Private Equity Firms Pull Out All the Stops to Get Deals Done

Private equity appears to have made it through the failure of Silicon Valley Bank and others last month unscathed. Or has it?

Deal volume fell 9.3 percent to 2,711 transactions, even as the value of deals rose 11.7 percent in the first quarter of 2023. Within seven days of SVB’s demise and the other turmoil it caused, private equity firms announced five mega buyouts worth a total of $31.3 billion. That included the largest of the year: taking Qualtrics private at $12.5 billion. “Clearly, PE dealmakers were undisturbed by the events that preceded and followed the SVB meltdown,” PitchBook said in its quarterly private equity report. READ MORE

How venture capital is shaping up in 2023, in 4 charts

Startups around the globe raised a collective $58.6 billion in venture funding in the first quarter—dropping 13% from the last quarter and at their lowest levels since pre-pandemic, according to new data from CB Insights. In the U.S., numbers were a bit steadier, but only because of Stripe’s whopping $6.5 billion funding announcement in mid-March. International startups, in particular, are struggling to fundraise at the same levels they had been, with funding in Latin America, Asia, and Europe declining by 54%, 27%, and 12% respectively. READ MORE

Venture capital keeps flowing past the warning signs

Venture capitalists are galloping through 2023 with blinders, dodging bank collapses and recession projections to invest tens of billions of dollars.

Why it matters: There's a brick wall ahead, covered in thorns and the jagged remnants of neon "exit" signs.

By the numbers: VC funds invested $58.6 billion globally and $32.5 billion into U.S. startups during Q1, according to data released today by CB Insights. READ MORE

Companies That Went Public via SPACs Log Billions of Dollars in Goodwill Write-Downs

Companies that went public through mergers with special-purpose acquisition companies in recent years booked billions of dollars in goodwill write-downs in 2022, reflecting in part a reckoning of the heady premiums paid to secure deals during the SPAC boom.

Some of the biggest goodwill impairments in 2022 came from SPAC-backed companies like cryptocurrency platform Bakkt Holdings Inc., business-services provider Advantage Solutions Inc., 3-D printing firm Fathom Digital Manufacturing Corp., self-driving vehicle startup Aurora Innovation Inc. and now-bankrupt bitcoin miner Core Scientific Inc., according to financial and risk advisory firm Kroll LLC. Each of these five companies’ pretax impairments exceeded $1 billion last year. READ MORE

Most Active US Investors: Angel And Seed Lead The Way In Slow March

The changes in venture from just 12 months ago are becoming more pronounced.

In March of last year, five different venture firms participated in 20 or more funding rounds.

Last month, only four venture firms took part in at least 10 rounds — and three of those firms specialize in angel and seed. READ MORE

North American Startup Funding Takes a Beating In Q1

After four consecutive down quarters, North American startup investors haven’t staged a definitive comeback yet. However, first-quarter numbers do show pockets of resilience, even as the general funding climate remains constrained.

North American funding in the first quarter reached $46.3 billion — a decline of 46% from the same period last year. That’s even including a reported $10 billion investment into OpenAI — largely from Microsoft — and a $6.5 billion round for payments giant Stripe. Without those two large deals, Q1 venture funding would have been down even more dramatically, with a more than 60% decline from the same period last year. READ MORE

Let’s Not Make A Deal: PE Valuation Chasm Is Stalling Deals

Let’s not make a deal—at least, not just now. Not until prices are back to “normal.”

That’s a refrain private equity investors and corporate acquirers seem to be hearing more frequently from founder-owners of bootstrapped businesses. Even those otherwise ready to sell or accept outside capital cling to the belief that their businesses are still worth the sky-high valuations they might have commanded only months ago—before the sharp rise in interest rates, banking industry turmoil and economic uncertainty wreaked havoc on markets. READ MORE

Private Equity May Be A Ticking Time Bomb For Public Pension Plans

Two years ago, when the economy was a runaway train, so were the returns on private equity investments. Among the biggest winners were large public pensions, which had invested a staggering $500 billion out of a total $4.5 trillion in private equity — one dollar out of every 10.

But with stock prices now plummeting, experts are fearful that private equity returns are not far behind. Accusations are flying that private equity firms are spinning an elaborate fiction to hide their losses. READ MORE

Venture capital funding drops 53% in first quarter amid ongoing macroeconomic issues

A new report today from Crunchbase Inc. finds that money flowing into venture capital continued to drop in the first quarter as growth investors further scaled back their investment pace amid ongoing worldwide macroeconomic issues.

