PitchBook News - Our best research of 2021

Featuring: Tracking impact funds by reason and region; Agtech and sustainability; Introducing the VC Dealmaking Indicator; Sports and private equity.
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The Research Pitch
January 1, 2022
Happy new year!

First off, we want to say thanks for helping PitchBook's Institutional Research Group have a record-breaking year for readership. We exceeded all of our goals in 2021 and have even bigger targets for 2022.

Also, this research-focused Saturday newsletter launched last March and has received tremendous support from you all, which we greatly appreciate.

For our debut newsletter of 2022, we asked our analysts to highlight their favorite research from last year, so please enjoy a recap of some of our best work.

As always, we welcome your questions and feedback. You can reach our whole team by emailing us at pbinstitutionalresearch@pitchbook.com.
Impact Funds by Reason and Region

By Hilary Wiek, CFA, CAIA, Lead Analyst, Fund Strategies & Performance

After over a year of work, we created a new dataset by tagging private market impact funds not only as impact funds but with a second level of tagging for the types of impact they hope to provide.

It's our most detailed analysis yet of where money has been flowing in the impact space.
 
Click to learn how we use the IRIS+ framework in our data.

We partnered with the Global Impact Investing Network (GIIN) to use their IRIS+ framework to tag approximately 1,300 impact funds into 16 categories.

One key takeaway from the research note: areas that attract more investment are linked to where there are perceived to be profitable, scalable opportunities:

Download the free research
 
Transformative Agtech and Sustainability Challenges

By Alex Frederick, Senior Emerging Tech Analyst

2021 saw an increased focus on the role of agriculture as both a contributor to climate change and a tool to help mitigate its effects.

For example, many people learned for the first time that forests play a critical role in absorbing atmospheric carbon and that converting forests into farmland destroys an essential part of lowering GHG emissions.
 
Click for a larger version of our visual agtech overview.

We also learned how agricultural activities contribute 42% of methane emissions and 75% of nitrous oxide emissions, primarily from livestock and fertilizer use.

This research note explores key environmental threats caused by agricultural activities and also the innovative technologies addressing those challenges:

Download the free research
 
Quantitative Perspectives: US Market Insights

By Zane Carmean, CFA, Quantitative Research Analyst

How do macro trends impact private markets?

Answering that question was the impetus to producing what might be our most wide-ranging report ever.
 
Click for a big version of our unicorn creation rate chart.

Featuring 75 charts across 70 pages, the report offers a bird's eye view of alternative markets utilizing PitchBook data as well as other datasets that speak to trends influencing our core industries.

Topics include fund cash flows, how LPs think about inflationary pressure and yield compression, impact investing, debt markets and their relationship to high-yield bonds, and much more:

Download the free research
 
Introducing the VC Dealmaking Indicator

By Alex Warfel, Quantitative Data Analyst

The VC environment tends to ebb and flow between startup and investor friendliness.

To put a figure on that relationship, we developed a method for quantifying who has more negotiating power at a given point—startups or investors—using our deal term data to measure inputs such as supply and demand of capital, board voting rights, and valuation step-ups.

(Note: We've also launched a live version of our VC Dealmaking Indicator.)

Currently, both the early and late stages are quite startup-friendly. Historically, we see that early-stage deals tend to be more startup-friendly when compared to late-stage deals:

Download the free research
 
Emerging Opportunities: Real-World Evidence

By Kaia Colban, Emerging Tech Analyst

The proliferation of mobile health apps, biometric trackers, and remote patient-monitoring devices has given rise to large quantities of healthcare data.

This can provide real-world evidence for use across the healthcare ecosystem in clinical trials, evaluating treatment outcomes, and monitoring safety after medical procedures.
 
Click for a larger version of our graphic on real-world data

Opportunities in this area include building proprietary datasets, developing analytical tools, and creating data standardization and management solutions.

This research note examines the regulatory landscape, use cases, and more in the emerging world of real-world evidence:

Download the free version
 
Getting to the Root of IoT/OT Security

By Brendan Burke, Senior Emerging Tech Analyst

The category of IoT/OT security shows that emerging problems can shift the startup ecosystem as much as emerging technology.

Industrial hardware stood out as a cybersecurity vulnerability in 2021 as sophisticated threat actors inundated companies with ransomware attacks.

As a result, private companies seized the opportunity to scale, strategic acquirers prioritized device security, and VC investors realized the need to familiarize themselves with the opportunity.

This research note identified the problem spaces that drove six mega-deals in the back half of 2021 and have positioned the category to achieve multiple mega-exits over $1 billion in 2022:

Download the free research
 
Biotech Went to Work as the World Stayed Home

By Joshua Chao, Ph.D., Senior VC Analyst

Focused on how the biotech & pharma industry was faring at the time, this research note was originally published around the one-year mark of the pandemic.

