Adding tech unicorns to PitchBook Indexes

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The Daily Pitch: VC

November 20, 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:

Lower-mid-market PE firms use co-investments to broaden their appeal to cash-strapped LPs

The PitchBook Indexes now tracks valuations of the top startups in 11 emerging tech verticals

Generative AI isn't exempt from the VC slowdown, but exit opportunities remain

China is outpacing the US in autonomous vehicle investment

PE is driving consolidation in the fertility sector

Today's Top Stories

Introducing indexes for unicorns by industry vertical

PitchBook and Morningstar have expanded our suite of private market indexes to track the valuations of the top private companies in emerging tech.

The Morningstar PitchBook Global Unicorn Industry Vertical Indexes tracks 11 emerging industries including AI, healthtech, fintech and climate tech. The just-launched family of indexes uses a proprietary pricing model to estimate daily valuation shifts for venture-backed private companies valued at $1 billion or more.

These indexes provide a framework for deriving market insights, benchmarking performance, informing thematic investment strategies and understanding trends that are reshaping the markets.

explore the indexes

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Mapping generative AI's dealmaking trends

Our latest Emerging Tech Research dives into the dealmaking trends within the generative AI emerging space, which—when excluding Big Tech's mega-deals—is only on pace to match 2021's VC funding total this year.

While generative AI isn't immune to the broader VC and tech slowdown, promising exit opportunities remain on the horizon in spaces including coding and healthcare. Our analyst note lays out all the trends, who's behind the investments, and what the future may hold.

read it now

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A message from Shoosmiths LLP

Cracking the club code:
Navigating the pitfalls and power plays

Amid increasing clubbing arrangements, private equity sponsors must navigate pitfalls with care. Here's how savvy investors navigate the rocky road to success:

Speak with one voice: align on governance, economics, structure and advisers in advance of bid submission to streamline decision making.
Bigger is not always better: on consortium deals, the parties' combined revenues in different jurisdictions often triggers antitrust notifications/approvals. Prepare antitrust analysis in advance to understand timelines and enhance execution deliverability.
Big brother/little brother: tightly draft minority consents.
Align exit expectations: differing vintages of ownership can lead to tensions on exit strategies and timing. Ensure alignment on expectations from the outset.

By collaborating, aligning on objectives, and presenting a unified front PE sponsors can unlock the full potential of clubbing together.

Read more here on cracking the club code

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Bid to rehire OpenAI's Altman fails as ex-Twitch CEO takes the helm

Emmett Shear (Lawrence Sumulong/ Getty images)

OpenAI has named Emmett Shear, former CEO of video livestreaming platform Twitch, as its new interim chief.

Chaos gripped the startup over the weekend as investors and employees pushed for former CEO Sam Altman to be reinstated after his sudden dismissal.

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Smaller GPs offer co-investments to build trust with LPs

Butterfly Equity bought an ownership stake in the Qdoba
restaurant chain in 2022 using a co-investment strategy.
(Nicolaus Czarnecki/Getty Images)

PE fund managers, particularly those in the lower middle market, use co-investments as a way to establish and solidify relationships with limited partners—an otherwise challenging feat given the lethargic fundraising environment.

For the LP, these arrangements can offer lower fees, increased control of the target company and a way to manage risk.

"[LPs] can adjust their risk-return appetite, like a choose-your-own-adventure," said Butterfly Equity co-founder and co-CEO Adam Waglay.

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China races past US in autonomous vehicle investment

(Peter Parks/Getty Images)

China has raced past the US when it comes to investing in autonomous vehicles.

Chinese companies have taken in around 60% of VC investment in driverless vehicles since the beginning of 2022. Meanwhile, US companies have attracted only 15% of global capital in the sector this year.

The reversal comes as Cruise, one of the largest self-driving car startups in the US, suspended driverless operations after one of its vehicles hit a pedestrian in October.

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PE drives consolidation in maturing fertility market

(Nata Serenko/Getty Images)

Private equity investors have piled nearly $3 billion into the fertility sector this year as consolidation continues to drive buyouts in the sector.

While dealmaking has dropped—deal value peaked at $8.4 billion in 2022—sizable acquisitions are still closing, including KKR-backed IVI-RMA Global and GED Capital's $534 million purchase of Eugin Group.

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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.

read the report

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Since yesterday, the PitchBook Platform added:

54

People

36

Companies

See what our data software can do

The Daily Benchmark:
2014 Vintage Global VC Funds

Median IRR

17.40%

Top Quartile IRR

25.48%

1.18x

Median DPI

Select top performers

Earlybird Digital East Fund I

True Ventures IV

Union Square Ventures Opportunity 2014 Fund

*IRR: net of fees

61 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Ingenious.Build raised a $37 million Series A led by Morpheus Ventures and Navitas Capital. Based in Nashville, the company offers project management software for real estate and construction.

Crypto startup Taproot Wizards raised a $7.5 million seed round led by Standard Crypto.

Quoherent, a quantum computing specialist, secured a $4.7 million seed round led by Morpheus Ventures.

Glencoco, the developer of a marketplace that connects businesses with consultants, secured a $3 million investment from Felicis and Crossbeam.

Africa's Pricepally raised $1.3 million in seed funding from Samurai Incubate for its online grocery store.

PE firm BV Investment Partners invested in VC-backed CallTower, an enterprise cloud communications and collaboration solutions provider based in Utah.

PE Deals

GTCR agreed to acquire Ohio-based Cloudbreak Health, a tech-enabled language interpretation service carved out from UpHealth, for $180 million.

Japanese technology group Panasonic plans to sell a stake in its automotive systems unit to Apollo Global Management and is considering a future IPO for the business.

Seaside Equity Partners acquired Houston-based Frontier Services Group, which provides emergency restoration services to residential and commercial customers in Texas and the Gulf Coast.

INVL-backed Latvian waste management company Eco Baltia has finalized its acquisition of 70% of Polish PVC window and door recycler Metal-Plast.

Cibus Capital has completed the sale of Spanish olive oil producer and processor Innoliva to Fiera Capital.

Exits & IPOs

Investcorp Capital, which debuted in Abu Dhabi at $451 million, ended its first day of trading Friday with its shares at the same price. The asset manager is a unit of PE firm Investcorp.

Chart of the Day

"Large-investor involvement in seed surged from 2020 to 2022 due to several factors, including heightened competition among investors, an increase in the number of funds closed, and the growth of seed-focused programs."

Source: Q4 2023 PitchBook Analyst Note: The Seed Blip

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