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Dawn of a new AI era: If you missed it, our Emerging Tech Future Report on generative AI examines how the new tech could transform a wide range of sectors. Get our deep dive into the age of AI: read the research.
Sneak peek: We'll give our new Carbon & Emissions Tech Report a wide release on Monday, covering the latest VC activity in the vertical and emerging areas like green construction. To access the research early: click here. | | | | | |
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| Headwinds continue to squeeze US VC valuations and deal sizes | | Rising interest rates, a lack of liquidity via public markets, and the newly added stress of regional bank collapses exacerbated the difficult dealmaking environment for startup founders in Q1. Across all stages but seed, median pre-money valuations and deal sizes continued their descent, further widening the gap from the record-high figures of the prior two years. We expect the more formulaic nature of seed deals and the increased participation of larger, multistage investors to shield this stage from the broader compression. But the data also shows survivorship bias, as seed deal activity has declined significantly and a flight to quality is in effect. Wavering confidence in the venture strategy has sidelined capital and led to the pullback of most nontraditional investors, impairing later-stage activity. For startups, this has made securing needed capital even more difficult, with the capital-demand-to-supply ratio spiking to new highs.  | | Source: PitchBook's VC Dealmaking Indicator | Despite the dreary dealmaking metrics, determined market participants have found opportunistic footholds, as bargaining power swings further in investors' favor. More structured equity deals that include provisions for downside protection, dividends, and participating shares are all up for consideration, mitigating risk for investors and preserving startup valuations. Much speculation remains as to when valuations will bottom out and paths to liquidity will reopen. Most startups are biding their time, taking on debt, or cutting costs, but others—particularly in the life sciences sector—need public markets to access large amounts of capital for clinical trials and R&D. Half of the public exits in Q1 were in the healthcare space. How long other startups can maintain operations without exit opportunities is a question that will likely be teased out in coming quarters through increasing down rounds. For more data on valuations and other deal terms, download our free US VC Valuations Report. | | | | | | | | | PE finds a new healthcare play in cardiology | | Roughly one in every 10 dollars invested by private equity in the US flows into healthcare services. PE's foray into healthcare delivery began with investments in surgical centers in the earliest days of the asset class and has since expanded to touch virtually every outpatient provider type. So it is noteworthy when a new healthcare play opens up. Since 2021, cardiology has drawn growing PE investor interest, and there are currently five PE-backed groups (four of them operational) in the US.  | | The hottest new PPM play for PE. | Cardiology benefits from compelling demand trends—around half of adults in the US have some form of cardiovascular disease. It also turns on two secular trends shaping the US healthcare industry as a whole: site-of-care innovation and value-based care. The site-of-care theme broadly involves moving healthcare delivery from the inpatient (hospital) setting into other sites that offer equivalent or better care quality while reducing costs and providing a more convenient patient experience—e.g., outpatient centers, homes, retail centers, virtual modalities. In the case of cardiology, technological progress has enabled more cardiovascular surgical procedures to be performed in ambulatory surgical centers instead of hospitals. This allows PE investors to back independent cardiovascular physician groups. There is also a significant value-based care opportunity in cardiovascular care since heart disease is a high-spend category that can see improved patient outcomes via chronic condition management, lifestyle improvements, and preventative care. Our new healthcare services research dives into these opportunities in cardiology, as well as the risks, which include a limited supply of targets and the potential for changing reimbursement dynamics. It also charts the continued cooling off of PE deal activity in healthcare services broadly—Q1 notched the fifth straight quarter-on-quarter decline—amid a "new normal" of higher interest rates, lower leverage ratios, and sluggish exits. Download our Q1 2023 Healthcare Services Report. | | | | | | | |
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Challenges for consumer-facing fintech startups have driven investors toward B2B opportunities.
And while we expect VC investment in fintech to continue to fall, a less crowded B2C market does have its upsides.
Our Retail Fintech Report explores recent VC trends in the vertical and also highlights emerging long-term opportunities in sectors like digital financial passports and open-loop peer-to-peer payments: | | | | | | After the collapse of FTX and a wobbly few months of fluctuating valuations, crypto has stabilized.
But a lot of the damage has been done, as Q1 marked the fourth straight quarter of declining deal activity and the lowest quarter for capital since 2020.
Our new Crypto Report covers the data and also where the vertical is growing most, highlighting segments where startups are working on privacy, data management, and security for Web3 protocols: | | | | | |
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This week, our analysts teamed up with our product department to demonstrate our new PitchBook Platform tool, the VC Exit Predictor.
Our webinar covered: - Current trends in the VC exit market and what the future holds in 2023
- How our teams think about developing IP on top of our massive datasets
- How to use the VC Exit Predictor to support your market research and deal-sourcing workflows
Watch the replay | | | | | |
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Our insights and data featured in the press: - "We've seen a lot of these large firms just add a seed strategy to their investment base that allows them to increase the pool of LPs, and they'll get those LPs that want a little higher risk in their portfolio." [Fortune]
- The estimated market for generative AI in enterprise technology will rise to $98 billion in 2026 from nearly $43 billion this year. [WSJ]
- Tech startups find one of their last funding sources—venture debt—is drying up. [Bloomberg]
- The firms most likely to have stopped funding crypto altogether are generalists who have probably moved on to AI. [Forbes]
- Deals between European PE firms have been halved on an annual basis as rising rates hit. [FT]
- Decreasing valuations in healthcare may force PE firms to accept that a wait-and-see approach is no longer viable. [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
Industry & tech research
Coming next week (subject to change) - European VC Valuations Report
- Global League Tables
- Supply Chain Tech Report
- Foodtech Comp Sheet & Valuations Guide
- Analyzing Public Venture Lending Earnings
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| A message from CIBC Innovation Banking | | |
| | Navigate your growth with a leading North American bank that understands the innovation economy.
Learn more | | | | | | | |
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| | Since yesterday, the PitchBook Platform added: | | 203 Deals | 920 People | 282 Companies | 14 Funds | | | | | | |
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