Emerging industrial tech's outlook for 2024

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The Daily Pitch: VC

December 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:

Our analysts predict that continuation and tech funds will show strength in 2024

Defense tech led and ecommerce lagged in our 2023 battle of the VC verticals

What does 2024 hold for industrial technology?

An anticipated PE revival for software speaks to the sector's underlying profitability

Today's Top Stories

Industrial tech's promising outlook

What does 2024 hold for industrial tech? Our latest Emerging Technology Research looks ahead to what could be in store for verticals like agtech, clean energy and more.

Will drone delivery find mass adoption? Will robots be commonplace on every farm? Our Industrial Technology Outlook predicts what the future could hold, guided by PitchBook analysts.

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Leaders and laggards: How startup verticals fared in 2023

(Ratana21/Getty Images)

Did things go from bad to worse for startups in 2023?

Deal metrics in the most prominent VC sectors certainly make it look that way. We examined how 12 verticals fared in 2023 in terms of deal value, deal count and valuations.

These were the weakest and most resilient tech sectors.

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A message from BMO

Transaction Trends: Rising rates and borrower costs

In the current issue of Transaction Trends, BMO Sponsor Finance explores the impact of rising interest rates on revolver utilization and debt service costs for borrowers. It also takes a look at the early childhood education sector, including the attributes looked for when evaluating deals in this industry.

To learn more, download the full issue of Transaction Trends. You can also contact Patty Weitzman, BMO Commercial Bank's Head of Financial, at patricia.weitzman@bmo.com.

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PE trends to watch in 2024

This year has been characterized by a slowdown in dealmaking and fundraising. In our US Private Equity Outlook, PitchBook analysts share expectations for the PE market in 2024.

There is likely to be a substantial amount of new continuation funds as PE managers navigate a challenging exit landscape. Fundraising overall may slide in the face of slower distributions. There will be a silver lining, however. Technology-focused funds are expected to outperform their generalist peers as the sector is buoyed by its resilient fundamentals and improving company valuations.

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PE's software surge is just beginning

(Shulz/Getty Images)

A pickup in PE-backed software deals is in the cards for 2024. While nowhere near the exceptional levels seen in 2021 and 2022, total global software PE deal count and value exceeded pre-pandemic levels in 2023, and the anticipated revival in deal activity speaks to the sustained profitability of the underlying portfolio companies.

"Software businesses have really good economic fundamentals, and that's something that's still intact," explained PitchBook senior PE analyst Garrett Hinds.

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Navigating the ups, downs of 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. The NAV loan market is forecast to grow sixfold to $600 billion by 2030.

Our recent analyst note examines the growth of the NAV lending market and the pluses and minuses of such loans.

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Since yesterday, the PitchBook Platform added:

14

VC valuations

1994

People

686

Companies

36

Funds

See what our data software can do

The Daily Benchmark:
2017 Vintage Global Secondaries Funds

Median IRR

18.24%

Top Quartile IRR

22.88%

0.65x

Median DPI

Select top performers

Northleaf Secondary Partners II

Crown Global Secondaries IV

Lexington Middle Market Investors IV

*IRR: net of fees

17 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Lightmatter, a silicon photonics startup based in Boston, has raised a $155 million Series C2 led by GV and Viking Global Investors.

San Diego-based biotech startup Lassen Therapeutics has raised an $85 million Series B co-led by Frazier Life Sciences and Longitude Capital.

Harvey, a generative AI specialist for the legal industry, has raised an $80 million Series B co-led by Kleiner Perkins and solo investor Elad Gil.

SimSpace, a cybersecurity startup based in Boston, secured a $45 million investment led by L2 Point Management.

Halcyon has raised a $40 million Series B led by Bain Capital Ventures for its anti-ransomware platform.

Munich-based sensors startup Blickfeld has secured €7.5 million in a round led by New Future Capital and UVC Partners.

CareerFairy, a Zurich-based recruiting specialist, has received a €3.5 million investment led by Mediahuis.

PE Deals

The Carlyle Group and Insight Partners acquired Exiger, a risk management software developer, at a $1.2 billion valuation, The Wall Street Journal reported. Existing backer Carrick Capital Partners will keep a minority stake in the company.

Farfetch, an ecommerce retailer, agreed to a $500 million buyout offer from Coupang and Greenoaks. The company had reportedly been in bailout talks with Apollo Global Management earlier this week.

German railway operator Deutsche Bahn launched an auction to sell its logistics unit, DB Schenker.

EQT agreed to acquire Zeus Company, which makes fluoropolymer tubing for medical devices, from the Tourville family.

HIG Capital agreed to acquire the spine healthcare business of Colorado-based life sciences company ZimVie.

Saudi Arabia-based Jadwa Investment acquired restaurant operator Blackspoon Group via its Food & Beverage Opportunities Fund.

Audax Private Equity invested in Dobbs Tire & Auto Centers, a Missouri-based tire retailer and automotive aftermarket service company.

Fundraising

Oaktree Capital Management closed its Special Situations Fund III and related vehicles on roughly $3 billion.

Boston-based Clearhaven Partners raised over $580 million for its Fund II, The Wall Street Journal reported.

EIB Global, the overseas investment arm of the European Investment Bank, agreed to invest up to $40 million in the second fund of Amicus Capital, a Bangalore-based firm investing in Indian small and medium-sized enterprises.

Chart of the Day

Source: Q3 2023 European VC Valuations Report

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Emerging industrial tech's outlook for 2024

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