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The Daily Pitch: VC

November 9, 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:

High bar for new funding rounds pulls down VC valuations

Why Ares is eyeing opportunities in the asset-based credit market

At SuperReturn, the LP-GP debate continues on the right length for secondaries election periods

Some investors are looking beyond big-name clubs to Europe's smaller soccer leagues

North America takes the lead in global early-stage VC dealmaking

Today's Top Stories

VC valuations stagnate further

With the exception of seed rounds, VC valuations in Q3 continued to descend from peaks registered in 2021 and early 2022. Fewer companies met investors' higher bar for funding, which forced many to resort to bridge financings or stave off raising new capital by cutting costs.

Despite IPOs of prominent companies, their listings performed relatively poorly, indicating reduced investor enthusiasm for VC-backed companies, according to the Q3 2023 US VC Valuations Report, sponsored by Morgan Stanley at Work.

Seed deal sizes experienced a modest ascent.

The valuation gap between seed and early-stage startups continued to shrink.

The estimated percentage of down rounds climbed to a 10-year high at 17.1%, up from 13.5% in Q2.

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North America claims lion's share of early-stage VC deal count

(IndoImages/Getty Images)

For the first time in nearly a decade, North America has pulled ahead of Asia to claim the biggest share of global early-stage deal count.

Early-stage investments have fallen significantly this year from last across all regions as the downturn slows VC dealmaking.

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A message from Citizens

Seven capital management strategies for a mixed economy

In a mixed environment with tighter credit conditions, a mindset of financial flexibility can help middle-market companies align their capital with their strategic plans.

The possibility of a recession, driven in part by high interest rates, is leading many companies to deleverage and conserve cash. At the same time, the potential for continued growth, driven by a robust job market and strong consumer demand, is creating a push for M&A exploration and capex investments.

To help you balance these conflicting priorities, our new article shares seven strategies for exercising caution while remaining ready to seize opportunities amid murky market conditions.

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Short election periods for secondaries frustrate LPs

Times Square in New York
(Maremagnum/Getty Images)

At a panel during SuperReturn North America, investors debated the merits of a key element in secondary transactions: the election period.

The term refers to the amount of time a GP gives an LP to decide whether to liquidate its investment or roll the stake into a continuation vehicle. Panelists said some GPs don't allot sufficient time for their LPs to make this call, while others argued that LPs should be better prepared for time-sensitive secondary opportunities.

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Ivy League endowments face another rough year in 2024

(Jenna O'Malley/Pitchbook News)

Endowments at the top universities in the US have had a tough couple of years, and their struggle is far from over.

Fiscal years 2022 and 2023 saw the worst returns in the past decade for Ivy League endowments. And as valuation corrections cut through the private markets, it may be a while before these institutional investors see above-average returns.

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Q&A: How LBK seeks to create value in European soccer

(Juventus FC/Getty Images)

As private equity deepens its hold on European soccer, some investors are looking beyond the top-flight clubs to seek out opportunities in the lower leagues.

We caught up with Ben Rosenzweig of LBK Capital, which bought Italian club Triestina in July, to get his perspective on how value can be created in Europe's "beautiful game."

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Opportunities emerge in asset-based credit market for alternative lenders

(jayk7/Getty Images)

Ares Management has been keeping its eyes peeled for rising opportunities in the asset-based credit market, a growing area of private debt.

The firm hopes to capitalize on the flow of bank asset sales, become a new capital partner to fintech lenders, and invest in the sale-leaseback market, said Keith Ashton and Joel Holsinger, co-heads of Ares' alternative credit group.

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Since yesterday, the PitchBook Platform added:

11

VC valuations

2099

People

672

Companies

35

Funds

See what our data software can do

The Daily Benchmark:
2014 Vintage European PE Funds

Median IRR

17.33%

Top Quartile IRR

22.89%

1.13x

Median DPI

Select top performers

CapVest Equity Partners III

Down 2 Earth Capital

Vitruvian Investment Partnership II

*IRR: net of fees

22 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

A message from Apex Group

A bigger, more complex industry eBook

In Apex Group's latest e-book, "A bigger, more complex industry," Apex unpacks the specific trends yet to take place in the industry, including themes such as technological advancements, political changes, and economic shifts. What are some of these potential trends that could shape the private equity industry in the coming decades?

