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The Research Pitch |
January 13, 2024
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Humanoid robots: The future of startups specializing in robots that mimic humans may not be as far away as you think. Our new Emerging Space Brief provides an overview of the industry's current shape and potential. Read it here.
Europe outlook: What do last year's challenges mean for European private capital in 2024? On Wednesday, our EMEA analysts will recap 2023's biggest trends and discuss their forecasts for this year. Register here.
We're hiring: We're currently looking for a PE reporter and a go-to-market campaigns director for corporates, SPs, and emerging markets.
Public comps: Our latest guide on public company valuations highlights the gaming sector, featuring the latest trends in stock performance, revenue forecasts, and more—plus what it all means for private companies. Also, don't miss this week's editions for other verticals we cover:
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US PE is primed to bounce back in 2024—but exits will be key
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Earlier this week, we released our
2023 Annual US PE Breakdown, the latest in a report series that has always ranked among our most widely read publications.
This year, we took the opportunity to introduce three important enhancements: 1) our model for estimating the size of nondisclosed deals has been trained on new datasets; 2) our deal multiples were finetuned to leverage Morningstar's robust methodology for determining normalized EBITDA; and 3) we've introduced a "First Look" for readers who want to make use of the report's core data within one business day of the calendar year close, a practice we will continue every quarter going forward.
Collectively, we believe that these enhancements will further elevate our offering as a best-of-breed dataset on PE dealmaking and the larger M&A deal ecosystem.
Now on to the main show, the $3 trillion US PE industry:
US PE just completed its worst year since 2016 in combined deal activity. While PE buying managed to surpass the truncated volumes of 2020's pandemic-induced lockdown, selling activity fell to its lowest point in over a decade.
PE capital deployed in the US declined by a sobering 29%. Meanwhile, exit value fell by 26% and is now down 73% peak-to-trough. A snapback in exit activity is what's needed to spark a broad-based recovery in PE dealmaking, which is now entering its third year of decline.
The bar is certainly set low enough. While not as depressed as exits, buyside activity has reset to roughly half of 2021's peak, with platform deals slowing to a crawl. Add-ons and PE growth equity rounds have filled the void, but only partially so as those are smaller deal types.
Slower deployment amid robust fundraising means that dry powder continues to build, swelling by 9% in the last two years to $956 billion.
PE's end game at present is to grow portfolio companies back into the values of old.
With interest rates higher for longer, PE companies are needing to grow for longer. Across the 11,059 US companies currently held by PE owners, the median age has stretched to 4.2 years and those that exited were held for 6.4 years, a new all-time high.
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| We have many more valuation metrics in the full report. |
PE firms that can afford to hold out for better prices are doing so, but not all can. A maturity wall is fast approaching in the form of finite-term funds and loans. Meanwhile, a 5.5% base rate puts many LBOs at risk of not covering debt expense, and a Fed rate cut can't arrive soon enough.
The good news is that public trading multiples have pushed significantly higher than private M&A deal multiples. History shows that before long, a bull-whip effect kicks in to propel M&A multiples higher.
Additionally, a wide gap between public and private markets can help pry open a tight IPO window. That would be good for exits and carry over to M&A.
For these reasons, we believe PE is set to rebound in 2024; however, exits hold the key. Without a reboot in exits, we doubt that a durable recovery in dealmaking can take hold, and fundraising is likely to falter, as well.
To read the free report, download our
2023 Annual US PE Breakdown.
We plan to unpack these and other trends on our quarterly PE webinar that we are hosting on January 31. All are welcome to join.
Register here.
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Enjoy the read!
Tim Clarke
Lead Analyst, Private Equity |
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17 key takeaways from the 2024 J.P. Morgan Healthcare Conference
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Healthcare's premier conference brought an estimated 10,000 participants to San Francisco this week.
Our healthcare analyst team attended the private company presentations and spoke with investors, service providers, and both established and up-and-coming companies throughout the week.
Download our full recap on the key themes that emerged and why they matter for healthcare PE and VC investing:
Top trend: AI
1. AI—though not necessarily generative AI—was the headline theme of this year's conference.
2. Hype swirled around the potential of AI to transform drug discovery, but savvy investors are looking for proof of clinical impact over the long term. We believe AI will make drug development faster, not less expensive, primarily because of the substantial expense associated with software development and computational power.
3. Consumer-focused digital health companies jockeyed to position themselves as AI forward, while addressing provider burnout and improving explainability continued to dominate conversations around AI in healthcare IT.
Trends to watch
4. Three approaches are emerging for startups in the pharma-dominated obesity drugs market: improve on existing biology; develop treatments for GLP-1 side effects, such as muscle and bone density loss; or pursue entirely new approaches or modalities.
5. Partnerships are emerging as a key go-to-market strategy for digital point solutions and AI technologies. Headspace announced an intention to partner with digital providers in subspecialties such as PTSD, OCD, and SUD treatment, while Arcadia will partner with clinical-decision-support company Atropos.
6. Genomic sequencing is becoming more competitive as newer entrants muscle to take share from Illumina. Element Biosciences and Ultima Genomics have been competing on price, throughput, features, and quality.
7. Private companies like Levels, Nutrisense, Signos, and Veri have been further expanding the glucose monitoring market to nondiabetics. Dexcom launched a new glucose sensor, Stelo, for FDA approval and expects a summer launch of the device, geared for diabetics who do not regularly take insulin.
