor MML.

Blackstone-backed Bourne Leisure has purchased two hotels from sovereign wealth fund Abu Dhabi Investment Authority to add to its Warner Leisure Hotels brand, The Times reported.

Exit & IPOs

Vuori, an athletic apparel and equipment company, is planning for a 2024 IPO, Bloomberg reported.

Global Infrastructure Partners has agreed to sell a 50% stake in Italo to Mediterranean Shipping Company. The deal gives the Italian high-speed rail operator an enterprise value of at least €4 billion, according to reports.

Bridgepoint is considering selling Humanetics Group, which provides simulation software and crash-test materials to automakers, Reuters reported. The company could be valued at around $1.5 billion.

Bain Capital and Cinven are weighing a potential exit for Stada Arzneimittel, a German drug manufacturer that could be valued at or above €10 billion in a sale or IPO, Bloomberg reported.

Cinven is considering exiting its majority stake in Viridium, a German life insurance company, Reuters reported.

Fundraising

Bain Capital has closed its latest European fund on €6.35 billion, exceeding its target of €5 billion, Private Equity News reported.

Middle-market PE firm Kelso & Company has closed Kelso Investment Associates XI on $3.25 billion, of which $400 million was committed by the firm's partners and employees.

Global manufacturer Mars and Digitalis Ventures have launched their Companion Fund II. The $300 million venture fund will invest in pet care companies.

Van Lanschot Kempen has launched its third private equity fund, which focuses on small and medium-sized businesses in North America.

Debiopharm Innovation Fund has launched a new seed funding initiative, targeting investment in pharmaceutical R&D and cancer care digital innovation.

Chart of the Day

Source: 2023 Global Fund Performance Report (as of Q4 2022 with preliminary Q1 2023 data)

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PitchBook News - VC returns hit 10-year nadir

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