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The Daily Pitch: VC

April 16, 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:

PE investors return to a value-creation strategy in the current higher-rate era

US startups may be facing an extinction event

Our Q1 valuations data for public companies in the enterprise SaaS and AI and machine learning sectors

Today's Top Stories

Does the US have too many startups?

(Orbon Alija/Getty Images)

The startup "mass extinction event" that doomsayers have predicted for two years is likely to ramp up in 2024. New founders facing a brutal funding environment may instead opt to bootstrap their growth.

Over 55,000 VC-backed companies are operating in the US right now, according to the latest PitchBook-NVCA Venture Monitor. Many of them are aggressively competing for VC funding in a slow landscape for deals.

Data on capital availability, seed deals and exits all point to one conclusion: The US has too many startups.

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Divestitures rise as PE firms seek value

For nearly a decade, PE investors sought growth over value—a strategy that was rewarded as long as multiples expanded. But higher borrowing costs have capped valuations and sent investors flocking to a strategy long out of vogue: divestitures.

PE-led acquisitions of corporate divestitures have risen steadily as a share of all buyouts from an all-time low of 5.7% in Q4 2021 to 12.6% in Q1 2024, our latest analyst note explains. Divested assets tend to be cheaper, allowing firms with a clear valuation strategy to win big at a time when financial leverage is less impactful.

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Combing for bright spots in gloomy Q1 for enterprise SaaS stocks

Public enterprise SaaS companies had a rough start to 2024, but areas of the data show nuance. The downward track of revenue growth has eased slightly, but pressure is expected to continue. Despite this, a few software subsectors showed growth: human resources, customer relationship management and business intelligence.

A few stocks from each subsegment with increased valuations bucked expectations. Weave, Informatica, HubSpot, SAP and Wix lead the way.

Our Q1 2024 Enterprise SaaS Public Comp Sheet and Valuation Guide tracks stock performance, revenue growth, valuations, and EBITDA margins for key publicly traded companies.

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AI stocks show split in tech giants vs. specialists, chips vs. self-driving cars

Tech giants dominated Q1 stock performance gains for the AI and machine learning sector. AI innovations did not boost specialist companies such as C3.ai, Snowflake and UiPath, even as it fueled overall earnings for Amazon, IBM, Meta, Microsoft, Oracle and SAP.

Further, fast-growing semiconductor companies had the best performance—Arm's shares grew 66%—while autonomous machines stocks came in at the bottom—Tesla's dropped 29%.

Our Q1 2024 Artificial Intelligence & Machine Learning Public Comp Sheet and Valuation Guide tracks stock performance, revenue growth, valuations, and EBITDA margins for key publicly traded companies.

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CVC Capital fires starting gun on $1.3B+ IPO

(NurPhoto/Getty Images)

CVC Capital Partners has finally published plans for its long-awaited IPO. Its expected €1.25 billion (about $1.33 billion) listing puts it in close contention with EQT to be the largest-ever IPO of a European PE firm.

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Since yesterday, the PitchBook Platform added:

9

VC valuations

1867

People

581

Companies

29

Funds

See what our data software can do

The Daily Benchmark:
2017 Vintage North American Real Assets Funds

Median IRR

10.13%

Top Quartile IRR

16.01%

0.47x

Median DPI

Select top performers

Twin Oaks Production Partners Fund

Ridgemont Equity Partners Energy Opportunity Fund

EIV Capital Fund III

*IRR: net of fees

36 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Singapore-based Carro, a used-car specialist, is in talks to raise $100 million from undisclosed investors, Bloomberg reported.

Indian social networking platform ShareChat has raised $49 million from Lightspeed, Temasek, Alkeon Capital and others.

Telehealth startup Equip, which specializes in treating eating disorders, has raised $35 million from undisclosed investors, according to an SEC filing.

Kode Labs, a Detroit-based autonomous building startup, has raised a $30 million Series B led by Maverix Private Equity.

Pula, a Swiss agricultural insurance provider, has raised a $20 million Series B led by BlueOrchard.

London-based legal-tech startup Lawhive has raised £9.5 million from GV and Episode 1 Ventures.

Don't miss our upcoming webinar

As interest rates begin to level out, the loan market is seeing renewed interest from previously risk-averse investors and issuers, as well as borrowers looking to refinance expensive debt. These conditions have helped the growth of both syndicated lenders and private credit, adding to the mounting competition between them. Key topics include:

Overall activity in the US leveraged loan market hit its highest levels in four years, though leveraged buyouts remain challenging.

As investors warmed to risk, riskier borrowers flocked to the market to refinance expensive debt.

A revitalized high-yield bond market sees a return of unsecured issuance—will this aggressive stance continue?

Register now to secure your spot.

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PE Deals

Clearlake Capital finalized a take-private offer to acquire Blackbaud's outstanding stock at $80 per share in an all-cash transaction. The software solutions company rejected Clearlake's previous bid of $71 per share in March 2024.

Warburg Pincus has invested in Xunyen A, an operator of four general hospitals in Vietnam.

Partners Group made a minority stake of $500 million in hospitality-focused real estate investor Trinity Investments.

Big 7 Ventures, which seeks to grow its industrial and construction portfolio, entered an agreement to acquire Bowtex, a manufacturer of survey stakes and grading products.

Exits & IPOs

Bowhead Specialty, an insurance underwriting specialist backed by PE firm Gallatin Point Capital, is planning a listing on the NYSE, according to an SEC filing.

The Carlyle Group is arranging a Q4 IPO of Hexaware Technologies, which could potentially value the Indian IT company at up to $6 billion, Bloomberg reported.

Fundraising

PE firm Citation is targeting $850 million for its inaugural private debt fund, with which it has taken an initial majority stake in food products manufacturer Cibo Vita, Bloomberg reported.

Biotech firm Regeneron is launching a venture arm, Regeneron Ventures, with a commitment of $500 million to invest in pharmaceutical startups.

Rosberg Ventures, founded by former Formula 1 racing champion Nico Rosberg, has launched with a $75 million fund-of-funds to invest in European startups.

Human Ventures raised $50 million for its second fund and plans to seek more, Fortune reported.

Chart of the Day

Source: H2 2023 Global Real Estate Report

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PitchBook News - Does US have too many startups?

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