PitchBook News - Finding top tech opportunities

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The Research Pitch

March 2, 2024

February performance: The US markets have continued to rally, driven by bullishness on AI. Our report breaks down trends in the equity, debt, and commodities markets, tracking returns across a range of indexes. Read it here.

AI + infrastructure SaaS: One vertical ready to capitalize on the sea change AI is bringing—infrastructure SaaS. Our new tech research dives into this opportunity and more. Read a free preview.

Tech talks: On Monday, we'll sit down with Y Combinator's latest group of second-time founders and learn about how leading a startup is different the second time around. Register here.

Quantifying the top investment opportunities in tech

Investments in early-stage VC and emerging technologies are most often synonymous.

Determining which sectors are most attractive among the array of different innovative technologies is an important task for VC investors. It's also challenging, as investment trends can shift quickly with developments in existing technologies and the emergence of new ones.

While the evaluation of trends in emerging tech investing is inherently qualitative, a quantitative approach can provide additional unique and timely insights. Our new report, VC Emerging Opportunities, seeks to do just that.

This report compares early-stage investment opportunities in 10 key verticals covered by our tech analysts: agtech, AI & ML, climate tech, cybersecurity, fintech, foodtech, gaming, IoT, mobility tech, and SaaS.

To see a larger version, click to access the full report.

At the core of this quantitative analysis lies the PitchBook VC Exit Predictor, a machine learning model that predicts the probability that a startup will ultimately be acquired, go public, or not exit.

This tool serves as the foundation of our bottom-up analysis by allowing us to aggregate individual company predictions into a vertical-level assessment. Historically, there has been a strong relationship between the predicted exit rates across verticals and actual outcomes.

The SaaS vertical is a clear standout from our analysis. Early-stage SaaS companies covered by our analysts are expected to successfully exit at a 78.2% rate—a net 13.7% higher than the second-ranked vertical. This translates to an expected 5.5 percentage points of annualized outperformance compared to the average vertical.

Meanwhile, the outlook for climate tech has been steadily improving since 2017. The vertical has gone from the worst ranked to sixth during that time, influenced by an increase in patent share and top-ranked investor participation.

For more details, including deep dives into the underlying segments of each vertical, download the free report: VC Emerging Opportunities

Thanks,

Andrew Akers, CFA
Senior Quantitative Research Analyst

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Public PE fundraising was down in 2023, but new addressable markets loom large

This week, we released our US Public PE and GP Deal Roundup, which extracts key private equity and credit metrics from the quarterly results reported by Blackstone, KKR, Apollo, Carlyle, Ares, TPG, and Blue Owl.

We use these metrics to confirm what our data says about trends in deployment, realizations, and fundraising, and for clues as to how these industry leaders are driving GP franchise growth.

For the vast majority of GPs that aren't publicly traded, the report also provides useful insights on the value their firms might fetch in a control or minority transaction. A total of 994 precedent deals are tracked going back 10 years.

Key takeaways from this quarter's report:

• These seven firms delivered a median 2023 gross return of 9.8% for private equity investors, 16.4% for private credit investors, and a whopping 62.1% for public shareholders. The combined market cap of PE's "magnificent seven" is more than twice that of the top seven traditional asset managers ($404 billion vs. $177 billion).

• Deal flow involving GPs as targets (including GP stakes) ended the year on a high note with 27 announced in Q4. Deals for GPs moderated slightly at down 9.8% for all of 2023 but exploded out of the gates in 2024 with the largest-ever deal announced for an alts manager—BlackRock's $12.5 billion acquisition of Global Infrastructure Partners.

• Fundraising by the top seven public managers eased by 15.4% in 2023, the second straight year of decline, but rallied strongly in Q4 with a 60.7% increase from the prior quarter led by strength in credit and opportunistic real estate strategies.

• Perpetual capital now accounts for 42.4% of these public GPs' total AUM, after growing by 16.4% in 2023 while the rest of AUM declined by 1.6%.

While 2023 fundraising was down, $482 billion combined is still a massive number. At $3.4 trillion in total AUM, these seven firms have hit the law of large numbers and, as a result, they are exploring new addressable markets.

The TAM for the wealth channel alone is estimated to be as large as $80 trillion. And the asset-backed finance market, dominated by banks to this point but now hotly pursued by the private credit arms of these seven managers, is estimated to have a $7 trillion TAM.

Lastly, the US life insurance industry is estimated to have over $5.2 trillion in invested assets. Adding up these TAMs, the PE magnificent seven may have another big leg of growth ahead of them after all.

For more data and analysis, download our free US Public PE and GP Deal Roundup.

Enjoy the read!

Tim Clarke
Lead Analyst, Private Equity

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Industry & Tech Research

Specialized healthcare funds are having a moment as allocators demand greater sector focus from their GPs.

Propped up by the industry's complex regulatory frameworks and scientific rigor, healthcare specialist PE fundraising activity hit an all-time high in 2023.

Our Healthcare Funds Report offers LPs, GPs, and other market players a comprehensive view of the landscape:

read a free preview

AI and machine learning startups raised $90.9 billion across 7,200+ deals across 2023, both totals representing another year of annual declines.

And the activity would be a lot lower without big tech's involvement in GenAI deals, including Alphabet's $2 billion commitment to Anthropic.

Our new AI & Machine Learning Report dives into the data, identifies trends in key segments, and explores emerging opportunities in AI datacenters, domain-specific foundation models, and local LLMs:

read a free preview

Thematic Research

The Evolution of Embedded Insurance

Embedded insurance is a model wherein coverage is offered and managed by non-insurance platforms—like buying travel insurance when booking a flight.

These platforms and digital ecosystems make insurance accessible and convenient by integrating coverage directly into the buying or service process.

The maturing insurtech model is becoming integral to non-insurance platforms, and VCs have taken notice:

read the free research

Market Updates

PE in the Netherlands ended 2023 on a disappointing note, with both deal count and value dipping in Q4.

But VC saw an uptick in deal count while total value remained stable.

Our debut Netherlands Market Snapshot is the latest addition to our country snapshot series, with all the "need to know" stats for a range of stakeholders:

read the free report

In the News

Our insights and data featured in the press:

Europe remains hard to crack for North American GPs. [TechCrunch]

Just 35 VC-backed biotechs went public over the past two years, a significant drop compared to the 154 in 2020-2021. [WSJ]

"The venture circle of life is real." [Fortune]

Grid infrastructure tech has been a standout segment for VC clean energy activity. [Insider]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

More of our recent research (* - report preview):

Market updates

Global League Tables
European VC Valuations Report
US VC Valuations Report
Quantitative Perspectives: US Market Insights

Thematic research

Industry & tech research

Credit research

Coming next week (subject to change)

Global Private Market Fundraising Report
Germany Market Snapshot
Nordic Private Capital Breakdown
Biopharma Report*
Retail Fintech Report*
The 2024 Tech IPO Pipeline
VC Investment in Climate Technology

Thanks for reading! Feel free to email us any time with feedback, questions, or tips!

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PitchBook News - Finding top tech opportunities

Older messages

The evolution of embedded insurance

After AI—what comes next for VC?

How VC powers AI data centers

Our guide to specialized healthcare funds

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