VC returns spur nontraditional investors

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The Daily Pitch: VC

July 19, 2021

Like our newsletter? The data comes from the PitchBook Platform — our data software for VC, PE and M&A

Today's Top Stories

PE's recovery boom continues in Europe

European PE is still riding a wave of deal activity as the asset class posts its second-highest quarterly numbers on record, thanks—in part—to growing vaccination rates and strong debt markets for leveraged buyouts.

PitchBook's Q2 2021 European PE Breakdown shows that while PE deal activity for the quarter has slowed from the first three months of the year, the region still saw nearly €170 billion invested across 1,800 deals, year-over-year increases of 161% and 137%, respectively. Other report highlights include:

Insights on how an appetite for attractive PE valuations among sellers, and the €250 billion mountain of PE dry powder, have increased GPs' access to high-value assets.

The latest analysis of the ongoing healthy rebound of PE exit activity, which follows the 2020 slowdown driven by COVID-19.

A look at the secular fundraising trends that have seen over €59 billion amassed across 64 funds in the first half of the year, driven partly by the public market volatility and zero-rates backdrop that have bolstered LP confidence in alternatives.

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Why nontraditional investors are expected to continue their push into venture

(SEAN GLADWELL/Getty Images)

Nontraditional investors have ramped up their involvement in VC over the last several years. We estimate that NTIs—a group including hedge funds, PE firms and corporate VCs—have between $250 billion and $350 billion to invest in the global venture market, effectively doubling the capital available to VC-backed companies worldwide.

Our recent analyst note shows how venture investing has generated strong returns for NTIs and explains why this group is expected to continue that strategy. Among the takeaways:

In 2020, nontraditional venture investors not only participated in 77% of the US market's deal value but were also beneficiaries of around 95% ($285 billion) of the year's total exit value.

Annualized returns from NTI investment in Series B through Series E rounds have ranged between 10% and 15%. While these returns may not satisfy traditional venture firms' expectations, NTIs have a different risk profile and can justify relatively lower returns.

Although nontraditional investors are generally not set up to invest in asset classes with long periods of illiquidity, they tend to back VC-backed companies during the later stages. This results in a median hold time of only 3.7 years, far less time than it typically takes to achieve an exit.

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A message from Will Reed

A look inside the top 50 seed-stage companies to work for in 2021

More than 500 tech companies were seeded between June 2020 and June 2021, but not all are created equal. Growing an unknown startup amid a global talent shortage requires a new level of commitment to mission, as well as a long-term vision for culture. As proven by the "Great Resignation," work is no longer just about paying the bills.

Visit Will Reed's Top 50 Seed-Stage Companies to Work for in 2021 to see which companies and founders are shaping the new workplace.

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Skyrocketing valuations for grocery delivery startups

(Julia Midkiff/PitchBook News)

A growing reliance on delivery services caused by the past year of lockdowns has led to an urban industry of rapid delivery e-grocers that are now competing for investment and market share.

Grocery delivery companies like Getir and Gopuff have seen their valuations skyrocket this year as they've hauled in mega-rounds of $100 million or more.

With the influx of VC money into the space, many markets are reaching the point of saturation. "It's still very early days, but in the long-term, the market probably can't maintain as many players as there are right now," said Steve O'Hear, VP of strategy at London e-grocer Zapp.

Recommended Reads

WhatsApp content moderators have the job of reviewing the worst material on the internet. Now a group of workers is claiming that they suffer pay discrimination too. [Time]

A detailed breakdown of SPAC deals, from their questionable start to their stakeholders to a return of the skepticism surrounding such deals. [Harvard Business Review]

For years, many have been urged to store their emails, texts, photos and other data online. But now the race is on to stop memories from being deleted. [BBC]

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Quick Takes


	The Daily Benchmark
	2017 Vintage European Real Assets Funds
	A message from RBC Capital Markets
	What's the new focus for M&A?
	VC Deals
	Carta eyes $7.4B valuation in Silver Lake-led round
	Shopmonkey picks up $75M
	Halla hauls in $4.5M
	Exits & IPOs
	ServiceMax inks SPAC merger
	SoftBank grabs $75M stake in Bullish SPAC deal
	India's Paytm files for IPO

The Daily Benchmark

2017 Vintage European Real Assets Funds

Median IRR

9.38%

Top Quartile IRR Hurdle Rate

13.33%

1.08x

Median TVPI

Select top performers

Tages Helios

Actis Energy 4

Ardian Secondary Fund VII Infrastructure

*IRR: net of fees

18 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

A message from RBC Capital Markets

What's the new focus for M&A?

With confidence on the rise and M&A activity reaching new highs since the markets reopened in 2020, the unusual patterns of the last 12 to 16 months will soon be behind us. An acceleration of key trends, coupled with strong market conditions, has led to a plethora of transaction opportunities across industries.

What's driving M&A today and what's the outlook moving forward? How are private capital and SPACs responding to current conditions? RBC Capital Markets' M&A experts explore how private capital may be deployed—and where these funds are looking for bargains coming out of the pandemic.

See what's ahead for M&A, with insights on key trends and opportunities from RBC's experts.

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VC Deals

Carta eyes $7.4B valuation in Silver Lake-led round

Fintech specialist Carta is wrapping up a funding round led by Silver Lake that could value the company at $7.4 billion and bring in $500 million to $600 million, The Information reported. Carta makes software for investors and businesses for tasks like cap tables and portfolios. The company was valued at $3.2 billion earlier this year, according to PitchBook data.

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Shopmonkey picks up $75M

Shopmonkey, a developer of SaaS software for auto repair shops, has raised a $75 million Series C led by existing investors Bessemer Venture Partners and Index Ventures. Headline, I2BF and Iconiq Growth also participated in the round. The company expects funding will be used for further innovation and growth of the company's products amid increasing car usage post-pandemic.

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Halla hauls in $4.5M

Halla has raised $4.5 million in Series A1 financing led by Food Retail Ventures, TechCrunch reported. The New York-based company is the developer of an AI-based personalized recommendations platform that uses human behavior to help shoppers find the grocery items they want.

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Exits & IPOs

ServiceMax inks SPAC merger

Asset-centric software provider ServiceMax has agreed to go public through a reverse merger with special-purpose acquisition company Pathfinder Acquisition Corporation. The transaction sets ServiceMax's valuation at some $1.4 billion and is expected to raise around $335 million of gross proceeds for the combined company. ServiceMax backers Silver Lake, Salesforce Ventures and GE will each keep their full equity in the company.

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SoftBank grabs $75M stake in Bullish SPAC deal

SoftBank's tech stock trading arm, SB Northstar, is investing $75 million in crypto company Bullish as part of the $300 million PIPE that accompanied a SPAC merger announced last week, Bloomberg reported. Bullish, which was spun out of Peter Thiel-backed Block.One in May, was valued at $9 billion in the deal with Far Peak Acquisition. Bullish plans to launch a cryptocurrency exchange later this year.

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India's Paytm files for IPO

Paytm, an Indian digital payments provider, has filed to raise 166 billion rupees (around $2.2 billion) in an IPO. The company, which has been backed by investors including SoftBank, Ant Group and Berkshire Hathaway, was valued at $16.7 billion in 2019, according to a PitchBook estimate.

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