PitchBook News - Wait, VC valuations are how high?

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The Research Pitch

November 13, 2021

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Lead Analyst, Emerging Technology

Analyst, Emerging Technology (SaaS, Enterprise Software)

Associate Quantitative Research Analyst

Love for VC returns keeps lifting valuations higher and higher

Lofty valuations have been a topic of discussion within the venture industry for several years.

There was even supposed to be a unicorn winter a few years ago, after a then-high number of companies reached a $1 billion valuation.

If there was such a winter, it was short, and the US VC industry now finds itself in the middle of a Death Valley summer, because 2021 valuations are… well… hot.

The top-quartile late-stage valuation threshold through Q3 was $500 million—double the full-year figure for 2020; the average late-stage valuation has surpassed three-quarters of a billion dollars.

How did we get here?

Well, venture capital has recorded the highest returns across all private market strategies over the past few years, which has driven interest in VC to new heights.

Valuations, naturally, have also been affected—and the current market is the result of a perfect storm.

Public markets are continuing to trade at all-time highs, so comparable private companies and sectors are seeing upward pressure on valuations.

Private capital availability is also unbelievably high, with dry powder at record levels, and large, nontraditional investors like hedge funds and mutual funds are pushing further into private markets.

Also, venture returns are driving more and more capital back to investors, and everyone wants a piece: more than a half-trillion dollars in US VC exit value has been generated this year through Q3.

But these aren't the only factors.

VC-backed companies are proving they can generate hyperfast growth, challenging incumbents quicker and earning market share sooner. As such, investors have been more willing to pay up.

Our new report takes a deep look at why valuations continue to surge at every stage and how the current market trends have impacted deal terms and liquidity.

Click to download our Q3 US VC Valuations Report.

Feel free to reach out with any questions or feedback, or if you would like to discuss the research.

Best,

Kyle Stanford, CAIA
Senior Analyst, Venture Capital

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The good times get even better for the giants of private equity

The big five public PE firms—Blackstone, KKR, The Carlyle Group, Apollo Global Management, and Ares Management—registered another stellar quarter in Q3 2021.

Everything appears to be going right for these firms, as the pace of capital deployment and monetizations have quickened and driven better-than-expected fund performance and fundraising figures.

Assets under management continue to skyrocket as the biggest firms take a larger share of wallet with LPs by seeking healthy step-ups and launching new products.

To that end, M&A drove an outsized proportion of the announced expansion; acquiring secondaries managers was particularly in vogue.

Growing beyond the traditional institutional LP also remained a theme, with many firms laser-focused on perpetual capital products intended for retail and insurance allocation dollars.

For a more nuanced look at what these industry leaders are doing and how their financial performance compares, please download our latest research on public PE earnings.

As always, I'm happy to discuss this topic offline should any questions or thoughts arise.

Best regards,

Wylie Fernyhough
Senior Analyst, Private Equity

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Emerging Tech Research

FOODTECH—Two trends continue to fuel the record funding of foodtech startups:

The continued desire for on-demand everything and the steady push for increasing sustainability across food and packaging waste.

The result this year? Nearly $29 billion in capital invested across the global foodtech industry through Q3, already up 85% over last year's total.

Our sector research breaks it all down and identifies some emerging investment opportunities:

Fungi is the next wonder ingredient, promising to improve taste, texture, and the nutritional profile of alt-proteins.

Online grocers appeal to consumers through sustainability improvements.

read an executive summary

ENTERPRISE HEALTHTECH—Hitting a low point since 2015, enterprise healthtech startups closed just 83 VC deals in Q3.

Deal value, however, remained high at $4.7 billion, and this year is also rewriting the record books for annual exit value at $28 billion—two indications that the industry is maturing.

But even as more attention goes toward established "winners" in the space, our analysts have identified early opportunities for investors:

Increased employer focus on virtual and preventative care will be a boon for the corporate distribution segment.

Decentralized clinical trials are becoming more feasible thanks to new, innovative tech.

read an executive summary

Thematic Research

Venture Debt in Life Sciences

Low revenue? No revenue?

That hasn't been a roadblock for life sciences startups when it comes to securing venture debt.

And while much of this growing financing strategy has centered on the tech world, the life sciences market quietly set new annual records in 2020 with 535 loans at a combined value of $4.5 billion.

What makes the sector attractive to lenders? How do shorter IPO timelines and the value of patents come into play?

read the free research note

In the News

PitchBook's Asad Hussain discusses Rivian and EVs.

Our insights and data featured in the press:

What Rivian's record IPO means for the electric vehicle industry. [Cheddar]

But despite Rivian's soaring debut… "Let's not put the cart before the horse. I think the real challenge is going to be ramping up that manufacturing capacity." [NPR]

Covid helped kickstart the age of cargo drones and air taxis. [Quartz]

American venture capitalists are investing record sums in European startups. [Axios]

A (slight) pullback in late-stage VC valuations. [Fortune]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

Highlights from our other research published this quarter:

Market updates

Thematic research

Emerging Technology Research (free previews)

Coming next week (subject to change)

Private Fund Strategies Report
European VC Valuations Report (sneak peek)
Emerging Tech Indicator
ETR: Insurtech
ETR: AI & Machine Learning
Petershill Partners PLC: Analyzing the public company and its implications
Beverage Robots: Automation increasing profit margins in foodservice

Thanks for reading! Feel free to email us any time with feedback, questions or tips!

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PitchBook News - Wait, VC valuations are how high?

Older messages

Venture debt rises in life sciences

Taking the pulse of VC healthtech

What are your business goals?

VC valuations surge higher

Why VCs are still hungry for foodtech

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