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Our Unicorn Index: Tracking the value of the world's largest private companies is no easy task. We've partnered with Morningstar on a whole new way to benchmark this segment of the market. See it on our PitchBook Indexes page and check out an explainer on our methodology.
Guide to your pitch: It's a difficult market for private market fundraising right now—especially for emerging managers. If you missed it last year, we've shared fundraising tips and advice from our former LP, download it here.
On the road: Our analysts have been especially busy at events recently and we've begun publishing their key takeaways, including tech themes from the SOSV Climate Tech Summit and foodtech challenges discussed at the Cultured Meat Symposium. | | | | | |
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| New valuations data reveals just how much VC deal terms are changing | | The venture market is compressing. After wide expansion through the first two years of the COVID era, late-stage valuations are now falling rapidly—Q3's median for US VC was more than 35% lower than Q4 2021. At the same time, seed and early stage continue to surge, as Q3 recorded the highest median seed valuation in our dataset. The convergent zone being created is adding further complications to the market's future. Q3 early-stage deal sizes and valuations remain at or near where the comparable late-stage figure was prior to the pandemic's onset.  | | This picture looks quite different at the early stage. | So where do companies go from here? At the late stage of VC, the pathways are increasingly leading down dead ends. With crossover investors slowing their activity, or even moving earlier in the venture lifecycle, the cash needed to support the high number of these companies simply isn’t there. Our estimations put late-stage capital availability at almost half of what it was in 2021. We expect that number to keep falling. And aside from Figma's $20 billion acquisition, there also doesn't seem to be any likely avenue for large companies to be acquired, either. So without an IPO market, the brightest spots of the late stage remain dim. The market narrative has been of falling valuations for several quarters, and now data is finally corroborating that story. But while the slowdown in valuations has been expected, surprises like the swift downfall of crypto exchange FTX highlight the possibility that the venture market we know from the past couple of years is a house of cards. Easy money has built a deal machine that has grown nearly 1,300 companies around the globe to valuations of $1 billion or higher. Yet these companies now have few options. The revenue multiples of 2021 have snapped back to reality, so even if growth projections remain the same as last year, pricing expectations need to be adjusted. The exits are closed, but the bars are no longer serving. For more data and analysis, download our Q3 US VC Valuations Report. You also get free access to the underlying XLS data file. | | | | | | | |
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Secondaries emerged as the private markets' leading strategy through Q1 2022.
One-year rolling IRRs for PE and VC faltered in the latest data, and we find it unlikely that those metrics—including now-negative quarterly returns—will reverse in the latter half of the year.
Our latest Global Fund Performance Report uses data through Q1 2022, as well as some preliminary Q2 figures, to provide a comprehensive look at how private market strategies have held up across PE, VC, real estate, real assets, private debt, funds of funds, and secondaries.
The report also examines how median returns could obscure wide ranges of investor results: | | | | | |
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Tenneco to Test Leveraged Loan Markets
The leveraged loan market that powers the PE buyout industry slowed significantly last quarter, down 75.9% from Q3 2021.
In the past two months, deals for Citrix, Brightspeed, Nielsen, and Twitter have failed to fully clear the market, highlighting how banks have struggled to offload loans for leveraged buyouts to investors.
In this environment, the proposed $1.4 billion loan backing Apollo's potential buyout of automotive parts specialist Tenneco could signal a recovery.
Our PitchBook and LCD analysts outline what to watch for when the deal gets priced next week: | | | | | |
Inferring the Future of AI Chips
The AI and machine learning semiconductor sector is especially sensitive to market fluctuations, an effect seen in the 69% decline of VC funding this year for startups outside of China.
This pressure could boost M&A as a preferred exit strategy and benefit startups whose technologies are attractive to established industry players.
|  | | A decline in funding for AI semiconductors may boost M&A. | | | |
In our latest AI & ML research, we've identified areas of opportunity amid a wider slowdown.
These include chips used to run AI on live data versus the historical preference for training on static data: | | | | | |
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VC deal value for carbon and emissions tech companies has increased each quarter over the past 12 months—and a total of $4.8 billion raised in Q3 marks the third-strongest quarter on record.
Our Q3 Carbon & Emissions Tech Report highlights the vertical's most active players, the technologies they're most interested in, and how startups have boosted efforts to develop more advanced and energy-efficient approaches to carbon removal: - The US Inflation Reduction Act—which committed $370 billion in grants, tax cuts, and loans to tackle climate change—hasn't yet made its expected impact on VC investing.
- Median pre-money valuations of early-stage VC companies in the vertical jumped from $9.9 million in 2017 to $35 million in 2022, an increase of 254%.
| | | | | | Market volatility has caught up with foodtech. VC investment in the sector during Q3 fell 76.9% year-over-year—with only $2.7 billion invested.
However, there are still reasons for optimism, as the US government pumps money into research on alternative food sources and retailers pursue automation and ESG goals.
With brand-new segmentation to reflect the rapidly changing industry, our Q3 Foodtech Report details VC activity in the sector and highlights emerging opportunities in plant-based dairy products and sustainable grocery tech.
The report also ranks the most active accelerators, investors, and strategic acquirers in the space: | | | | | |
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How has a decline in US VC dealmaking impacted different segments of the market?
Why is fundraising value so high this year?
What should we make of current dry powder levels?
Our webinar this week with Insperity and J.P. Morgan covered the most pressing trends in the current US venture market and what market participants should expect going forward: watch the replay - Bonus podcast: Techstars CEO Maëlle Gavet joined us for an impromptu episode last week at Web Summit 2022. She talks about investing in the Middle East and Africa, opportunities in the farm-to-fork supply chain, optimism about the early stage, and why she expects VCs to start disappearing. Listen here.
- Planning ahead for SXSW: Applications for the 2023 SXSW Pitch event need to be submitted by November 13. For more details and access to this year's PitchBook report for SXSW 2023, which explores industry categories and data on standout past participants, click here.
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Senior emerging tech analyst Robert Le weighs in on what the FTX collapse means for the crypto VC industry (read his full analysis here):
"While failures are a common occurrence among venture-backed companies, the collapse and loss of $2 billion would rank second only to drug therapeutic company Intarcia, which raised $2.1 billion over 13 years, according to PitchBook data. For further context, blood-testing company Theranos raised roughly $1.1 billion from investors.
"We expect investment capital flowing into the crypto space to recede in 2023. Crypto VCs have raised more than $40 billion over the past two years to fund crypto companies, but the pace of investments should slow considerably. Some funds may extend their deployment periods for longer than the typical two to four years to let the market recover.
"Depending on broader market conditions, LPs may rethink capital call requests for what's now widely viewed as the riskiest investment areas. Still, we believe the long-term prospect for crypto and blockchain technologies remains favorable, and those with longer time horizons on investments will likely continue to find valuable opportunities."
| | Robert Le
Senior Emerging Technology Analyst
Fintech, Web3 & DeFi | | | | | |
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Our insights and data featured in the press: - Large tech companies cutting jobs "should be a warning to small companies to preserve runway and opt for a sustainable growth, if growth is still possible." [WSJ]
- How early investors could get hurt most in the FTX fallout. [Fortune]
- Only 8% of VCs surveyed at Web Summit said they planned to significantly pull back on investing due to rising inflation rates. [Reuters]
- Early-stage valuations are holding up—but will it last? [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) - Healthcare Services Report
- Global League Tables
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| | Since yesterday, the PitchBook Platform added: | | 358 Deals | 2065 People | 594 Companies | 15 Funds | | | | | | |
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