High VC valuations hide slow-growth woes

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The Daily Pitch: VC

November 7, 2024

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Today's Top Stories

High VC valuations mask slow growth

The venture market's LP problem is as bad as ever.

Some $4 trillion in value is locked up in VC-backed companies in the US alone. The overinflated valuations set in 2020 and 2021 burned many companies' willingness to exit, and investors' holding value of those stakes is teetering, according to PitchBook's Q3 2024 US VC Valuations Report, sponsored by Morgan Stanley at Work.

Frothy valuations for AI companies are overshadowing the reality of much of the industry: Valuation growth between funding rounds has slowed, startups are waiting longer to raise their next round, and the rates of flat and down rounds are at a decade high of 26.6%. Read the report.

Also...

👁️ Webster Equity Partners secured a $4.6 billion sale of specialty-care medical practice Retina Consultants of America to drug distributor Cencora. The hefty exit offers a glimmer of hope for investors struggling to offload healthcare provider assets. Read more.

📈 Our VC-backed IPO Index spiked in October, bringing the total gain this year to 44% and bolstering the argument that tech listings will pick up in the coming quarters. The PE-backed IPO index has climbed 33%. Explore the indexes.

Technology leads the M&A recovery charge

(Yuichiro Chino/Getty Images)

The technology sector is leading the recovery in M&A deal flow, as a rally in tech stocks and lower interest rates led more PE firms and corporate buyers to the negotiation table. While both have been active, PE's renewed appetite for large tech acquisitions served as part of the fuel for the strong comeback.

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VC Deals

Recognise Bank, a digital bank for small and medium-sized businesses, has raised £25 million (approximately $32.3 million) led by Parasol V27.

Fundcraft, a Luxembourg-based digital fund operations platform, closed an €11 million Series A led by 3VC and MiddleGame Ventures.

Ethereum data infrastructure startup Vlayer has raised a $10 million pre-seed round by Andreessen Horowitz's crypto startup accelerator, Credo Ventures and BlockTower.

Research Grid, a startup automating administrative tasks for clinical trials, has raised $6.48 million led by Fuel Ventures.

PE Deals

Elevate Patient Financial Solutions, which has backing from Frazier Healthcare Partners and The Edgewater Funds, has acquired NYX Health Eligibility Services in an effort to expand claim eligibility verification and enrollment capabilities for patients.

Dunes Point Capital has expanded its construction and engineering portfolio, acquiring Earl W. Johnston Roofing through its portfolio company Roofing Services Solutions.

PE-backed Concurrent Utility Services, a utility infrastructure company, has expanded its market position by acquiring Atlantic Utility Constructions.

Blackstone’s worker housing firm Avery Lodge is attracting prominent suitors including Apollo, Bain Capital and Brookfield Asset Management potentially valuing the company at $568 million, according to Bloomberg.

Sabel Systems Technology Solutions, a digital engineering specialist that caters to government and private sector clients, secured a majority investment from Sagewind Capital.

Advent International, Apollo, Clayton Dubilier & Rice, and PAI Partners are looking to potentially acquire consumer goods provider Reckitt Benckiser. Bloomberg reports the company is seeking a valuation of £6 billion ($7.7 billion).

Key trends shaping the future of Impact and ESG

Our fifth annual Sustainable Investment Survey reveals a compelling shift in the investment landscape: Despite the controversies surrounding ESG and Impact, practitioners are not just adapting but innovating. With insights from over 1,000 global respondents, including asset owners, VCs and family offices, this survey uncovers the strategies and motivations driving ESG and Impact practitioners. We also delve into the perspectives of those who have opted not to incorporate ESG into their investment programs, shedding light on their rationale and decisionmaking processes.

Our Sustainable Investment Survey is just one of many ESG and Impact research efforts we provide to help investors create a double bottom line of financial returns and positive social or environmental impact. PitchBook Research helps our customers navigate complexity across the entire investment cycle, including contextualizing sustained trends in evolving spaces such as ESG.

Download our report.

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Exits & IPOs

KKR is considering a partial exit of its controlling stake in JB Chemicals & Pharmaceuticals, an India-based pharmaceutical manufacturer, Bloomberg reported.

Vanguard, GIC, Public Investment Fund and Hassana have backed the Abu Dhabi IPO of Lulu Retail Holdings, a hypermarket operator in the country.

Peak6 Investments sold its minority stake in the holding company of UK Premier League team Wolverhampton Wanderers to Fosun Sports Group for about $50 million, Bloomberg reported.

Latvia-based custom printing service startups Printful and Printify have agreed to merge.

Fundraising

WovenEarth is targeting $300 million for its Fund II, a second climate VC fund-of-funds.

Villi Iltchev, a former Two Sigma Ventures senior partner, is looking to raise a $156 million debut fund for a new VC firm, Category Ventures, The Wall Street Journal reported.

French early-stage VC firm Axeleo Capital has held a €125 million first close for its €250 million Green Tech Industry I Fund.

Amsterdam-based Pymwymic has closed its second fund on €71.5 million to back agrifood startups.

Chart of the Day

Source: Q2 2024 Digital Health Report

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