Prime time for software: Conditions are ripe for another strong run by PE-backed software companies. Our new research dives deep into the current opportunity for PE in tech. Read our free version.
2024 Allocator Outlook: In the first of our analyst outlooks for next year, we take a look at the evolving LP playbook and the three factors that impact return expectations across asset classes. Read it here.
E-commerce's long road: Inflation has slowed consumer spending, which in turn has dampened activity across the e-commerce vertical. So, which technologies and markets are providing opportunities? Read our report preview. |
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A message from DealCloud, by InTapp
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Hyde Park Capital increases accuracy and consistency with DealCloud
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Prior to deploying DealCloud, the professionals at Hyde Park managed their data using a generic CRM. Hyde Park realized its need to operate more efficiently and have greater visibility across the firm. By implementing DealCloud, Hyde Park Capital has optimized contact and activity capture, relationship intelligence, data management, and marketing.
Download the case study for more insights on how Hyde Park Capital is leveraging DealCloud’s technology to meet the unique needs of modern-day investment banking. |
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Why Impact investing doesn't inevitably preclude positive performance
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This week, we launched the third iteration of reporting on our proprietary dataset of private market funds that seek Impact, as well as the types of Impact they're seeking.
Readers of prior editions will note that the addition of infrastructure to the Global Impact Investing Network's IRIS+ framework has caused
the real assets strategy to grow substantially as a proportion of Impact assets being raised. Very large projects related to the energy transition require very large investment sums being served by very large infrastructure funds.
The share of fundraising targeting real assets in the Impact space (68%) versus the weighting in the overall private capital market funds universe (9%) is an important point when one tries to examine the performance of Impact funds versus the broader markets.
In this month's report, we attempted to tease out if "going woke" will cause investors to "go broke," as one of our
Sustainable Investment Survey respondents predicted.
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| Median IRR tells part of the story. Our research tells more. |
While at the median level, Impact fund performance was often lower than non-Impact funds by vintage year, the fact that real assets have performed markedly lower than other strategies must be considered as one explanation. Real assets returned 7.6% over the past 10 years, per
our most recent Benchmarks, versus 13.5% for all private capital.
With the Impact universe more heavily weighted to real assets via Impact infrastructure, it is reasonable to assume that some performance gap is due to this phenomenon, rather than some wokeness factor. Unfortunately, the data is too thin at the strategy level to make more apples-to-apples comparisons at this time.
The data does show there are Impact funds that perform very well and ones that do poorly—just as with the broader funds universe. But there is no indication that seeking Impact is going to necessarily lead to lower returns.
The onus, as always, is on allocators to perform their diligence in selecting fund managers that meet their objectives, a topic I wrote about earlier this year, particularly from
the qualitative diligence perspective.
Please enjoy this latest
Impact investing update!
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Reflecting on COP28 and the path ahead
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COP28 wrapped up Wednesday with an agreement among participating countries to "transition away" from fossil fuels. Some are calling it a victory and others are calling it loophole-riddled and disappointing.
The major achievement of the conference was the agreement's unambiguous acknowledgment—for the first time in COP history—of the need to curtail fossil fuel use. However, for those conscious of the sense of urgency required to mitigate climate change and its impacts, the agreement's shortcomings outweigh its victories.
While it is important to examine the successes and failures of COP28, now is also the time to refocus on the path ahead and the technologies that will pave it. VC firms are particularly well-positioned to foster businesses developing solutions to the problem of maintaining energy security while reducing contributions to climate change.
In our Emerging Sustainable Investing Opportunities series, we've recently highlighted two areas of clean energy and climate tech that are poised to perform well from a financial perspective while contributing to the net-zero and circular economy movements in the next decade.
One is the waste-to-fuel space, in which companies use various waste streams—from forestry or agricultural residues to municipal or food waste—to produce different fuel and chemical types. The other is carbon utilization, which encompasses a range of approaches to making use of captured CO2, typically in industrial chemicals, fuels, and construction materials.
This research aims to bring attention to the factors supporting the financial return potential and the positive social and environmental impact potential of companies using these technologies, especially as allocators and asset managers make decisions about where to invest.
In doing so, we hope to guide some of the post-COP28 momentum toward conversations about the companies helping to build a sustainable future.
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Dealmaking fatigue has reached the US PE middle market, where Q3 deal volume hit a six-year low and exit value declined 26% on a quarterly basis.
Deal multiples for PE transactions targeting small to medium-sized companies contracted from recent peaks and fundraising also cooled.
Our US PE Middle Market Report looks at the factors driving the headwinds and what could get things moving: |
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Capital raising for real assets funds has been far from fertile in 2023, which is shaping up to be the weakest year in over a decade.
