| Analyzing where top-performing VCs place their early-stage capital | | Every quarter, thousands of early-stage deals generate tens of billions of dollars of VC investment in new technologies that have the potential to shape the future and disrupt industries.
However, the sheer magnitude of this activity makes it hard to get a clear understanding of where investors are placing their bets and what industries they see as the most promising.
While massive late-stage rounds often grab headlines, understanding trends in early-growth capital is more complicated.
To help solve this problem, we've created a new quarterly report—the Emerging Technology Indicator—that provides a unique view of early-stage VC activity by focusing only on those deals that involve the world's most successful VC firms.
This is accomplished via a proprietary methodology that ranks VC firms based on the historical success of their portfolio companies in terms of capital raised, ability to complete an exit, and valuation.
Each quarter, we analyze 10 years of startup data based on these metrics in order to identify the VC firms that have the best track record of investing in outperformers. We then look at the early-stage investments those firms made in the most recent quarter, yielding a list of about 150 to 200 startups that we can analyze in detail to provide a unique perspective on trends in emerging technology.
In our inaugural Q1 2021 report, we identified 171 startups that received seed- and early-stage capital from the top-performing VC firms.
What we find is that biotech and fintech have consistently ranked at the top of early-stage VC activity in recent quarters, suggesting investors view these industries as having significant medium- to long-term growth opportunities.
Stand-out areas of investment in Q1 (highlighted because they haven't received significant capital in prior quarters) included DeFi and proptech—two areas of opportunity that could be generating significant opportunity as the crypto industry expands and real estate markets experience significant upheaval following the pandemic.
Our analysis also finds that leading VC firms are investing record amounts into early-stage deals, with Q1 claiming more $100 million+ deals than ever before—a bullish indicator, overall: Feel free to reach out to me or our institutional research group with any feedback or questions.
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Manager Behavior After a GP Stakes Deal
Limited partners have some concerns when it comes to the booming strategy of GP stakes.
For example, will my manager's fund returns decline after getting such an investment?
Will my manager focus too much on raising larger funds and adding new strategies, targeting growth in fees rather than performance?
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We took a look at the data, capturing the changes in IRR, TVPI, AUM, active strategies and more to get a clearer picture of what actually happens after a GP stakes transaction.
Some of the results even surprised our analysts: | | | | | | Exploring Long-Dated PE Funds
One of the more recent innovations in private equity has been that of long-dated funds.
Defined as being 15+ years in length, plus extensions, these vehicles are part of a wider trend designed to capture greater value over longer investment periods, similar to GP-led secondaries and continuation funds.
How are all of these strategies connected? How are LPs most impacted? What are the tax implications?
Our analysts cover it all in a report that we feel is among the most comprehensive and up-to-date treatments of long-dated PE funds out there: | | | | | | US VC Manager Style Drift
How have VC manager investment styles changed over the past 15 years?
We've analyzed the data across multiple time periods to illustrate how VC firms are shifting to the extremes, either a generalist approach (often more established firms) or a specialist strategy (including new entrants focused on their founders' areas of expertise). | | There's a lot more data and nuance unpacked in our analyst note, including the consideration of how large firms like a16z are launching sector-specific funds and the categorization of deals at the intersection of multiple industries—like AI and biotech.
Note: PitchBook Platforms users will be able to see this tool on investor profile pages starting Monday. | | | | | |
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FINTECH: Huge rounds. Huge exits. Huge intrigue.
It's been near impossible to avoid the massive growth of fintech startups worldwide, as Q1's total of $21 billion in VC invested represents a massive increase on both a quarterly and annual basis.
So, where are the newer, emerging opportunities? Our analysts highlighted three areas in our Q1 update on the fintech sector: - Autonomous finance tools developed to help the controller function can significantly speed up tasks and improve decision-making.
- Credit cards will be an upcoming area of major disruption, even as monumental customer acquisition challenges exist.
- Earned wage access that enables faster digital payments and real-time payroll data could make the traditional payday model obsolete.
Exclusively for clients, our new report features a timeline of key events in Q1, updated charts and datasets, and all of our latest insights.
Non-clients can access a preview of the report. | | | | | |
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Why do we think biotech IPOs will set a new record this year?
What are emerging opportunities and key drivers in health & wellness tech?
Analysts Joshua Chao and Kaia Colban addressed these topics and more in this week's webinar covering data and trends in biotech and healthtech: watch here. - June 22: We're partnering with the BVCA on a series of fireside chats, the first of which will feature our department head, Nizar Tarhuni, and Scott Ramsower from the Teacher Retirement System of Texas. Exclusive to BVCA members.
- June 24: Analysts Andrew Akers and Hilary Wiek will discuss how mark-to-market accounting and conservative valuations can produce misleading returns data for private funds. Register here.
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Fintech analyst Robert Le weighs in on the $1.2 billion IPO of payments processing giant Marqeta:
"We believe Marqeta is in a strong position to benefit from the accelerating secular shift towards ecommerce and digital payments.
"Further, Marqeta also issues physical cards, allowing it to capture offline and in-store transactions as the economy begins to open back up post-pandemic.
"Fintech infrastructure and backend platforms like Marqeta have seen a high level of VC exits in the past year, including from companies like nCino, Galileo, and Finicity.
"Other companies in this space primed to exit include Plaid (which recently scrapped its $5.3 billion acquisition by Visa), MX, and Alkami."
| | Robert Le
Senior Emerging Technology Analyst
Fintech | | | | | |
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Our insights and data featured in the press: - Monday.com's IPO is one of the biggest listings we've seen in Israeli tech. Analyst Nalin Patel looks into the company's growth drivers post-pandemic and what the exit might foretell for the country's VC ecosystem. [Times of Israel]
- Klarna's recent SoftBank-led mega-round continues the boom in European VC. Our data tells exactly how close the region already is to breaking last year's record. [CNBC]
- How much VC is going to quantum computing startups? Our data helps supplement a look into the space, following SoftBank's new partnership with IonQ. [WSJ]
If you're a media member interested in interviewing our analysts, contact our PR team. | | | | | |
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Highlights from our other research content published this quarter:
Market updates Thematic research Emerging Technology Research (report previews) Coming next week (subject to change) - Q1 US PE Middle Market Report
- IoT Security Market Guide
- Leveraging Technology to Revamp Health Insurance
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| | Since yesterday, the PitchBook Platform added: | | 322 Deals | 1397 People | 399 Companies | 20 Funds | | | | | | |
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