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In today's Daily Pitch, you'll find: - Fundraising is increasingly difficult, and it's particularly challenging for micro-funds.
- Our latest US PE Breakdown offers insight into what went right for private equity in Q1 while much of the financial system floundered.
- More capital has been leaving Europe's VC funds than entering them, and a dry powder shortage may loom.
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| Micro-fund managers feel deflated as LPs cool on VC | |  | | (Jenna O'Malley/PitchBook News) | | | The number of micro-funds—VC vehicles under $50 million—exploded during the last couple years of the boom cycle.
But now, raising capital has become so hard that managers may need to meet upward of 100 potential LPs to raise a significant amount of money for their next fund. Venture capital industry participants expect a chunk of those micro-funds never to raise a subsequent vehicle.
The widespread decline in exits means emerging managers haven't had a chance to prove themselves, and they may find the battle to raise funds isn't worth the fight. | | | | | | | | | Banking crisis tests PE's vision for private credit | | While much of the financial system turned upside down in March, it was almost business as usual for private equity dealmakers. Although some firms eyed Silicon Valley Bank's loan book as a potential means to expand their private credit offerings when the bank collapsed, they failed to land a deal. Mega-buyouts, add-ons and secondaries alike were unencumbered by the panic.
But it's never simple: PE deal value in Q1 rose over 11% from the previous quarter, while the total number of deals fell more than 9% and exit activity deteriorated. Our latest US PE Breakdown, sponsored by Stout, G-P and Barings, offers insight into what went right for private equity. Other takeaways include: - Tech take-private buyouts in Q1 were financed with less debt than in recent history. Notable deals from March required 70% to 92% equity contributions, much higher than the typical median equity contribution of around 48%.
- Exit count and value declined for the third-straight quarter as investors balked at selling portfolio companies at lower valuations. Corporations proved popular counterparties, making up nearly 70% of all buyers of PE assets.
| | | | | | | | | PE sellers use earnouts, seller's notes to close deals | |  | | (Mario7/Shutterstock) | | | In a cooling deal market, PE buyers have more power to demand attractive terms from sellers, such as deferred payments and earnout provisions.
Market participants say a widening valuation gap, caused by heightened economic uncertainty and a tight credit market, has incentivized sellers to agree to deal sweeteners. | | | | | | | | | Dry powder shortage on the horizon for European VC | |  | | (n_defender/Shutterstock) | | | VCs have been deploying capital into European startups at an unprecedented rate in recent years, but now they're struggling to secure the commitments required to meet future investment needs.
With significant declines in fundraising and exits, VCs could find themselves short of capital. | | | | | | | | | Surveying sustainable investing practices | | We're conducting our 2023 Sustainable Investment Survey to measure how investors and other private market participants are thinking about impact strategies and/or ESG risk factors. Please share your firm's approach to sustainable investing and what drives it.
All who complete the 10-minute survey will have the opportunity to enter a prize drawing, and for each completion, PitchBook will make a donation to World Central Kitchen. | | | | | | | | | | Why Silicon Valley's favorite slogan has lost all meaning. [The Atlantic]
What do Apple's forays into financial services mean for the future of Wall Street? [Financial Times]
A spirited roundup of seven nuclear fusion startups making clean-energy history. [Bloomberg] | | | | | |
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| | Since yesterday, the PitchBook Platform added: | | 26 Deals | 115 People | 19 Companies | 3 Funds | | | | | | |
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The Daily Benchmark:
2018 Vintage Global Real Estate Funds | | | | | | |
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Weaviate, an Amsterdam-based data storage startup, has raised a $50 million Series B led by Index Ventures.
Paris-based Mooncard, a corporate expense-management specialist, has raised a €37 million Series C from investors including Orange Ventures, Portage and Partech.
Sero, a UK-based clean-energy startup, has secured £6 million from Hodge and Legal & General Capital.
London-based Evermile, which offers a local delivery platform for small businesses, has raised $6 million in a round led by 10D.
Bixby, which provides private credit information on loan issuers, has raised a $5.5 million Series A led by Fitch Ventures.
Earlybird has led a €3.2 million seed investment in Nosh.bio, a maker of plant-based food proteins.
Shield, a Los Angeles-based cybersecurity startup, has raised $2.1 million in pre-seed funding from investors including Kraken Ventures, Eterna Capital and Moonpay. | | | | | |
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| Don't miss our upcoming webinar | | The war in Ukraine, skyrocketing inflation and overall financial market volatility resulted in a rocky year for the European leveraged-finance primary markets in 2022. Loan volume plummeted to a 10-year low, and new high-yield bond issuance registered its lowest annual tally since the global financial crisis of 2007 to 2009.
In our upcoming webinar, LCD analysts will explore what lies ahead for leveraged financing trends in 2023. Key topics include: - What specific refinancing risks loan and bond-funded companies face.
- How the cost of capital in the loan, bond and direct lending markets is changing.
- How recent market volatility in the banking sector is impacting corporate financing and PE activity.
Register now to secure your spot. | | | | | | | |
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| I Squared Capital has agreed to acquire environmental services specialist Enva from Exponent. Enva, which offers waste management services in the UK and Ireland, was created in 2017 when Exponent bought the environmental division of DCC. | | | | | |
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JP Morgan Growth Equity Partners has raised over $1 billion for its debut growth equity fund. The vehicle will target Series B to pre-IPO investments in sectors including software, fintech, real estate and consumer tech.
Hitachi Ventures, the corporate venture arm of Japan's Hitachi, has launched its third fund with $300 million to target Web3, cloud computing and generative AI investments. | | | | | |
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