Don't miss it! We're hosting a live discussion about PE and healthcare services on Thursday, Oct. 7, with industry veterans from McGuireWoods, The Bloom Organization, and Bailey Southwell & Co.
More details here |
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Introducing our new guide to the macro trends affecting private markets
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Roaring stock markets, rising private company valuations, and a buoyant dealmaking environment would have been bold predictions in March of last year.
But fast forward to today and that's exactly what we have seen.
The COVID-19 crisis has created fundamental shifts in the economic and financial market environment, influencing supply chains, accelerating tech adoption, and rewriting the playbook for real estate.
That is why, for the next iteration of our Quantitative Perspectives report series, we're broadening the lens and providing US market players and industry observers a macro view of each core private capital strategy.
Dubbed US Market Insights, this report delivers visuals of and commentary on the key data points we're observing that affect private markets—from private equity and venture capital to real estate, real assets, and debt markets.
The report includes information on macroeconomics, public financial markets, demographics, private markets, and our proprietary quantitative research.
In each edition, we will provide a spotlight section highlighting a particularly interesting storyline. This quarter we dive into private fund cash-flow data to analyze how the pandemic shock and subsequent recovery impacted the LP/GP experience in 2020.
After a brief dip in capital call and distribution rates, Q4 2020 saw a swift bounce back in activity. Most notably the attractive exit environment that ensued by the end of 2020 led to the best year on record for US venture fund realizations, with $71.7 billion in estimated distributions.
In addition to out-of-the-ordinary fund cash flow fluctuations, the current economic climate and enormous capital availability have led to many fascinating dynamics unforeseen early last year:
- The US venture market continues to create unicorns at a breakneck pace (see below), aided by a highly startup-friendly environment.
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| Click for a big version of our unicorn creation rate chart. |
- In PE, buyout multiples have resumed their climb after a lull in early 2020. But compression of yields in other areas leaves PE deal valuations within the decade's norm on a relative basis.
- Industrial real estate (distribution centers and warehouses) has been the clear winner in commercial property, buoyed by accelerated ecommerce adoption as the pandemic set in.
- Within real assets, infrastructure has usurped oil & gas as the leading strategy desired by LPs. The maturation of impact investing themes will be particularly noteworthy for the space in the coming years, as will rapid tech adoption.
- Finally, private debt funds have seen the influence of direct lending vehicles due to the pullback in traditional bank lending after the financial crisis. Direct lending fund NAV hit an all-time high of $120.4 billion as of the end of 2020.
These and an array of other interesting storylines are available in the full report.
Click to download our Q3 2021 Quantitative Perspectives: US Market Insights.
Feel free to reach out with any questions or feedback, or if you would like to discuss the research.
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What Europe's booming unicorn scene means for VC in the region
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Europe's unicorns are multiplying, and that rapid rise underscores the changing nature of VC on the continent.
Records have tumbled in the European VC ecosystem and unicorns have been a major driving force.
Since 2018, cumulative unicorn numbers in Europe have roughly tripled and the aggregate value has increased sixfold to €253.3 billion.
In the first half of the year, €17.9 billion in deal value was recorded across a record 61 unicorn deals.
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| The rise of unicorns has driven Europe's record year for VC. |
Deal sizes across all financing stages and quartiles were up and to the right in Q2. And as more capital has entered VC, larger and larger rounds are being completed, especially at the late stage where unicorns typically close deals.
Key takeaways from our new research:
- The chief unicorn-producing nations in Europe are the UK, France, and Germany, but unicorns are also beginning to appear in emerging ecosystems like Lithuania, Estonia, and the Netherlands.
- A healthy unicorn market enables more capital to trickle down into the ecosystem and accelerate the maturation of VC clusters, with founders becoming serial investors, early employees moving into VC-related roles, and employee shareholder schemes spreading capital across VC networks.
- Despite some concerns over enormous valuation step-ups, several unicorns are valued among the largest companies in their respective sectors.
Our new analyst note evaluates the factors driving the growth of Europe's most valuable VC-backed companies and their impact on the VC ecosystem.
Click to read our research: Unicorns Defining the New Norm
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Uncertainty Clouds Future for SPACs
We've reached the point in the SPAC cycle where IPOs are slowing and acquisitions are growing.