It features analysis into a lot of the trends we were seeing as well as some sector-specific knowledge.

Furthermore, we provide five key drivers within the biotech industry and offer an outlook on how the sector will look on the other side of the pandemic:

Download the free research
 
Sports Teams and Private Equity Pair Up

By Wylie Fernyhough, Lead PE Analyst

Everyone knows about sports, but not everyone knows about the economics behind these (often multibillion-dollar) teams.

Breaking ground for PE research into the sports arena, this note looks across all sports leagues and the biggest investors embracing the investment thesis.
 
Click for more on sports teams selling stakes to sponsors.

The PE and sports connection isn't going away, so this research can be a resource in learning more about how investors think about these deals:

Download the free research
 
Established PE Healthcare Provider Plays

By Rebecca Springer, Ph.D., PE Analyst

Behavioral health, dentistry, dermatology, and vision together account for around half of all PE healthcare provider buyouts since 2016.

With these four areas in the spotlight, this research note dives into strategic considerations for each segment, including regulatory and reimbursement trends, sub-strategy emergence, inorganic vs. organic growth, and exit opportunities.

It also includes new data and insight into platform growth patterns and consolidation dynamics:

(Note: Stay tuned in 2022 for the launch of our twice-annual PE healthcare sector report, covering deals, exits, fundraising, and performance across healthcare services, IT, pharma & bio, and more!)

Download the free research
 
Introducing the Private Equity Barometer

By Andrew Akers, CFA, Quantitative Research Analyst

A complex set of economic and market factors affect private equity returns.

That may be easy to overlook when returns are boiled down to a single number, yet LPs must consider these influences when building portfolios and managing risk.

To get deeper insight into the return environment, we developed our Private Equity Barometer to identify and quantify the factors driving aggregate returns.
 
Click to read about how we score the PE return environment.

(Note: We've also launched a live version of the Private Equity Barometer.)

One key takeaway from the quantitative research: Much of the historical variation in quarterly PE returns can be explained by macro, credit, and equity factors that are common across risky assets:

Download the free research
 
Exploring Global PE Multiples by Sector

By Dominick Mondesir, Senior Private Capital Analyst

Many of the pandemic-related impacts on the IT, healthcare, and consumer sectors continue to persist.

And with a more hawkish policy environment looming, it will be fascinating to see if valuations drop in 2022, as higher rates should lower valuations due to higher discount rates.
 
Click to dive into EV/EBITDA buyout multiples by sector.

We suspect valuations will remain aloft, due to the rife competition in the PE market, plentiful liquidity, and limited partners' insatiable appetite for alternatives, due to the potential of higher risk-adjusted returns.

This research note breaks down buyout multiples by sector and projects more of what the future may hold:

Download the free research
 
Does an Allocation to Private Equity Add Value?

By Andrew Akers, CFA, Quantitative Research Analyst

PE performance is always a popular subject.

This quantitative research note takes a new approach toward answering the question in the title, notably looking at the holistic portfolio returns, rather than trying to look at different asset classes independently.

One key takeaway from the note is the addition of a 20% allocation to randomly selected PE buyout funds to a simple 60-40 portfolio added an average of 0.6% in annualized excess returns from 1997 to 2020:

Download the free research
 
Beyond Fund I

By PE analysts Rebecca Springer, Ph.D., and Jinny Choi

Diving into fundraising success, trends in step-ups, and performance, this research unpacks how emerging PE managers in the US progress from Funds I to III.

It's the latest in our series of PE notes on emerging managers and it's targeted toward GPs raising early funds and LPs interested in committing to them.
 
Click for more on US PE emerging manager performance.

2021 had an increase in first-time and emerging manager fundraises, so the note comes at an apt time.

A few key takeaways: contrary to popular belief, emerging managers do not consistently outperform established managers; performance varies significantly by vintage; and about one-third of managers fail to raise a subsequent fund at each stage of this scope:

Download the free research
 
Petershill Partners PLC

By Wylie Fernyhough, Lead PE Analyst

This research note hit a sweet spot for two of our two coverage areas: public PE firms and GP stakes.

It also fills a gap in the research market, where there isn't much written on these topics that's free and available to the public.

Following Goldman Sachs' public listing of its Petershill Partners assets, the note features innovative modeling of portfolios, touching on valuation, risks, and how this all may affect the world of GP stakes going forward:

Download the free research
 
The Emerging Baltic VC Ecosystem

By Nalin Patel, Senior Private Capital Analyst

As we continue to build out our institutional research function within Europe, this note provides a primer for VC in the Baltic region—where activity has grown impressively in recent years.

It's an area we hadn't covered before.

And we explain why it could be a major growth area within Europe in the coming years as investors look to new regions for better value-for-money investments:

Download the free research
 
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