By contrast, natural resources fundraising, which includes oil and gas, is ahead of 2022's pace.
Our Global Real Assets Report looks into the dip in the strategy's recent returns—and the likelihood they could recover by year-end: |
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NAVigating Considerations and Controversies Around NAV Loans
As fundraising slows and exits stagnate, PE fund managers are increasingly employing creative portfolio management strategies.
Net asset value loans, which are credit facilities secured against a fund, have become one of the financing tools filling the demand for liquidity.
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| This year hit a low since early 2010. |
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Our analyst note examines the growth of the NAV lending market and the pluses and minuses of such loans: |
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The digital health market continued its challenging year during Q3.
The sector was a pandemic darling, but shifting conditions have significantly reduced the available funding, according to our Digital Health Report.
Still, our analysts see emerging opportunities in virtual specialty medicine, like gastrointestinal care, and digital drug companion software: |
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In a market increasingly weary of point solutions, early-stage healthcare IT dealmaking is lagging as investors hold out for companies developing platform solutions.
Meanwhile, PE activity ticked up slightly in Q3 but continued on its overall downward trajectory.
Our Healthcare IT Report outlines the trends to watch and breaks down promising areas including healthcare price transparency and value-based care point-of-care solutions: |
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Mobility tech is bouncing back.
Driven by a few large deals, the vertical's VC funding rebounded to $9.8 billion in Q3.
Our Mobility Tech Report takes a closer look at these mega-deals along with the future of microcars and the role drones play in defense and warfare: |
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PitchBook at JPM 2024
Join us! Our healthcare analyst team will be on-site in San Francisco for the J.P. Morgan Healthcare Conference, which runs from Jan. 8-11.
For PitchBook clients, we're hosting an investor lounge on Jan. 9 where you can network, recharge, refuel, and connect with our analysts for in-person discussions around healthcare services and digital health. More details here.
We're also hosting a pair of webinars that are open to all:
Jan. 9: Though multiple biotech subindustries showed promise, setbacks have pushed VC toward new therapeutic applications. Our analyst Kazi Helal will discuss it all with a panel of VC biotech investors. Register here.
Jan. 11: Our team will recap JPM 2024 and share our most important takeaways from the private company-related presentations and discussions. Register here.
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Senior tech analyst Brendan Burke weighs in on Paris-based Mistral AI raising a $415 million funding round at a roughly $2 billion valuation.
"In generative AI, open-source adoption is a leading indicator of deal value along with high-end research talent and state-of-the-art model performance. Mistral rates high on all of these with a team of former Meta and DeepMind researchers.
"In open-source adoption, Mistral's large language model has become a top 10 text generation model on Hugging Face, surpassing 500,000 downloads. By comparison, MosaicML garnered a $1.3 billion valuation from Databricks and its LLM has only surpassed 100,000 downloads on the same platform.
"Mistral AI's models, including Mistral 7B and Mixtral 8x7B, differentiate themselves from OpenAI's GPT-4 and Anthropic's Claude 2 in cost and efficiency. Mistral AI is designed to be significantly more cost-effective, offering 10x cost savings over OpenAI's popular GPT-3.5 model.
"Mistral is working on similar architecture to OpenAI with a mixture-of-experts model, reaching performance parity with GPT-3.5 and surpassing Claude and Meta's Llama-2.
"Lead investor Andreessen Horowitz has been a prominent proponent of open-source AI and is likely to invest in the ecosystem around Mistral's models to create a challenger to OpenAI."
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Brendan Burke
Senior Emerging Technology Analyst
AI & Machine Learning |
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Our insights and data featured in the press:
- Some unlikely sectors of the healthcare industry stand to benefit from the growth of the weight-loss market—like value-based cardiovascular startups. [Business Insider]
- Early-stage startups are feeling more and more of the fundraising pain that initially hit the late stage. [TechCrunch]
- Secondary funds are the only type of private funds that have gathered more capital globally this year than last. [WSJ Pro]
- "The U.S. is positioning itself as a world leader in carbon capture." [GreenBiz]
- Three new tech unicorns were born in the UK this year. [City A.M.]
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 (* - report preview):
Market updates
Thematic research
Industry & tech research
Credit research
Coming next week (subject to change)
- 2024 US Venture Capital Outlook
- 2024 US Private Equity Outlook
- 2024 EMEA Private Capital Outlook
- 2024 Healthcare Outlook
- 2024 Enterprise Tech Outlook
- 2024 Consumer Tech Outlook
- 2024 Industrial Tech Outlook
- Emerging Sustainable Investment Opportunity: Indoor Farming
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Since yesterday, the PitchBook Platform added:
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10
VC valuations
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1673
People
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527
Companies
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31
Funds
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