PitchBook News - What could go wrong from here?

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The Research Pitch

December 11, 2021

We just launched a live version of our VC Dealmaking Indicator, which quantifies the relationship between startups and venture investors.

The Indicator leverages data from five different deal terms as well as the time between rounds, valuation step-ups, and percent of ownership acquired.

Check it out (and save it to your bookmarks!)

The US financial markets and PE industry are booming. What's next?

More than 18 months have passed since the world and financial markets were thrown into disarray as a result of the COVID-19 pandemic.

While life has still not fully returned to normal for most, in many ways, financial assets and economies have not only recovered but boomed in recent quarters.

While the party is going full swing right now, the cautious observer might ask: What could go wrong from here?

From a long-term perspective, we see a challenging period ahead for institutional investors as rising valuations across asset classes have further pushed down expected returns.

Recent forecasts suggest only PE and emerging market equity will return over the average US pension's target of 7% per annum over the next 10 years.

We believe this will motivate asset allocators to increase risk in portfolios by pushing further into alternatives, including PE, and directly adding leverage.

There are several short-term risks to the outlook that deserve attention, as well.

Rising inflation to its highest rate in 30 years and a tight labor market suggest we are late in the economic cycle, to which the Federal Reserve has responded by signaling the beginning of tighter monetary policy.

Historically, this has been a poor environment for risk assets as discount rates increase and real growth slows.

Data is seasonally adjusted and contains estimates for the four most recent quarters.

Meanwhile, over the past two quarters, PE deals and exits have been completed at their highest levels relative to trends in at least the last 20 years.

Although the current torrid pace is unsustainable, near-record-high dry powder and corporate cash balances and a red-hot IPO market—as well as an ample and cheap supply of debt financing—highlight a supportive backdrop for completing PE deals and exits.

For more analysis on what's next for financial markets and PE, click to download our free Quantitative Perspectives report: US PE: Recovery and Beyond

Please feel free to reach out with any feedback or questions.

Thanks,

Andrew Akers, CFA
Quantitative Research Analyst

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Thematic Research

Taking the Pulse of Medtech Innovation

Is medtech innovation dead?

Our analysts recently examined the VC funding gap within life sciences—exploring why biotech has overshadowed medtech (by a 3:1 basis in recent years), as well as what medtech's future holds.

Medtech's proportion of VC raised YTD is at an all-time low.

Innate differences in average time to market, the FDA regulatory approval process, average associated costs, clinical trial requirements, and platform versatility are key factors that influence life sciences investors' decisions when investing in medtech versus biotech:

read the free research

Emerging Tech Research

AGTECH: Venture funding for global agtech startups is absolutely flourishing.

The sector collectively raised $3.2 billion in Q3, setting what's by far an all-time record and driving annual deal value to $7.8 billion—already surpassing 2020's full-year total by more than 20%.

In our latest agtech research, we dive deeper into the data and also break down new emerging opportunities:

New biochemicals aim to reduce reliance on synthetic chemicals.

Soil measurement tools play a critical role in restoring soil health.

read an executive summary

In the News

Our insights and data featured in the press:

Why autonomous middle- and last-mile startups like Gatik, Nuro and TuSimple could eclipse robotaxi leaders Waymo and Cruise in commercializing at scale. [Reuters]

"The idea that 'every company will be a fintech company' a few years ago can now be rearticulated as 'every company will be a crypto company.'" [Quartz]

PE dealmaking is on pace to set massive new records this year. "If there is a headline for next year, it would probably be, 'the bigs keep getting bigger.'" [PE Hub]

Who's pouring money into supply chain tech? [WSJ]

In the last six months, private equity firms have been exiting companies at a higher rate than they have in at least 20 years. [Fortune]

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

ICYMI

Highlights from our other recent research:

Market updates

Thematic research

Emerging Technology Research

Coming next week (subject to change)

US PE Middle Market Report
ETR: Fintech
ETR: Retail Healthtech (sneak peek)
US Private Equity Outlook for 2022
European Private Capital Outlook for 2022
PitchBook's Fundraising Guide for GPs
Archetypal Investing in Climate Tech
VC in Southern Europe (sneak peek)

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

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PitchBook News - What could go wrong from here?

Older messages

A checkup on medtech innovation

Agtech startups reap record VC funding

VC valuation trends in seven charts

PE's recovery—and beyond

Parent-tech investments on the rise

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