Examining Plans for Private Equity Portfolio Companies

The continued influence and scale of private equity (PE)-backed corporate takeovers has increased many companies’ interests in learning about the long-term incentive (LTI) strategies that PE firms adopt and implement for their portfolio companies (PortCo).  

WTW has conducted its first-ever survey of PE firms and their portfolio companiesOpen in a new tab to determine common plan designs that are established by PE firms at the time of their investment. This follows an August 2022 articleOpen in a new tab, which explained WTW’s findings based on publicly disclosed initial public offering data reported by PE-backed portfolio companies.  READ MORE

What Does ‘Dry Powder’ Actually Mean For Startups?

As startup fundraising appears to be stabilizing after a few tumultuous years, there’s one topic which has reliably featured in that conversation: dry powder.

“Dry powder” refers to the amount of money that limited partners have committed to venture capital funds. Rather than being delivered upfront, that capital is requested in increments by VCs during the first few years of a fund in order to meet funding obligations to founders. That estimated number stood at around $580 billion at the end of 2022. READ MORE

Global Venture Funding In July Was Second-Lowest This Year As Seed Startups Are Hit Hard

Global venture funding in July 2023 was the second-lowest monthly total since the reset began more than a year ago, Crunchbase data shows. With the slowdown now in its fourth or fifth quarter, it increasingly looks like the startup ecosystem is undergoing a top-to-bottom reset, from seed through late-stage startups and all the way to the investors that back them.

Global venture funding in July 2023 totaled $18.6 billion — down about 20% month over month, and 38% compared to the $29.8 billion invested in July 2022. READ MORE

Valuation Compression Hits Early-Stage Venture Capital

As valuation continue to compress at venture-backed companies, even early-stage startups have begun to feel the pinch.

During the 2022 market downturn, early-stage companies — those at series B or earlier — held up better than their late-stage counterparts, reaching a median valuation of $45 million in the third quarter of 2022, up 50 percent from the highest quarterly figure before 2021. One reason for this is that early-stage startups are further removed from potential exits, so the impact from the heightened volatility in public markets is less severe than that experienced by late-stage companies. READ MORE

Biden's ban on Chinese AI investments will change venture capital

President Biden on Wednesday proposed an effective ban on U.S. venture capital and private equity investments into Chinese tech companies, via an executive order aimed at bolstering national security.

Why it matters: This is the end of unfettered globalization in venture capital and private equity.

Details: This is the so-called "reverse CFIUS" rule that's been expected since last year, and its implementation is subject to a comment period and rulemaking by the U.S. Treasury Department. READ MORE

Bootstrap, Sell Or Recapitalize? A Tech Entrepreneurs’ Guide To Surviving A Capital Crunch

In the ever-changing landscape of the tech industry, even the most promising startups can find themselves in a precarious financial situation. For many early-stage tech entrepreneurs who raised capital in the golden era of 2021, the winds have shifted, and the market is now down.

The revenue multipliers that once buoyed their ventures are now significantly lower, and investment criteria is more stringent. Those who did not reach profitability will struggle to secure additional external funding. READ MORE

What venture capital layoffs mean for the startup economy

Silicon Valley was thrown off balance this year thanks to the ongoing rise in interest rates and a particularly unpredictable stock market. It’s led to a rare event in the startup economy: layoffs at venture capital firms.

In the past few weeks, two of the biggest names in VC — Sequoia Capital and Y Combinator — parted ways with a number of their staff and investors.

These kinds of layoffs were once unthinkable, according to Sarah McBride, a reporter at Bloomberg News. READ MORE

Are biotech VCs headed for better times? In one firm’s success, lessons for turning crisis into profit

Right now, venture capital firms are struggling with the impact of a persistently anemic biotech market. But if past downturns are any indication, some VCs will steer out of the slump into brighter times.

The story of one fund overseen by The Column Group, a firm profiled in the 2023 edition of “Ranking biotech’s top venture capital firms,” STAT’s annual report on VC performance, shows how that might happen. READ MORE

The downturn is really hitting seed startups now

Global venture funding in July 2023 was the second-lowest monthly total since the reset began more than a year ago, Crunchbase data shows. With the slowdown now in its fourth or fifth quarter, it increasingly looks like the startup ecosystem is undergoing a top-to-bottom reset, from seed through late-stage startups and all the way to the investors that back them.

Global venture funding in July 2023 totaled $18.6 billion — down about 20% month over month, and 38% compared to the $29.8 billion invested in July 2022. READ MORE

Private equity’s growing role in M&A has clear benefits

Private equity firms have been playing an increasingly important role in the M&A market. The private equity market tripled in size during the last decade, and a McKinsey report revealed that 2022 was the second most active year in history for private equity-backed deal volume. Additionally, an article published by Harvard observes that private equity’s share of the overall M&A volume is approximately 36%.

There are a number of factors driving the growing role of private equity in M&A. One factor is the availability of capital. Private equity firms have access to large amounts of capital, which allows them to make big deals. According to PWC, private equity firms in the United States have invested approximately $10.7 trillion in capital over the last decade. Private equity firms also have access to more creative financing solutions such as elevated equity contribution, seller’s notes, paid in-kind financing and private credit markets helping them to advance in deals that other parties may not be able to. READ MORE

Bankruptcies among private equity portfolio companies on track for 13-year high

Private equity portfolio companies in the US are on course in 2023 to post the highest number of annual bankruptcy filings since 2010, as credit tightening and interest rate hikes push highly leveraged companies toward nonperforming status.

In the first half of 2023, 338 US companies filed for bankruptcy protection, including 54 companies with private equity or venture capital backing, according to an analysis of S&P Global Market Intelligence data. READ MORE

How I Bootstrapped to $100 Million Without Venture Capital Funding

Venture capital (VC) funding has plummeted in 2023 due to high interest rates and less enthusiasm from investors. Research shows that VC funding almost halved globally in the first six months of this year, ushering in what some have called a VC winter.

Despite this, entrepreneurs shouldn't give up hope of making their dreams a reality. Even though VC funding has slowed to a trickle, good ideas to launch a successful business have not. READ MORE

Venture-backed startups are failing at record rates

If current trends continue, more VC- or private equity-backed startups will fall into bankruptcy this year than at any point since 2010. 

In the first half of 2023, 338 U.S. companies filed for bankruptcy protection, according to newly released S&P Global Market Intelligence data, including 54 companies with private equity or venture capital backing. At that rate, 108 VC-backed startups will fail by year’s end, besting the 95 that failed during 2010. READ MORE

How To Bring 10,000 More Women Into Venture Capital

Historically, venture capital has been dominated by men in Silicon Valley, who may have fueled massive innovation but who also fueled questionable cultures and some business practices that most of us wouldn’t want to replicate. Despite the public stories of harassment, discrimination and biased decision-making, some courageous women have broken in and learned the trade. By my count, today we have more than 425 women-run venture firms with the ability to dramatically shift the innovations, leaders, jobs and corporate cultures of the future, by investing in and supporting companies and ideas that support women around the world. Yet, because many of these firms can’t find investors in their ventures, they can’t scale funding fast enough to sustain a reasonable operation. READ MORE

3 Reasons To Downgrade VC And Embrace A New Era In Venture Financing

Is the failure of Silicon Valley Bank one of the first dominoes to fall signifying the end of the easy money in venture financing? Or will the days of wine, roses, cheap money, and SPACs return with the resurgence of the stock market?

Ventures are said to be holding on to the cash they raised earlier, and are reluctant to raise more because some valuations have fallen by half or more. They are also waiting for the return of the glory days and high valuations of the recent past. READ MORE