Sneak peek! We just published our latest Greater China Venture Report. To get an early look before its wide release Monday, click here.
Lender rankings. Our 2021 Annual PE Lending League Tables are live and can be sorted by deal type, geography, sector, and more. See the lists.
PE podcast. In our latest episode of In Visible Capital, PE analyst Wylie Fernyhough discusses recent trends involving the industry's public giants. Listen in. | | | | | |
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| Do VC industry specialists outperform? | | A common narrative we have heard in VC circles is managers that specialize in companies within a narrow industry have a performance edge over managers that are industry agnostic. Industry specialization has long been a defining aspect of many VC investors, leading to a common, albeit oversimplified, dichotomy between generalists and specialists. Investment strategies at the two ends of the spectrum have stark differences, and each comes with pros and cons. Specialist investors are often able to attract and develop a team with deep domain and market expertise. Proponents of the specialist strategy argue that not only does this enable them to gain an edge in identifying attractive companies, but it also makes them appealing partners to startup founders.  | | Click to zoom in on VC performance by investor style. | However, specialization does have drawbacks. Most important, specialist investors have a much smaller investable universe, which can make it difficult to secure investment opportunities and scale a strategy. While a debate of the relative fundamental advantages and disadvantages of specialization is interesting, we asked a more objective question: Have differences in specialization across VC funds been associated with differences in performance outcomes? The short answer is no. Looking at US-based VC funds with vintages from 1996 to 2015, we found that funds with differing industry specialization have had similar performance. While there are many logical reasons a general partner may choose to implement a specialized industry strategy, such as limited resources or a means to get access to deals, gaining a relative performance advantage does not appear to be one of them. Limited partners should be skeptical of any claims that industry specialization leads to superior performance. Selecting a specialist fund should be done on the basis of other components of the fund due diligence process or how a concentrated industry exposure fits within a broader portfolio. For more detail, including our methodology, click to download the research: Do VC Industry Specialists Outperform? Please feel free to reach out with any questions. | | | | | | | | | | PE middle market comes back strong with record-breaking 2021 | | The US PE middle market had a phenomenal last year, rebounding fervently from the slight dip in 2020. 2021 was the most active dealmaking period in history thanks to ample dry powder, gobs of stimulus capital, and nearly endless cheap debt funding. Exits also rocketed to new highs, driven by rising multiples across sectors. This pushed many portfolio companies to hit price targets early and sponsors sold a flurry of PE-backed companies to well-financed corporate and sponsor-backed acquirers.  | | We may see dealmaking slow in the first half of 2022. | Middle market fundraising showed slower signs of recovery than the rest of the PE fundraising landscape. However, frenzied dealmaking led firms to deploy capital quickly and return to fundraising at a faster pace—and often at sizable step-ups. Going forward, investors have much to be wary of. Ongoing inflation and higher input prices are stifling company earnings while valuation multiples of growth-oriented companies are taking a tumble with expected interest rate hikes. Price pressures from sanctions on Russia are hitting consumers when the US inflation rate is already at its highest and many buyers are hitting pause on processes amid significant financial market uncertainty, which could seriously hinder deal, exit, and fundraising activity in 2022. For additional analysis, click to download the free 2021 Annual US PE Middle Market Report. Feel free to reach out with any questions or feedback, or if you would like to discuss the research. | | | | | | | |
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How does venture funding for female founders compare to the overall market?
Why are female GPs an important catalyst for driving change?
We hosted a webinar this week with JP Morgan to discuss the rise of women in VC, the importance of boardroom diversity, and more: watch the replay - March 31—Our analysts will talk about the prevailing sustainable investing philosophies and how they intersect with topics like greenwashing and impact. Register here.
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Senior technology analyst Alex Frederick weighs in on how the war in Ukraine will impact the global food and agriculture industries:
"The disruption of grains and other ag products out of Ukraine and Russia has major implications for agtech in Europe.
"Ukraine is often called the 'breadbasket of Europe' because, with Russia, it provides 29% of global wheat, along with significant quantities of corn, vegetable oil and other ag products.
"Europe must now find new food sources, which could mean revitalizing fallow fields, making existing fields more productive, or building indoor agricultural facilities.
"Many agtech solutions could be adopted to ramp up farming operations and productivity in Europe, including robotic machinery, farm management software, and satellite imagery analytics solutions. Key providers include Infarm, Blue Ocean Robotics, and Perfarmer.
"Additionally, Russia is also one of the largest exporters of synthetic fertilizer.
"The war has caused fertilizer prices to surge to heights unaffordable to many farmers.
"Pricing pressures or unavailability of Russian fertilizer may lead farmers to seek out bio-based fertilizers like Gaiago or other plant nutrient solutions such as Aphea.Bio that may have been too costly or unnecessarily risky to adopt rapidly in calmer times."
| | Alex Frederick
Senior Emerging Technology Analyst
Foodtech & Agtech | | | | | | Lead PE analyst Wylie Fernyhough weighs in on EQT's agreement to acquire Baring Private Equity Asia for $7.5 billion:
"EQT's acquisition of Baring Private Equity Asia is a major deal, and not simply because of the price tag.
"This move underscores the importance that the Asian market will have in the years to come.
"Additionally, the deal illustrates how willing to use M&A the major players are as top firms consolidate and expand product offerings.
"Going forward, we expect firms in the $50 billion+ AUM range to be active acquirers with more BPEA-sized deals."
| | Wylie Fernyhough, CFA
Senior Analyst
Private Equity | | | | | |
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Our insights and data featured in the press: - Silicon Valley is trying to disentangle itself from Russian investors who last year took part in $9 billion worth of VC deals, mostly backing startups outside of Russia. [Bloomberg]
- AI chip startups are pulling in massive amounts of VC funding as they navigate supply constraints. [WSJ]
- The US PE middle market experienced a strong year for dealmaking and exit activity in 2021. The road ahead may not be quite as smooth, however. [Institutional Investor]
- As technology innovation gets faster and new markets emerge, it's going to be even more imperative for corporates to invest in startups. [Business Insider]
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 recent research:
Market updates Thematic research Emerging Technology Research Coming next week (subject to change) - Greater China Venture Report
- ETR: Fintech
- ETR: Agtech
- ETR: Internet of Things
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| | Since yesterday, the PitchBook Platform added: | | 277 Deals | 605 People | 222 Companies | 15 Funds | | | | | | |
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