Will VC recovery bring staffing recovery?

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The Weekend Pitch

July 14, 2024

Presented by Masterworks

(Megan Woodard/PitchBook News)

The venture capital market has already bottomed out, with signs that a gradual rebound is underway—but VC teams are still thinning out.

I'm Andrew Woodman and this is The Weekend Pitch. You can reach me at andrew.woodman@pitchbook.com or on Twitter @adwoodman.

On the positive, valuations are in recovery and total deal value is at an eight-quarter high, hitting $55.6 billion, according to the Q2 2024 PitchBook-NVCA Venture Monitor released Thursday. At the time of writing, our European edition of the report has not yet been released; however, the Q1 2024 European Venture Report showed similar signs of recovery.

However, firms are still trimming the fat, and high levels of turnover reported in 2023 have continued in 2024, on both sides of the Atlantic Ocean. As recently as last week, Index Ventures cut five out of nine of its investors in San Francisco, Business Insider reported. Not long before that, we reported that UK-based Octopus Ventures cut 16% of its investment team.

Much of these dwindling headcounts can be put down to cyclical factors. Investment firms facing a difficult exit and fundraising environment must cut their cloth accordingly.

But there are also structural changes to consider: Technology is changing the way VCs work and putting pressure on existing business models. In a new era of generative AI, could slimmed-down investment teams become the new normal?

Trivia

In the first half of 2024, the level of private equity dealmaking in the US ______

A) increased
b) decreased
C) stayed roughly the same

Find your answer at the bottom of The Weekend Pitch!

A muddled reality sets in for VC

(We Are/Getty Images)

At a glance, Q2's venture numbers look promising: With $55.6 billion invested, deal value rose to an eight-quarter high. But $14.6 billion of that capital was concentrated in just two companies—CoreWeave and xAI. For everyone else, fundraising is a challenge as LPs remain reluctant to double down on the asset class, according to the Q2 2024 PitchBook-NVCA Venture Monitor, sponsored by J.P. Morgan, Dentons, Deloitte and Juniper Square.

Takeaways include:

The market has bottomed out and valuations are rebounding—but those up rounds are concentrated within a small cohort of high-growth startups, while middle-of-the-road startups are struggling.

Sluggish stock performance for companies outside of the Magnificent 7 is dampening the exit outlook, further entrenching LPs' caution.

As distribution-to-AUM rates continue to worsen, more VCs are taking to the secondaries market to secure much-needed liquidity.

Share:

Tell us what you think of sustainable investing and ESG

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We've launched our revamped 2024 Sustainable Investment Survey to take a closer look at what investors are doing and why—including the current events influencing sustainable investing practices.

We would also like to hear what the term "ESG" means to private market participants and whether concessionary returns are implicit in impact investing. We invite you to share your firm's approach.

All who complete the roughly 10-minute survey will have the opportunity to enter a prize drawing, and for each completion, PitchBook will donate to World Central Kitchen. Take the survey here.

How big is PE's slice of the healthcare pie?

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Private equity owns less than 4% of US healthcare providers by revenue—a smaller share than many would assume given how the industry looms over public debates.

In her latest note on the sector, PitchBook lead healthcare analyst Rebecca Springer lays out the scope of PE investment in healthcare providers to inform future discussion.

Share:

Quote/Unquote

“A thriving tech ecosystem is crucial to reignite growth in the UK.”

—Suranga Chandratillake, a London-based general partner at Balderton Capital, saying he was encouraged by the Labour Party’s plans to spur investment in the UK.

Stay tuned

Keep an eye out for these insights and research reports coming out this week:

European PE Breakdown
European Venture Report
Comp sheets: AI & ML, Enterprise Fintech, Healthcare Services and more!
Half-year update to the 2024 US Private Equity Outlook
Enterprise SaaS M&A Review

Trivia

Answer: A)

US PE dealmaking increased 12% YoY in H1. Data in the latest US PE Breakdown, sponsored by Weaver, heralds the start of a recovery for dealmakers.

This edition of The Weekend Pitch was written by Andrew Woodman and James Thorne. It was edited by Clarinda Simpson and Ron Prichard.

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Will VC recovery bring staffing recovery?

Trivia

A muddled reality sets in for VC

Tell us what you think of sustainable investing and ESG

How big is PE's slice of the healthcare pie?

Quote/Unquote

Stay tuned

Trivia

Older messages

AI is a bandage, not VC's cure

A fresh look at fund performance

VC puts a premium on experience

GPs chip away at PE's exit logjam

How much of US healthcare does PE really own?

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