For the quarter that ended March 31, global funding came in at $76 billion, down 53% from the $162 billion invested in the first quarter of 2022. Excluding two big rounds in the quarter — Microsoft Corp.’s investment of $10 billion into OpenAI Inc. in January and $6.5 billion invested in Stripe Inc. in March — the downturn is even more considerable, with a quarterly figure closer to $60 billion. READ MORE

Venture capital funding in start-ups halves as tech downturn bites

Venture capital funding of start-ups has plunged by more than 50 per cent in the past 12 months, as an economic downturn weighs on valuations at nascent tech groups. Globally, venture funds invested $76bn into start-ups in the first three months of 2023, less than half the $162bn they deployed in the same period a year ago, according to data provider Crunchbase. READ MORE

Are venture capital funds about to lift off?

Whether you like it or not, venture capital has become ever more widely available as an opportunity — albeit a risky one — for private investors. Until just a few years ago, those who put their money to work in early-stage private businesses did so through tax-efficient venture capital trusts (VCTs) where they benefited from an immediate tax subsidy to help compensate for the higher risks implicit in these assets. READ MORE

Global VC Funding Falls Dramatically Across All Stages In Rocky Q1

Venture and growth investors in private companies continued to scale back their investment pace in the first quarter of 2023, Crunchbase data shows.

Global funding in the first quarter reached $76 billion — marking a 53% decline year over year from $162 billion in the first quarter of 2022. That’s even including a reported $10 billion investment into OpenAI — largely from Microsoft — and a $6.5 billion round for payments giant Stripe. Without those two large deals, Q1 venture funding would have been down even more dramatically, close to $60 billion. READ MORE

Are private equity valuations too high—and would we know?

Should there be a better way to value private equity assets? It's a question that's been on my mind since last year, when public equities took a massive dip but private market valuations remained high.

I started working on this story in late February, just a couple of weeks before the failure of Silicon Valley Bank brought wider banking instability issues into stark relief. READ MORE

The World Of Venture Capital Has Changed: Venture Capital Must Pivot

Just one more narrative about the decline in the role that venture capital is playing in our current world.

Michael Casey, the founder of Portico Advisers, writes in the Financial Times:

"Venture capital blossomed from an artisanal strategy into a behemoth over the past decade, raising $163 billion last year in the U.S. alone." READ MORE

Why VC Is A Driving Force Of Innovation

Sometimes, it takes a monumental event in an unfamiliar sector to open our eyes to how complex and important things are, and how much the general public doesn’t understand. The recent banking crisis has been such an event. Despite the fact that private market investing and venture capital (VC) are critical factors in our nation’s position as a global innovation leader, it’s relatively unfamiliar to many people. READ MORE

VC environment tilts toward investors

SVB Financial Group's collapse added another concern to venture capital funding after the sector was already under pressure. The once high-flying asset class' roadblocks include higher interest rates, weaker public equity markets and valuations under pressure. But the shakeout might result in venture capital funds receiving more favorable investing terms from portfolio companies, which could lead to higher returns down the road. READ MORE

Founders Beware - The Devil's In The Term Sheet Details

In the high-stakes game of startup financing, founders must approach VC term sheets with a healthy dose of scepticism and due diligence. By understanding the potential red flags and negotiating for more founder-friendly terms, entrepreneurs can secure the funding they need while maintaining control over their company's destiny. READ MORE

Venture capital tries to find way in post-SVB era

More than two weeks after the collapse of Silicon Valley Bank sent shock waves through the venture capital industry, the broader startup ecosystem that revolved around the innovative lender is still grappling with the aftermath.

That ecosystem includes startups with deposits in the bank, venture capital funds that invested in the startups, and limited partners that financed the venture funds. READ MORE

The Relevance Of Private Equity Investments For Medium-Sized Companies

As someone who has worked in consulting, venture capital and private banking, I have seen firsthand the many advantages that private equity investment can bring to midsized companies. Private equity firms have a unique set of skills and resources that can help these companies achieve their growth objectives and maximize their value. READ MORE

Private Credit Funds, Banks Will Aggressively Push To Fill SVB’s Role — Likely At Higher Rates

With much of what once was Silicon Valley Bank falling into the hands of Raleigh, North Carolina-based First Citizens BancShares, it is fair to wonder what the future of lending and credit may look like for venture-backed startups.

SVB’s outsized role in venture debt and lending will be taken over not just by a few smaller banks, but also likely will raise interest in many private credit funds — or shadow banks — and others that have eyed the industry for a while, say those in the venture world. READ MORE