PitchBook News - Zombie funds: the next wave

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The Daily Pitch: VC

October 14, 2024

Presented by Fidelity Private Shares^SM

In today's Daily Pitch, you'll find:

Our analysts examine how VC is fueling a recovery in enterprise SaaS M&A

As unique VC investors reach a decade low, the zombie fund horde swells

Our Q3 valuations data for public companies in the healthcare services sectors

Fundraising for global infrastructure vehicles remains weak, with $78 billion added this year

PE dealmaking in Japan with foreign capital participation is on track to reach a five-year high

Today's Top Stories

Startup investor ranks fall another 25%—can they come back to life?

(Julia Midkiff/PitchBook News)

More VC firms than ever are becoming zombies.

In 2023, some 15,303 unique investors participated in at least one VC deal in the US. But this year, that figure has dropped to 11,425, according to the Q3 2024 PitchBook-NVCA Venture Monitor.

The decline signals that a significant consolidation of the venture market is underway.

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VC-backed sales fuel a recovery in enterprise SaaS M&A

Corporate M&A is unexpectedly up in the enterprise SaaS sector, especially for deals involving VC-backed companies. Some 62% of enterprise SaaS M&A dealmaking in the first half of 2024 focused on such companies, compared to a recent historical average of 38%, according to our latest Emerging Tech Research.

Across the SaaS industry, deals are recovering, despite a dip in buyouts by PE firms—AuditBoard and BioCatch being the two notable exceptions. And while valuation metrics are being left out of more deals announcements, the increasing investor confidence in the space is clear.

read it now

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Vertical integration is in question for healthcare services

The direction of healthcare services giant CVS is unclear as the company considers separating its assets. Other public companies such as Walgreens and Walmart have receded their retail primary care offerings, and CVS could do the same with its value-based care clinic Oak Street Health. The splitting of these acquisitions puts into question the appeal of vertical integration in the healthcare services market, which has also seen a renewed appetite for IPOs.

Our Q3 2024 Healthcare Services Public Comp Sheet and Valuation Guide tracks stock performance, valuations, revenue growth, and EBITDA margins for key publicly traded companies.

see the preview

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PE still waiting for an infrastructure fundraising rebound

(Ezra Bailey/Getty Images)

Fundraising for global infrastructure vehicles has not recovered, with around $78 billion added so far this year.

However, a handful of mega-funds could close before the year is out. And growing LP demand for exposure to digital infrastructure and clean energy could drive more allocations.

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Since yesterday, the PitchBook Platform added:

306

People

96

Companies

27

Funds

See what our data software can do

The Daily Benchmark:
2017 Vintage Global Secondaries Funds

Median IRR

17.80%

Top Quartile IRR

20.56%

0.62x

Median DPI

Select top performers

Timber Bay Fund I

Secondary Overflow Fund III

Northleaf Secondary Partners II

*IRR: net of fees

16 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

AI startup CoreWeave raised $650 million in a credit facility led by JP Morgan, Goldman Sachs and Morgan Stanley.

Abridge, a startup using AI to transcribe doctor's appointments, is raising $250 million in a round led by Elad Gil and IVP, The Information reported.

Electric vehicle battery-maker Northvolt, based in Sweden, is in talks to raise €200 million, Reuters reported.

Automated accounting software developer Numeric raised a $28 million Series A led by Menlo Ventures.

COVU, a San Francisco-based startup developing AI software for insurance providers, raised $12.5 million in debt and equity as part of its Series A from investors including Benhamou Global Ventures, ManchesterStory and Markd.

PE Deals

The personal protective equipment unit of Honeywell is in talks to be acquired by Odyssey Investment Partners in a deal valuing the business at around $1.5 billion, Bloomberg reported.

Nasdaq-listed JFrog, which creates technology for software developers, is in talks to be taken private. Permira and Hellman & Friedman are among firms eyeing the company, Bloomberg reported.

CD&R beat a rival bid from a group led by Paris-based PAI Partners for French pharmaceutical company Sanofi's consumer health unit at a €15.5 billion valuation.

Exits & IPOs

The PGA National Resort will likely be sold by owner Brookfield Asset Management to real estate firm Henderson Park Capital in a transaction valuing the private golf club at around $425 million, Bloomberg reported.

Trustly Group, a Sweden-based digital payments company, is in talks to be sold by Nordic Capital, which could also push for an IPO, Bloomberg reported.

Bain Capital scrubbed the IPO plans for Japanese memory chip manufacturer Kioxia after investors gave the company a market value of 800 billion yen ($5.4 billion) firm, matching only half of Bain's target, Reuters reported.

Fundraising

New York-based Mill Point Capital closed its third PE lower-mid-market fund on $1.7 billion, The Wall Street Journal reported.

Siguler Guff raised over $580 million for its small-business credit opportunities fund.

Interlagos, a California-based VC firm founded by former SpaceX employees, is targeting $550 million for its first fund.

Montreal-based VC firm Diagram closed its ClimateTech Fund on a $80 million hard cap, beating its target of $60 million.

Investors

London-based Mountside Ventures launched its inaugural accelerator program for emerging VCs. It is the first program of its kind in Europe.

InfraRed Capital Partners agreed to manage the wind-down of UK investor Digital 9 Infrastructure, replacing Triple Point.

Chart of the Day

Source: PitchBook Analyst Note: Infrastructure Investors Capitalize on the Digital Revolution

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PitchBook News - Zombie funds: the next wave

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