PitchBook News - Rebound hopes fade for fund performance

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The Daily Pitch: VC

November 7, 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:

Fund performance across the private markets settles after the highs of 2021

Solo VC Elad Gil's new $1 billion-plus fund sets him up to hunt for generative AI opportunities

A look at the most active PE investors in data center deals

Ada Ventures' Check Warner on what LPs can do to improve gender equality among UK VCs

Today's Top Stories

Fund performance gains of 2021 are in rearview mirror

The high performance marks that private capital notched in 2021 are now a relic of the past. Through Q1 2023, all but one of the seven asset classes posted a one-year horizon IRR below their five- and 10-year averages—the outlier, real assets, did not spike as high in 2021 and thus did not have as far to fall.

Our latest Global Fund Performance Report digs into the factors affecting fund performance and how they might shift future returns. Preliminary Q2 data does not point to a rebound, but four of the asset classes have continued to outperform the S&P 500 index.

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Exclusive: Elad Gil raises $1B+ for third VC fund

Elad Gil (Vaughn Ridley/Getty Images)

Elad Gil has raised over $1 billion for his third fund, according to securities filings, a 77% increase over its predecessor, which closed on $620 million in 2021. The new vehicle further cements Gil as the most well-funded solo VC in Silicon Valley and sets him up to go after opportunities in generative AI.

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How long will the effects of the 'seed blip' linger?

Deal metrics have fallen for most VC stages since the market peaked in 2021, but one part of the US VC ecosystem bucked the trend: seed. The youngest companies' valuations and deal sizes were generally propped up by large investors whose participation at that stage exploded during the pandemic boom.

Large investors accounted for more than a third of seed deal value in 2022, but their involvement at that stage is starting to recede. Our recent analyst note examines a phenomenon we call the "seed blip," along with how large investors have shaped that funding stage and why the continued growth of seed deal metrics is unsustainable.

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Since yesterday, the PitchBook Platform added:

16

VC valuations

1673

People

414

Companies

20

Funds

See what our data software can do

The Daily Benchmark:
2021 Vintage Global Secondaries Funds

Median IRR

30.12%

Top Quartile IRR

41.64%

0.09x

Median DPI

Select top performers

Capital Dynamics Global Secondaries VI

Banner Ridge Secondary Fund IV

Resolute II Continuation Fund

*IRR: net of fees

37 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Aleph Alpha, a German generative AI company, raised over $500 million in its Series B led by Innovation Park Artificial Intelligence, Bosch Ventures and Schwarz Group.

01.AI, a foundational large language model startup, raised an undisclosed amount from investors including the Alibaba Group's cloud unit at a valuation of over $1 billion, Bloomberg reported.

Development and operations startup Replit raised $20 million from Craft Ventures.

Paris-based mobile gaming publisher TapNation raised €15 million from investors including Re-Sources Capital and Paluel-Marmont Capital.

Fashion-tech company Zelig raised a $15 million Series A led by Hilco Global.

Smart contract management startup Llama raised a $6 million seed led by Founders Fund and Electric Capital.

Dreamfarm, an Italian maker of plant-based cheese, secured €5 million from angel investors Giampaolo Cagnin and Francesco Mutti.

Solar project management SaaS company Coperniq raised a $4 million seed round, TechCrunch reported.

Ensol, a French company that specializes in custom-made solar panels, secured €3 million from Otium Capital.

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PE Deals

French media group Vivendi, the largest shareholder of Telecom Italia, is threatening the company with legal action after the board approved KKR's €22 billion acquisition of the Italian telecom group's fixed-line network.

Bain Capital agreed to acquire Virginia-based consulting firm Guidehouse, which serves the public sector and commercial markets, from Veritas Capital for $5.3 billion.

Joffre Capital is in talks to acquire Bay Area-based digital reading platform Epic from Byju's, an Indian online education provider, for about $400 million, Bloomberg reported.

Portfolio Companies

Stanley Capital-backed French pharmaceutical company Laboratoire XO acquired Nimodipine, a stroke prevention medication, from Bayer.

Exits & IPOs

The Carlyle Group plans to sell Tokyo-based Tokiwa Cosmetics in 2024 at a valuation close to $1 billion, Reuters reported.

Nasdaq-listed cybersecurity vendor Palo Alto Networks agreed to buy Lightspeed-backed Talon Cyber Security, a B2B secure internet browser provider based in Israel. The deal is worth $625 million, TechCrunch reported.

Bregal Partners sold Virginia-based direct-to-consumer dog treat manufacturer TDBBS to Central Garden & Pet.

Fundraising

KKR raised $2.8 billion for its second global impact fund, Reuters reported.

Investors

PAI Partners has taken out a €1.2 billion NAV financing loan against assets held in a flagship fund, Private Equity International reported.

Chart of the Day

"Our data suggests that large investors have flexed their size advantage for increased influence over seed, as they lead nearly one-third of the seed deals they participate in, setting the terms of the round within the company. This figure reached 35.0% in 2022. When large investors are leading financing rounds, they are setting the term sheet and determining the pre-money valuation and round size, thus setting higher figures that make a more effective use of their capital."

Source: Q4 2023 PitchBook Analyst Note: The Seed Blip

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PitchBook News - Rebound hopes fade for fund performance

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Tracking the SaaS tools for growth

Ivys' not-so-elite returns

Making sense of seed deal data

Fintech's opportunity in open banking

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