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Private credit battle: A $2.75 billion financing backing Blackstone's LBO of Copeland has resurfaced in the syndicated leveraged loan market after it first emerged in the private credit sector. For more on the tussle between the two leveraged finance segments, click here.
April data: Our latest Global Markets Snapshot breaks down a month of trends in the equity, debt, and commodities markets, tracking returns across a range of indexes and sectors. Read it here.
VC Dealmaking Indicator: In April, late-stage VC demand for capital relative to the available supply climbed to a record 3.13x. For more on how investor-friendly the environment has become, see the new data
Featured webinar: What is the future of VC exits? How can our new VC Exit Predictor tool support your deal-sourcing workflows? Our team leads will walk you through it on Wednesday. Register here. | | | | | |
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| Generative AI, ChatGPT, and the new disruption cycle | | In a year marked by slow economic growth, rising inflation, war in Europe, and a massive pullback in financial market activity, few expected AI to take center stage.
While the collapse of SVB and the banking crisis felt like part of the economic script we were expecting, the ability of a single webpage—not even an app!—to rapidly capture global attention is truly one of the most remarkable and unlikely stories of 2023.
On an enterprise level, organic adoption of ChatGPT is already widespread. (For example, I used it to help edit this intro.) Yet scaled generative AI deployments for functions other than internet search tools remain scarce.
Nonetheless, there has been a notable explosion of AI applications in the months since ChatGPT was launched—including the mind-bending AutoGPT—and the realization that the tech is (mostly) free for all means every organization has to "game theory" around the idea that their competitors are using it to find an edge.
To help explore these emerging enterprise use cases, we published research describing some of the ways generative AI could be applied across various industries. These include the mundane (forecast analytics), the tantalizing (personal shoppers), the world-changing (precision agriculture), and the existential (virtual humans).
But despite these compelling—and seemingly attainable—use cases, corporates face significant hurdles to integration. While the conversational aspects of generative AI have taken the world by storm, much work still needs to be done marrying it with correct data in a verifiable and trustworthy way.
There are also significant legal conundrums related to privacy, intellectual property, copyrights, and service agreements with cloud vendors. Yet, sentiment in the tech world suggests that these obstacles are surmountable and venture investment into generative AI startups has been ramping up.
While OpenAI may not deserve the credit for creating transformer architecture technology, it does get the award for making it something the masses can now easily comprehend and engage with.
Indeed, the genie could not be more out of the bottle.
For more analysis, read our Emerging Tech Future Report: Generative AI.
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Private equity and venture capital funds are generating lower returns on their investments, with both strategies lagging far behind their 10-year performance averages.
Preliminary data from Q4 2022 shows PE and VC funds' quarterly horizon IRR at -0.2% and -0.8%, respectively.
Across all private market strategies, performance in that quarter was around 0.5%—far behind the key public equities index—but real assets and real estate funds more than pulled their weight.
Our new Global Fund Performance Report dives into the latest returns data across private market strategies: | | | | | |
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H1 2023 VC Tech Survey
Have market disruptions changed investor expectations?
We recently conducted a survey of 58 VC firm insiders on a range of topics including generative AI's potential for disruption, which tech sectors will drive the most innovation, expectations around fundraising, and more.
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Some other survey questions include: - Which VC vintage from 2019-2024 do you think will have the highest IRR?
- How does the current weak IPO market impact early-stage investing?
- Did the percentage stake acquired in rounds you invested in change over the last 12 months?
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Applications for Synthetic Biology in Agriculture
Modifying a plant's genetic code could be the key that unlocks the future of farming.
Decreasing crop yields and global food shortages are major crises for farmers, but advances in synthetic biotechnology could reverse those trends by developing new plant varietals, boosting soil health, cleaning contaminated fields, and more.
|  | | Click to access more of our agtech synbio market map. | | | |
But it won't be easy; public companies in the vertical have recorded lackluster revenue and stock performance has largely suffered.
Our new research digs deep into the synbio world and how these startups could be a gamechanger for agtech: | | | | | |
RSA Conference Paves Path for Infosec Startups
Buzz about AI's usefulness is everywhere. At a gathering of information security professionals, however, it was discussed as a threat as well as an asset.
