Credit outlook: On Wednesday, our LCD team is hosting a live discussion to examine the trends that have defined the credit markets and what developments to expect in Q4. Register here.
Crypto talk: Despite the bear market, traditional financial institutions continue to forge ahead, exploring and investing in digital assets and crypto products. We'll discuss this and more on Thursday with professionals from Goldman Sachs and Rosenblatt Securities. Register here.
VC Dealmaking Indicator: Venture investors at all stages have had their most favorable negotiating environment in the past 10 years. See our new data.
Public comp sheets: We've published more guides on public company valuations, covering stock performance, revenue forecasts, and what the current backdrop means for private companies:
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Disinflation: Good news for capital markets?
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Since the second half of last year, inflation has been dropping—a trend that has historically led to increases in debt and equity issuances. Though each disinflationary period is unique, factors such as lower unemployment and increased corporate profits suggest a positive outlook for capital markets.
The latest Citizens infographic places the current environment in historical context to help guide your thinking and take advantage of company financing opportunities in current market conditions.
See how disinflation could impact market trends. |
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Introducing our new location-based VC Ecosystem Rankings
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We recently released our Global VC Ecosystem Rankings to compare how locations rank in overall development and their growth rates relative to one another.
The note provides a scoring system for development and growth by assessing the size, maturity, and growth rates of a VC ecosystem using proprietary data points in the PitchBook Platform.
The purpose of the framework is to help founders, operators, and investors identify locations that could be beneficial to expand or invest in to generate outlier returns in the long run.
From our analysis looking at the most developed ecosystems, we found:
• San Francisco is the most developed VC ecosystem in the world by a considerable amount.
• VC ecosystems in the US and Asia account for 85% of the 20 most developed VC ecosystems.
• London is the only European city among the top 10 most developed VC ecosystems globally.
In high-growth VC ecosystems, we found:
• Dubai pips Detroit at the top of our VC Ecosystem Growth Rankings.
• 65% of the 20 highest-growth VC ecosystems are in Europe or the US.
• Only three locations in Asia are among the 20 fastest-growing VC ecosystems.
We also combined our Development and Growth Scores to create an Overall Score and we discovered:
• Locations with the largest Development Scores possess lower Growth Scores.
• The top 50 overall are spread across the globe with 40% in North America, 32% in Asia, and 24% in Europe.
• New York, Shanghai, London, and Berlin strike a balance between development and growth.
To see the full lists, download our Global VC Ecosystem Rankings.
If you have any questions, please reach out.
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Why it's even worse than it looks for the PE exit drought
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The US government is not the only one threatening to shut down these days.
The PE industry packed up its "for sale" signs on scores of portfolio companies during the third quarter, a sharp about-face from the prior quarter.
We dive into the factors driving this change as well as other key trends in our quarterly US PE Breakdown, one of our most widely read reports here at PitchBook. Here are the top takeaways from the Q3 edition:
• US PE exit value hit an air pocket in Q3, falling by half from the prior quarter to its lowest quarterly level since the global financial crisis and now down 80%+ from the Q2 2021 peak.
• We track buying versus selling on a dollar basis. Both are down this year, but the deficit is still massive at $475.1 billion. The industry needs to build more "offramps."
• So far so good on the fundraising front. The year is tracking approximately 13% lower but from a record high. CD&R's recent close of a $26 billion buyout fund is a sign that "megafund fatigue" may be turning.
• Lastly on the financing front, wounds are finally healing, and banks are wading back to their traditional role as lenders to large LBO transactions.
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| See the full chart going back to 2009 in the report. |
While on the surface exits reached a more-than-decade low, it was even worse on a relative basis.
Back in its heyday, it was not unusual for total PE exit value to equal or exceed total value expended by PE firms in a given quarter. In Q3 2023, PE exit value equated to 25.5% of what PE firms announced or closed in buy-side deals. That's the lowest percentage ever recorded by PitchBook going back to 2006.
