Sell in May… Our new Global Markets Snapshot tracks last month's winners and losers across the equity, debt, and commodities markets. Get it here.
Join us! How likely is a recession? What's next for the PE and VC industries? Senior analysts from our team will talk all about it on Tuesday. Register here.
Changing tide: Our VC Dealmaking Indicator quantifies how friendly the environment is for startups versus investors. It just reversed course after several quarters in one direction. Take a look. | | | | | |
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| IPOs stall and valuations fall as the venture market recalibrates | | When we think about the current macroeconomic environment as it relates to VC, the aftermarket performance of technology and growth stocks is often the first topic of conversation, as that's where the most immediate effect has been felt. Our index that tracks the public performance of previously VC-backed companies has shown significant underperformance to the S&P 500 since the start of the year.  | | Click for a larger version: VC IPO Index vs. the S&P 500. | This uncertainty has handcuffed new IPOs, especially for more highly valued businesses, as no US VC-backed company valued at over $1 billion has launched and completed an IPO so far in 2022. This is critical given that nearly 90% of all VC exit value over the last two years has come from public listings, mostly by multibillion-dollar late-stage companies. If this drought persists, there may be cause for concern around VC's ability to return capital while avoiding suboptimal exits. This could have serious knock-on effects for the rest of the VC market. Late-stage startups are the closest private companies to the public markets, so it seems logical that this is where we've already seen a tempering of valuations. For US deals closed in Q1 this year, we've seen a near 30% drop in the average late-stage valuation from 2021's highs. This contrasts with early-stage and seed deals, which were priced around the same levels.  | | Late-stage VC valuations began their pullback in Q1. | In the next few quarters, we expect to see a greater effect in the late stage and eventually a trickling down to earlier stages. For new deals, exit valuation assumptions will be priced at today's market levels, and anecdotal evidence suggests investors are being considerably more prudent in the due diligence process. The depth of the revaluation seems to be stabilizing, but if there are any further unexpected shocks to what the market has priced in, we believe the valuation decreases will deepen. Well-positioned startups should be able to utilize the record levels of capital investment over the last two years to extend runways and avoid pricing new equity into the current climate. The greater question will be whether marginal demand from LPs and nontraditional investors will continue to flow now that the economic outlook has changed and a rising interest-rate environment disincentivizes investment in growth businesses. We believe that many nontraditional investors like corporate VCs will maintain their presence in the space, but some investors and LPs with significant public equity exposure may be more inclined to pause new commitments or investments until there's more certainty in the market. At the moment, many of these outcomes are more likely in the worst-case scenario and we still expect VC investment to be robust throughout 2022. However, we also expect more prudence in terms of capital deployment from both investors and startups, as all parties involved weigh how long a downturn might be in effect. For more data and analysis, click below to download our free research: Feel free to reach out with questions or comments. You can also join our Global VC Valuations webinar on Wednesday by registering here.
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How PE Firms Will Navigate Today's Complex Macro Environment
The current macroeconomic backdrop is perhaps the most fraught since the global financial crisis.
And that tense environment brings questions from all parts of the private equity industry about what this means for them and what the future holds.
|  | | We expect PE exits to stay low and hold times to lengthen. | | | |
Our global team of PE analysts worked together to explain where firms go from here.
They wrote about why dealmaking will slow (but not stop), why hold times will get longer, why fund performance is set to decline, and more: | | | | | |
First-Time VC Funds Before the Global Financial Crisis
As the market turns downward, investors are hiking up the premium on experience when it comes to GP fundraising.
Consider it one of many challenges for emerging managers in today's environment, following a boom in new venture capital funds over the past few years.
So, how did first-time managers fare in the last crisis? What's different this time around?
We examine follow-on success rates and more as we turn back the clock: | | | | | |
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VC investment in AI & machine learning startups slumped during Q1, falling more in line with activity prior to Q4 2021.
Valuations remained resilient, though, as both public and private AI companies traverse challenging market conditions.
Segments within the vertical that drove VC funding include healthcare, autonomous vehicles, and natural language technologies.
Our latest AI research also dives into emerging investment opportunities in conversational AI, silicon photonics, and revenue operations: | | | | | |
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Amid geopolitical and financial headwinds, France and the Benelux region recorded strong private market activity in Q1. Our latest regional report goes deep into these PE & VC ecosystems, the highlights of which include: - Activity in Europe's second-largest PE market had a record start to the year, as piles of dry powder, France's GDP expansion, and willing sellers spurred dealmaking.
- VC deal value displayed resilience in Q1, but startups and investors may struggle to keep pace with past years.
- PE fundraising has slowed after a massive 2021 as the region's biggest managers might not return to market until 2023 and LPs are reaching their allocation limits.
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In our latest webinar, senior emerging tech analyst Alex Frederick led a discussion this week on the market drivers behind foodtech's evolution.
Topics included the proliferation of app-based delivery platforms, changing consumer preferences, and VC funding trends.
Frederick also highlighted some emerging investment opportunities, as covered in his latest research.
Watch the replay | | | | | |
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Our insights and data featured in the press: - PE funds launched during the most recent recession weren't great performers, as vintages from 2007 through 2010 performed worse than funds launched later. [WSJ]
- Foodtech investment is showing signs of slowing as the sector is vulnerable to shifting consumer habits and price-sensitive shoppers. [Axios]
- Don't expect PE dealmaking to come to a screeching halt: "PE firms will adjust to the current turmoil in the macroeconomic environment." [Institutional Investor]
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) - Quantitative Perspectives: Private Equity
- GP Stakes Portfolio Construction
- Analysis of Public PE Earnings
- ETR: Supply Chain Tech (sneak peek!)
- More reaction to the new macro environment
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| | Since yesterday, the PitchBook Platform added: | | 349 Deals | 1646 People | 556 Companies | 27 Funds | | | | | | |
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