The RSA Conference, which took place last week in San Francisco, serves to convene VCs, startups, and acquirers in an annual launchpad for industry innovation.
Our latest analyst note offers our key takeaways from the event, covering topics like ChatGPT, passwordless authentication, and postquantum cryptography: | | | | | |
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VC funding in the information security vertical has been holding its ground.
Our new research details how the industry has weathered the storm, as adoption and funding trends remained steady. Key takeaways from our Information Security Report: - VC funding reached $2.5 billion in Q1, in line with the previous two quarters.
- Significant acquisitions continued through a muted exit environment.
- Emerging segments of the market include cloud workload protection and data security posture management.
| | | | | | Agtech startups raised $1.9 billion in VC funding across 172 deals in Q1—declines of 10% and 39%, respectively, on a quarterly basis.
Investors are concentrating on larger deals in later-stage companies that seem like safe bets, according to our new Agtech Report, as pre-money valuation levels jumped nearly 20% from 2022.
Indoor farming has been hit especially hard this year—five companies have ceased operations or gone bankrupt.
On the other hand, agtech segments potentially on the rise include ag finance and insurance, land-based aquaculture, and precision irrigation: | | | | | |
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Quarterly exit activity for US VC hit a decade low in Q1.
Fundraising has dramatically declined and continues to concentrate among established managers.
Deal value & count experienced declines across all stages on a quarterly basis.
Our Venture Monitor webinar covered all of these trends and more, explaining how the industry is managing persistent market headwinds and what to expect going forward: watch the replay. - May 9: Our Tim Clarke will host a session at ACG's DealMAX examining the recent performance of and future outlook for middle market PE. Details here.
- May 11: Join us for a discussion centered on the new Morningstar PitchBook Global Unicorn Indexes. We'll cover valuation best practices, index construction methodology, and more. Details here.
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Senior tech analyst Brendan Burke weighs in on vector database company Pinecone raising $100 million in Series B funding led by a16z at a $750 million valuation:
"This deal signifies that vector databases will be a standalone category of database software benefiting from the growth of large language models.
"Vector databases convert unstructured data into numerical values called vectors and quantify the similarity between vectors, enabling queries of semantic search spaces via chatbots or search interfaces. These databases are used to fine-tune large language models with user databases and train new language models.
"Pinecone contributed to founding this niche in 2021 and has grown its customer logo count by 8x to around 1,600 in the past three months, according to Andreessen Horowitz.
"Existing data lakes are insufficient to make use of embeddings in large language models, encouraging startup innovation in the $5.5 billion industry of enterprise search.
"Other vector database startups raising significant rounds recently include Weaviate and Qdrant. They compete with incumbent search indexing solutions from Elastic, Yahoo Vespa, and Meta's FAISS project."
| | Brendan Burke
Senior Emerging Technology Analyst
AI & Machine Learning | | | | | |
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Our insights and data featured in the press: - Greater Silicon Valley's share of VC activity has fallen. No other region is close to challenging its dominance, though. [Bloomberg Opinion]
- Investors are flooding into funds that specialize in private debt. [WSJ]
- VCs expect AI to outperform other tech sectors when it comes to growth and innovation over the next 12 months. [Institutional Investor]
- Explaining the impact of nontraditional VC investors pulling away from European startup deals. [Sifted]
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
Industry & tech research
Coming next week (subject to change) - US VC Valuations Report
- Healthcare Services Report
- Crypto Report
- Retail Fintech Report
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| M&A fallout from new tax law governing R&D costs | | It’s no secret, transactions are complex and move quickly. Avoiding surprises and preserving cash flows requires a mindful and comprehensive tax strategy.
A new requirement for the tax treatment of R&D expenses is affecting mergers and acquisitions by introducing buyers to new potential costs and tax liabilities via their targets under section 174.
Buyers can avoid surprises and preserve cash flows by being mindful of the tax law changes when preparing operating models and projecting cash taxes. Consider historical exposures, purchase agreement negotiations and tax projections as part of updated transaction diligence processes.
Learn more | | | | | | | |
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| | Since yesterday, the PitchBook Platform added: | | 408 Deals | 2049 People | 486 Companies | 17 Funds | | | | | | |
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