Exit activity is arguably the most important link in the PE chain of capital formation and a lead indicator of industry growth. Its cash flows recycle into fundraising that feeds into dry powder and fund deployment, and most importantly, fund performance. A large imbalance between selling and buying over a prolonged period can disrupt that cycle and undermine industry growth.
New liquidity solutions and exit offramps will need to be built by the industry to avert a pileup as more funds approach end of life, as we discuss in our analyst note, PE Exit Timelines and the Impending Maturity Wall.
Fortunately, those efforts are well underway in the form of secondary funds and continuation vehicles. We expect these deals and announcements to accelerate in the next few quarters, and we will be tracking the new trend closely.
For more data and analysis, read our US PE Breakdown.
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Enjoy the read!
Tim Clarke
Lead Analyst, Private Equity |
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The Instacart and Klaviyo IPOs were a good start, but the US VC market isn't out of the woods yet.
Total exit value remains at an extreme low despite signs of an IPO-market thaw, according to the new PitchBook-NVCA Venture Monitor.
The GPs still deploying capital have slowed their activity dramatically. In turn, capital availability is in decline.
That's unlikely to change until exits rebound, but with the IPO backlog sitting at around 75 companies, 2024 may make for a busy year: |
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The newest PitchBook Benchmarks have just gone live, with tons of fund performance metrics through Q1 like IRR quantiles, pooled horizon returns, cash multiples, and PMEs sliced by vintage year, geography, and strategy:
- Global (includes prelim Q2 data!)
- Venture capital
- Private equity
- Private debt
- North America
- Europe
- Secondaries
- Funds of funds
- Real estate
- Real assets
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Emerging Space Brief: Fusion Energy
Nuclear fusion tech has been making major breakthroughs.
But despite its immense promise, when it comes to scaling the technology, a difficult road lies ahead.
Waste disposal and integrating into the energy grid are two of the complex issues founders and investors are tackling: |
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Tech analyst Eric Bellomo weighs in on the Federal Trade Commission and 17 state attorneys general suing Amazon for a variety of alleged anticompetitive practices:
"While the FTC's lawsuit against Amazon represents a significant effort to rein in the company's e-commerce empire, the ultimate outcome of the suit is unlikely to substantially impact Amazon's market position or alter the startup environment for merchants or enablement platforms.
"Sellers could theoretically benefit from a degree of margin relief but cannot neglect Amazon's shopper base. Software vendors may be incentivized to add platform features, but Amazon's marketplace services, spanning advertising and fulfillment, are too robust to ignore.
"Despite speculation that Amazon could somehow be forced to break up, we see little precedent to support such an action, and it is not clear the company controls the market in a way that is entirely detrimental to consumers. Amazon's share of total retail is relatively small when including offline sales, and the company faces substantial competition in its online business from large retailers such as Costco, Walmart, and Target.
"Startups operating in the e-commerce space tend to view Amazon as both friend and foe, and the FTC's ability to extract monetary concessions from the company (the most likely outcome, in our view) is unlikely to meaningfully alter this relationship, though it might place clearer parameters on marketing and discounting activities."
For more on what the lawsuit could mean for startup innovation, read our free research: Amazon Lawsuit Unlikely to Change Startup Ecosystem
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Eric Bellomo
Analyst, Emerging Tech
E-Commerce & Gaming
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Our insights and data featured in the press:
- US PE exits sink to one of the lowest points in over a decade. [WSJ]
- Why a massive liquidation sale from FTX's investment portfolio could send the value of crypto startups plummeting further. [Bloomberg]
- 4 charts on VC performance over the past 10 years. [Fortune]
- Generative AI deals are down, both by number and by deal size. [Fast Company]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.
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More of our recent research:
Market updates
Thematic research
Public comp sheets
Credit research
Coming next week (subject to change)
- European PE Breakdown
- European Venture Report
- Foodtech: Annual Overview*
- Analyzing the state of cloud gaming
- Antitrust regulations and their impact on M&A
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Since yesterday, the PitchBook Platform added:
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4
VC valuations
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2426
People
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606
Companies
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27
Funds
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