PitchBook News - An optimistic outlook for US markets

VC distributions sink to 14-year low; SoftBank Vision Funds hesitate to invest; mezzanine outpaces other private credit strategies
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The Daily Pitch: VC
February 12, 2024
The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data
In today's Daily Pitch, you'll find:
 
Today's Top Stories  
Signs point to an improving climate for US private markets
The private markets were mired in a slower deal and exit environment last year. Deal volume of buyouts, growth equity and VC investments dropped by 47.8%, 44.9% and 61.8%, respectively, in Q4 from the high-water marks set in Q4 2021.

But encouraging economic indicators, improving credit conditions and the upturn in public market performance signal that private market investors may soon be out of the woods, according to our Q1 2024 Quantitative Perspectives: US Market Insights report.
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VC distributions sink to 14-year low
(PalleC/Getty Images)
Of all the problems that have besieged VC in recent years, arguably none is more acute than investors' difficulties converting their paper returns into cash.

By at least one measure, distributions haven't been this low since the days of the global financial crisis. In 2023, distributions to LPs as a percentage of mature funds' net asset values fell to the lowest point in nearly 14 years, according to PitchBook data.
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Vision Funds hold back even as gains lessen burden of losses
SoftBank's $4 billion gain in its Vision Funds last quarter reduced the lifetime loss of the portfolio to $2 billion. But as our dashboard shows, the once mighty Vision Funds remain hesitant to invest despite ambitions for AI.
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How VC can fight AI-generated disinformation
The information security industry is expanding to defend against disinformation ahead of the 2024 elections, according to our recent Emerging Tech Research. Despite a decline in VC funding for the sector since early 2022, opportunities still exist. Our analysts cover the key players and trends in the space.
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Mezzanine outperforms other private credit strategies
(Alan Thornton/Getty Images)
Within the private credit bucket, mezzanine debt funds boasted the highest returns, offering a rolling one-year IRR of 15.5% through Q2 2023. That compares with a one-year IRR of 9% for direct lending funds and 2.3% for funds targeting distressed or special situations strategies.
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The Daily Benchmark:
2019 Vintage Global PE Funds between $500M-$1B
Median IRR
17.69%
Top Quartile IRR
28.35%
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People  
Financial services company Plaid has appointed Jen Taylor, former chief product officer at Cloudflare, as its first president as it readies itself for a public listing.
 
VC Deals  
OpenAI co-founder and CEO Sam Altman is attempting to raise as much as $7 trillion from investors including the government of the United Arab Emirates for a semiconductor endeavor, The Wall Street Journal reported.

Nasdaq Private Market, which offers a secondary trading platform for the private markets, raised a $62.4 million Series B led by Nasdaq.

New York's Ezra secured a $21 million investment from Healthier Capital. The company's AI-powered MRI scans are used in early cancer detection.

UK-based Lilli raised £8.2 million led by West Hill Capital for its AI-powered patient monitoring app.

Canada's Code, a micropayments startup, raised a $6.5 million seed round led by M13 and Union Square Ventures.
 
Don't miss our upcoming webinar
Despite poor public stock performance last year, our analysts say the economy performed better than anticipated, and we can anticipate a steadier trickle of IPOs in 2024 if interest rates begin to decrease. Still, intensifying hurdles like dwindling cash runways and access to capital are driving startups and investors to approach 2024 with even greater caution.

In partnership with the National Venture Capital Association (NVCA) and sponsored by J.P. Morgan, Dentons, and Deloitte, this webinar will highlight key findings from the Q4 2023 PitchBook-NVCA Venture Monitor and what investors should be aware of in 2024. Key topics include:
  • Later-stage companies, many of which should have exited by now, have been impacted the most by the significant slowing of deal activity YoY across all stages.

  • Despite some high-profile IPOs, we are far from an IPO comeback, leaving many companies at the mercy of an investor-friendly fundraising market.

  • Nontraditional investors have continued to reduce their VC appetite. Given the current interest rate environment, we don't expect many of them to return for quite some time.
Register now to secure your spot.
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PE Deals  
Hillhouse Investment acquired Singapore-based corporate services specialist InCorp Global from TA Associates.

Marcelo Claure's Claure Group bought a stake of less than 5% in the general partnership and management company of Hedosophia, a tech-focused investment firm, Bloomberg reported.

Linden Capital Partners partnered with the Ontario Teachers' Pension Plan to launch an investment platform for clinical research companies.

The Carlyle Group has exited its investment in UK video game publisher Jagex, which is primarily known for its RuneScape titles, to CVC Capital Partners and Haveli Investments.
 
Exits & IPOs  
Shares for Bain Capital-backed drug developer Kyverna Therapeutics soared as much as 59% on its trading debut Thursday after raising $319 million via its US IPO.
 
Fundraising  
Amsterdam-based VC firm Orient Growth Ventures has closed its second fund on $90 million. The vehicle will target venture funds and direct investments in India and Southeast Asia.

Warburg Pincus plans to raise about $2.5 billion for its third fund focused on financial services companies, Bloomberg reported.
 
Chart of the Day  
Source: 2023 Annual US VC Valuations Report
 
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