US SPAC mergers in Q3 are poised to set the highest levels we've ever seen in terms of deal count and value (which is good to see, as a bevy of failed deals would mean everyone loses).
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But the outlook going forward is very muddy:
- There's a disconnect in the number of targets available and the amount the blank-check vehicles in the market.
- SPAC aftermarket performance (both pre- and post-acquisition) has been lackluster.
- Regulatory scrutiny and legislative risks have perhaps never been higher.
Taken together, SPAC sentiment might be at a low point since this explosion began: |
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PE and VC dealmaking records are going to be smashed in the France & Benelux region this year.
It only took two quarters for the region to hit pre-pandemic activity in PE, and the emergence of highly valued VC-backed companies is developing in regional pockets like Amsterdam.
Still, some questions remain:
- Will Euronext Paris be able to establish itself as a prime destination for sought-after tech IPOs within the EU trading bloc?
- Why is PE fundraising set to slow down after Ardian's massive raise earlier this year?
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The augmented and virtual reality space has no doubt had its ups and downs.
Growth has been slow. Failures have been big. Devices are niche. And prices are still high.
But AR/VR innovation and investment is moving forward undeterred, as covered in our latest client-only Vertical Snapshot.
The report highlights key trends and technologies advancing these mixed reality experiences and also provides a new proprietary taxonomy of the landscape and visualizations that bring the space to life:
- Big Tech is playing a big role in the future of AR/VR, with Facebook, Apple, Google, Microsoft, Amazon all active in the industry.
- Privacy concerns will be a major headwind, especially as many tech giants have work to do to rebuild public trust.
- We expect adoption will accelerate later in the decade after hardware advances, content expands, and costs drop.
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Our senior analysts Nalin Patel and Dominick Mondesir covered how and why the European VC and PE environments are already setting records this year.
You can still get our analysis on the latest trends: watch the replay
- Oct 13: Analysts Hilary Wiek and Dylan Cox will explore findings from our recent Sustainable Investment Survey, which garnered record responses from around the globe. Register here.
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Information security analyst Brendan Burke weighs in on Akamai's $600 million acquisition of Tel Aviv-based network security company Guardicore:
"This acquisition carries the highest VC exit deal value we have tracked in the network security segment of information security since Cisco's $635 million acquisition of OpenDNS in 2015.
"Guardicore's software enables security policy enforcement within complex environments including web applications and public cloud assets, referred to as micro-segmentation.
"This deal continues a trend of acquisitions justified by zero trust strategies, which reorient enterprise networks toward a security posture of default denial of services.
"Platforms in this category typically assess the level of trust with each user in real-time to allow access to the network.
"Precedent acquisitions of zero trust startups have been made by Microsoft (RiskIQ) CrowdStrike (Preempt Security), Zscaler (Edgewise Networks and Smokescreen), Okta (ScaleFT), and HPE (Scytale).
"Security acquisitions have also been a priority for content delivery network operators, as evidenced by Fastly's acquisition of Signal Sciences, and we believe further investments will be required to improve zero trust strategies, web application protection, and API security."
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Brendan Burke
Senior Emerging Technology Analyst
Information Security |
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Our insights and data featured in the press:
- A look into the booming world of ultra-fast delivery: "There's increasing expectation for on-demand everything." [CNN]
- High-priced VC tech deals are raising fears of overheating. [FT]
- Half of the global VC money going into climate tech has been directed to electric transportation and supporting infrastructure. [Cipher]
- Swelling unicorn valuations in Europe raise questions over fate of future IPOs. [Citywire]
- Fierce competition in the middle market is leading GPs to shorten their processes and spend more upfront on due diligence. [PE Hub]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team. |
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Highlights from our other research content published over the past few weeks:
Market updates
Thematic research
Emerging Technology Research (free previews)
Coming next week (subject to change)
- PitchBook Benchmarks (as of Q1 2021)
- Real Estate Report
- Recycling Batteries to Recharge the Environment (sneak peek)
- UK SPAC Rule Changes and Impacts on Private Markets
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Since yesterday, the PitchBook Platform added:
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10
VC valuations
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1415
People
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399
Companies
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39
Funds
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