Headline deals and announcements
8. Alphabet's digital biology play Isomorphic Labs, which announced strategic collaborations with Novartis and Eli Lilly, dominated VC conversations. Investors expressed both optimism for the industry and concern that Big Tech's dominance could create a barrier to entry for disruptors.
9. Amazon further expanded its healthcare service by launching its Health Condition Programs in tandem with Omada Health. Amazon wants to be a front-door and fulfillment partner in healthcare delivery, but it remains unclear whether the company will prioritize a direct-to-consumer model or an employer-facing model.
10. General Catalyst did not announce its health system acquisition target, but it did lead a $95.5 million round in Harbor Health, an eight-location value-based primary care and multispecialty clinic in the Austin, Texas, area.
11. Boston Scientific made a splash with its $3.7 billion purchase of urinary and bowel neuromodulation device maker Axonics. Neuromodulation—nerve stimulation treatment—is getting major attention from medtech VCs.
12. As consumer mobility companies continue to expand their healthcare footprints, Uber Health and Socially Determined announced a collaboration to identify at-risk patients and provide them with nonemergency medical transportation and grocery and prescription delivery.
13. Mayo Clinic was ubiquitous in AI headlines, announcing an investment in remote diabetes monitoring company UpDoc, partnerships with K Health for cardiac monitoring and Cerebras for the development of a genomic LLM, and several in-house AI-related projects.
Market conditions
14. While VC biopharma deal activity remains muted, a series of large biotech IPOs, including Metagenomi, Praxis Precision Medicines, and Dyne Therapeutics, highlighted the backlog of late-stage biotechs needing to return capital to investors.
15. VC healthtech financing remains tight, and despite optimism around potential deal flow, there were no VC rounds over $100 million announced during the week of the conference—a sign that sluggish VC investment is set to continue through at least the first part of the year.
16. Late-stage digital health startups are holding out hope for a reopened IPO window. Many presenting companies emphasized paths to profitability and a desire to go public—though less-profitable startups could test the waters first, as those with strong balance sheets can afford to wait.
17. PE investor sentiment was muted. Although we heard of a few deals in progress, industry participants don't expect activity to reaccelerate materially until H2 2024. Some firms traditionally focused on healthcare providers are pivoting toward healthcare IT and pharma services.
For the full recap, download our Takeaways From the 2024 J.P. Morgan Healthcare Conference.
And don't miss our 2024 Healthcare Outlook.
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Best,
Rebecca Springer, Ph.D.
Lead Analyst, Healthcare
Email | LinkedIn |
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US VC has had a tough 12 months.
But despite a $72 billion drop in funding for the asset class compared to 2022, sunnier skies may be ahead, according to the new PitchBook-NVCA Venture Monitor.
VC deal count was still higher in Q4 than in any quarter pre-2020, while public markets finished up for the year.
The market is awash with dry powder, and many expect that economic uncertainty will lessen, bringing the venture ecosystem back to a more stable state: |
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The newest PitchBook Benchmarks have just gone live, with tons of fund performance metrics through Q2 2023—and preliminary data through Q3.
Our 10 editions feature IRR quantiles, pooled horizon returns, cash multiples, PMEs, and more, sliced by strategy, vintage year, and geography:
- Global
- Venture capital
- Private equity
- Private debt
- North America
- Europe
- Secondaries
- Funds of funds
- Real estate
- Real assets
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Vertical Opportunities in a Reopened IPO Window
VC's liquidity crunch has left the ecosystem in desperate need of an IPO comeback.
But some sectors, particularly those that have received significant capital investment, are facing disproportionate pressure to provide returns.
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Our analyst note dives into three segments—SaaS, AI and machine learning, and fintech—poised to benefit from a reopened window for public listings: |
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From last-mile delivery to freight, the world of mobility tech has undergone transformative shifts in the years since the early aughts.
Just as ridehailing companies turned the industry on its head in the 2010s, innovations to minimize jet fuel's carbon footprint and maximize EV battery effectiveness are set to boom as the world moves away from fossil fuels.
Our annual Mobility Tech Overview dives into what's ahead for 11 sectors, including advanced air mobility: |
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Other webinars coming up over the next month:
Jan. 24: Last year, the US broadly syndicated loan and private credit segments battled a challenging leveraged finance market—and each other. Where will opportunities lie in 2024? We'll discuss it all. Register here.
Feb. 15: Dwindling cash runways coupled with a stagnant exit environment have created intense challenges for the US VC ecosystem. Our quarterly Venture Monitor webinar will feature key highlights from the report and discuss trends investors need to be aware of. Register here.
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Our insights and data featured in the press:
- The median holding period of US PE investments exited has reached 6.4 years, the highest in more than a decade. [Bloomberg]
- AI startups attracted one out of every three VC dollars invested in the US last year. [Reuters]
- It's difficult to pinpoint a single reason why funding to women founders has dipped a bit. [TechCrunch+]
- UK venture capital funding cratered by almost half last year amid rising interest rates and an economic downturn. [City A.M.]
- Final numbers on crypto's brutal 2023. [Bloomberg]
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):
2024 Outlooks
Market updates
Thematic research
Industry & tech research
Credit research
Coming next week (subject to change)
- European PE Breakdown
- European Venture Report
- Healthtech Unicorns
- Voluntary Carbon Markets
- Emerging Spaces Brief: Carbon Nanotubes
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