Monday, January 16, 2023

PE emerging managers brace for headwinds

Why is VC dry powder still piling up?; negative PE returns threaten pension plans; the battle for grid-scale batteries
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The Daily Pitch: VC, PE and M&A
January 16, 2023
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PE emerging managers brace for headwinds in 2023
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Emerging managers are in for a challenging year as LPs become more cautious about their allocations and favor deploying capital with proven GPs they already know and trust.

For managers who typically don't have track records of strong returns and pre-existing relationships with GPs, the market environment could produce fierce competition with mega-funds. However, it's unlikely that LPs will abandon smaller and newer managers altogether.
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'Warning signs': PE could impact public pension plans' funding status this year
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Declining private equity asset values constitute a major threat to public pension plans this year. A reporting lag in private equity return data means that institutional portfolios with allocations to the asset class will reflect 2022's losses in their 2023 numbers.

While most investors believe the losses won't be as acute as those in public equities, pensions—and their beneficiaries—should be concerned about declining funded ratios. Negative PE returns could push the national average funded ratio to below 2007 and 2008 figures, making it impossible for pensions to compensate all of their retirees, according to an Equable Institute report.
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Why is VC dry powder still piling up?
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VC firms continued to accumulate a growing pile of cash as of the end of Q3 last year, while the dry powder for other private asset markets—including private equity, private credit and secondaries—declined, according to PitchBook data.

The heavy presence of nontraditional investors in venture deals has contributed to the record stockpile of undeployed capital held by VC investors. At the same time, strong fundraising in the first half of 2022 also added to VC firms' war chests.
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Go with the (redox) flow
In the battle for grid-scale battery dominance, who will emerge victorious? Lithium-ion has proven to be far from perfect, but the alternatives—such as redox flow to metal air—also have their lists of pros and cons with much to prove. With the first winter since Russia's invasion of Ukraine approaching and threatening Europe's energy security, the interest and investment in new energy technologies have never been higher.  

In our recent analyst note, PitchBook analyst John MacDonagh dives into the figures, trends, and emerging technologies on the rise. He lays out these alternatives—and the big players that VCs are betting on.
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Recommended Reads
A new study shows Exxon's scientists were uncannily accurate in their global warming projections from the 1970s onward. [The Guardian]

Charting out what experts and decision-makers perceive as the greatest risks to humanity. [Visual Capitalist]

The number of UFO sightings reported to the Pentagon has risen sharply in the last year, according to an unclassified government report. [Axios]
 
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Quick Takes  
  The Daily Benchmark  
  2019 Vintage Global VC Funds  
  VC Deals  
  Welcome Homes collects $29M  
  Insurance specialist Joyn nabs $17.7M  
  CyberX rakes in $15M  
  PE Deals  
  Sycamore in talks to buy Bed Bath & Beyond assets  
  Malaysian pension fund to sell $115M in assets  
  Alpine's ASG to acquire loss prevention specialist  
  Portfolio Companies  
  Gemini Trust hit with SEC complaint  
  Altum lends $4M to VC-backed Uk University  
  Sealed snags InfiSense  
  Fundraising  
  New firm Theory Ventures targets $200M fund  
 
 
The Daily Benchmark  
2019 Vintage Global VC Funds
Median IRR
35.03%
Top Quartile IRR
62.45%
1.36x
Median TVPI
Select top performers
Flexcap Fund I
Grayscale STRIVE Fund 2
Creandum V
*IRR: net of fees
80 Funds in Benchmark »
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VC Deals  
Welcome Homes collects $29M
Welcome Homes, which offers a platform for designing and building single-family homes, has raised a $29 million Series A led by Era Ventures.
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Insurance specialist Joyn nabs $17.7M
OMERS Ventures has led a $17.7 million Series A for Joyn, which provides insurance to small and medium-sized businesses.
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CyberX rakes in $15M
CyberX, a crypto market maker, has raised $15 million from Foresight Ventures, CoinDesk reported. Market makers act as trading firms and platforms for cryptocurrency tokens.
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PE Deals  
Sycamore in talks to buy Bed Bath & Beyond assets
Sycamore Partners is among the potential buyers interested in some of Bed Bath & Beyond's assets, particularly its Buy Buy Baby stores, The New York Times reported. In early January, the cash-poor retailer was reportedly considering filing for bankruptcy protection.
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Malaysian pension fund to sell $115M in assets
Employees Provident Fund, the Malaysian pension fund, has decided to sell a set of assets valued at $115 million, Reuters reported. The assets are held by the firm's Alpha REIT, an education-focused fund, which owns several schools in Malaysia.
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Alpine's ASG to acquire loss prevention specialist
Alpine Investors-backed Alpine Software Group has agreed to acquire Ontario-based ThinkLP, a SaaS company that serves retailers' loss prevention departments. The deal represents ASG's 50th acquisition since its origination in 2016.
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Portfolio Companies  
Gemini Trust hit with SEC complaint
The SEC has charged Gemini Trust, a crypto exchange provider run by Cameron Winklevoss and Tyler Winklevoss, in a complaint alleging it offered unregistered securities. Genesis, a subsidiary of Gemini, is also part of the complaint.
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Altum lends $4M to VC-backed Uk University
Uk University, or Universidad Uk, has secured $75 million Mexican pesos (about $4 million) from Mexican private lender Altum Capital. The university, which is based in Mexico City and serves Latin America, has other backers including Potencia Ventures, Zoma Capital and the Inter-American Development Bank.
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Sealed snags InfiSense
Climate-tech startup Sealed has acquired InfiSense, a data company specializing in building performance, for an undisclosed sum. Sealed raised a $45.5 million Series B led by Fifth Wall last year.
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Fundraising  
New firm Theory Ventures targets $200M fund
California-based Theory Ventures has begun raising capital for its first fund and hopes to collect $200 million, The Wall Street Journal reported. The firm, founded by Tomasz Tunguz, will focus on making seed and Series A investments in enterprise software companies.
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Chart of the Day  
Source: 2022 Annual US PE Breakdown
 
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