Apex is predicting … a sharp increase in global interconnectedness and integration, a stronger focus on sustainability and ESG, data transparency and technology and an uptick of alternative investments.

To find out more, download the Apex eBook on the Apex Group website here.

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VC Deals

Quantum computing startup Photonic raised $100 million from investors including British Columbia Investment Management Corporation, Microsoft and the UK government's National Security Strategic Investment Fund.

Trax, which provides image recognition tech for retail, secured $50 million in venture debt from Deutsche Bank Private Credit & Infrastructure.

Niron Magnetics raised $33 million from automotive manufacturers GM Ventures and Stellantis Ventures, among others. The company makes permanent magnets for electric motors and other applications.

AI coding software startup Tabnine secured $25 million in a Series B led by Telstra Ventures.

ShippyPro, an Italian provider of shipping software for ecommerce businesses, raised a $15 million Series B from Five Elms Capital.

Ozone, which is developing an AI collaborative video editor, raised over $7 million in seed funding from investors including Y Combinator, NEA and General Catalyst.

ReturnGo, the Tel Aviv-based developer of a self-service return management platform, raised $5 million in a round led by Trestle Partners.

Protecto, which protects enterprise data in generative AI applications, raised a $4 million seed round led by Together Fund.

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PE Deals

KKR and GED Capital have bought Barcelona-based fertility business Eugin Group from German healthcare company Fresenius in a deal worth up to €500 million.

Warburg Pincus said it plans to make a tender offer for Sao Paulo-based insurance group Alper that would value the company at 850 million Brazilian reais ($173.93 million), Reuters reported.

Palisade Infrastructure acquired Rainier Connect, a Washington-based provider of local internet and phone services.

Core Industrial Partners acquired Illinois-based folding carton manufacturer General Converting, which serves food, confectionery and consumer brands.

Macquarie Capital agreed to acquire Camin Cargo, a Texas-based testing, inspection and certification provider for the energy industry, from Metalmark Capital Partners.

Norland Equity Partners has acquired UK traffic management and parking services provider CSP.

Portfolio Companies

Singaporean insurance company Singlife has secured S$180 million (around $133 million) from Sumitomo Life Insurance Company.

Exits & IPOs

Accel-KKR sold IntegriChain to Nordic Capital. The company helps drug manufacturers get their products to market.

VC-backed grocery delivery company Getir acquired New York-based online grocery business FreshDirect from Ahold Delhaize USA.

Fundraising

New York-based Harvest Partners raised $5.34 billion for its ninth flagship fund. The PE firm invests in businesses valued between $300 million and $5 billion in the business and industrial services, consumer, industrials, healthcare and software sectors.

France's SWEN Capital Partners has reached a €580 million final close on its second energy transition fund. SWIFT II is twice the size of its target and more than triple that of its predecessor.

Munich-based Acton Capital closed its sixth venture fund on €225 million to back early-growth-stage startups.

Oraseya Capital, the venture arm of the Dubai Integrated Economic Zones Authority, launched a $136 million fund targeting pre-seed to Series B investments.

Finnish VC firm Kvanted launched a €70 million vehicle targeting early-stage industrial tech startups across Northern Europe.

Black Opal Ventures raised $58 million for its first healthtech VC fund from LPs including Eli Lilly, Bank of America and Atlantic Health System Venture Studio.

Investors

Brian Laureano—the founder of Apollo Global Management's credit secondaries team—and former Morgan Stanley executive Tony Colarusso launched a new firm dedicated to credit secondaries called FoxPath Capital Partners, which aims to raise a fund in 2024, The Wall Street Journal reported.

Corporate M&A

France-based designer label owner and retailer LVMH is buying luxury eyewear brand Barton Perreira.

Chart of the Day

Source: PitchBook's Q3 2023 US PE Breakdown

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PitchBook News - VC valuations just keep falling

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