1031 Exchanges In The World Of Private Equity Commercial Real Estate

Commercial real estate investors are understandably interested in pursuing strategies that reduce or even eliminate tax liabilities. It’s no surprise that some of the most common questions investors ask are related to deferring taxes upon the profitable sale of a commercial property, and for many of these investors, a 1031 exchange is a great option. A little-known but important fact in the commercial real estate industry is that investors can work with a private equity sponsor to complete a 1031 exchange. READ MORE

Hedge funds take on private equity in battle for distressed companies

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Hedge funds are challenging private equity firms over restrictions that dictate who can lend to or buy the debt of buyout-backed companies, weighing legal action to capitalise on a surge in corporate distress. Private equity portfolio companies can be particularly exposed to interest rate rises because of buyout firms’ reliance on debt to buy businesses. The firms draw up “whitelists” of approved lenders to stop potentially troublesome credit investors from using a position in the companies’ debt to steer the business’s strategy. READ MORE

2024 M&A Outlook: PE Comes Off the Bench

2023 brought a relatively sluggish year for M&A as macroeconomic conditions kept many key players on the sidelines. However, S&P’s latest analysis predicts that several factors may spur dealmakers into action in 2024.

The decline in deal announcements and total value, observed since 2022, has been attributed to the impact of a rising interest rate environment, leading to increased financing costs and decreased equity prices. While expectations suggest that interest rates will remain somewhat elevated, an end to the Federal Reserve’s hiking cycle will improve the M&A outlook. READ MORE

Industries Without Investors

Venture-capital backed startups almost all cluster in the same handful of industries, mostly various types of software. This leaves a variety of large and economically important sectors with almost no venture-capital backed startups. That means those industries see fewer new companies and new ideas; they must rely on either growth from existing firms, which are unlikely to embrace disruptive innovation, or on startups that bootstrap and/or finance with debt, which tend to grow slowly. READ MORE

2024 Commerce Predictions, According to Top Venture Capitalists

Commerce, or the buying and selling of goods globally, is one of our economy’s largest drivers and continues to see rapid evolution. At the dawn of 2024, we are living through continued geopolitical tensions, more war, and rising deglobalization; a seemingly-averted recession, stabilizing inflation, and a new (higher) cost of capital; and, of course, the mass adoption of consumer-focused AI. What is in store for commerce? And what are investors paying attention to? READ MORE

US startup funding drops 30% in 2023 despite AI frenzy

U.S. investors injected $170.6 billion into startups in 2023, a decrease of nearly 30% from the $242.2 billion recorded in 2022, as the venture capital funding market continues to grapple with valuation resets amid rising interest rates, according to PitchBook data released on Thursday.

The latest data, from a year in which megadeals in artificial intelligence captured the imagination of investors, shows a persistent decline from the peak of U.S. venture funding in 2021 when startups raised $348 billion. READ MORE

Looking at CES 2024: Startups and A.I. Take Center Stage

The annual Consumer Electronics Show (CES 2024) kicks off this week in Las Vegas. The tech conference, once a product showcase for giants like Sony and Samsung, has morphed into a hub for small tech companies over the past several years. 

Since the pandemic forced companies to stage virtual launch events, large companies have followed Apple's lead, saving big product reveals for private, in-house showcases. This shift effectively opened the popular tech conference up to startups. For smaller, newer companies, shows like CES are prime opportunities to mingle with distributors and manufacturers and bend the ears of influential tech journalists in a quest for both publicity and the market's attention.  READ MORE

How to build the foundation for a profitable AI startup

Investment in AI companies has now entered its cautious phase. Following a year when the money directed at AI startups far outpaced any other sector, investments have recently become more sound or validated. Investors are more wary about the AI hype and are looking for companies that will turn a profit.

Building a profitable AI business poses unique challenges beyond those faced when launching a typical tech startup. Systemic issues like the high cost of renting GPUs, a widening talent gap, towering salaries, and expensive API and hosting requirements can cause costs to quickly spiral out of control. READ MORE

A VC Just Shared His Formula for Requesting Introductions. It's Pure Genius and Will Work for Anyone

Kirby Winfield, founding general partner of Seattle pre-seed venture capital firm Ascend just shared his incredibly smart formula for entrepreneurs to request "warm" introductions from their investors. The instructions are clear, sensible, can easily be followed by anyone with a LinkedIn account, and should work for anyone seeking business introductions for almost any purpose. (Many thanks to my friends at GeekWire for linking to this from their email newsletter.)

I'm already planning how I can use this approach myself. It's well worth checking out Ascend's blog post, which includes lots of screenshots so you can see exactly what to do. Here's a quick overview. READ MORE

Brace Yourself, Start-ups: VC Investments May Hit a 5-Year Low in 2024

After years of raising over $100 billion annually, start-ups seeking funding from venture capital firms may have to prepare themselves for the worst thanks to increasingly challenging market conditions.

An EY analysis noted that in 2023, venture firms invested $140 billion in portfolio companies. In every year since 2018, venture-backed portfolio companies have raised more than $100 billion. READ MORE

Regulatory Creep and Venture Capital Risk Management

Since the 2008 financial crisis, the SEC has made repeated encroachments into the private funds industry. Registered investment advisers (RIAs) have borne the heaviest regulatory burden: routine examinations, frequent rulemaking, and aggressive enforcement activity. The harshest government gaze has always been reserved for retail-facing firms, but RIAs advising sophisticated accredited investors (e.g., private equity fund advisers) have also received a lot of attention from the Securities and Exchange Commission (SEC) over the past 15 years. READ MORE

VCs love the idea of continuation funds. Here's why there aren't more of them.

The worst M&A and IPO environment in over a decade is forcing many VC firms to consider selling their startup stakes to secondary buyers in order to return capital to LPs.

While VCs are exploring all flavors of secondary solutions, continuation funds are gaining more momentum than other transaction types, investors say. These vehicles allow existing LPs to sell aging assets to new buyers or roll those investments into the new fund. READ MORE

Explained in 5 charts: Venture capital in 2023

Barely two weeks into the year, the 2024 startup news machine is running at full clip. A quick scan of TechCrunch headlines reveals venture funds adding new capital, and startups that have either raised lots of money or are in the process of closing deals to raise lots of money.

We’ve gone over how venture capital investment fared across the world over the past few days, but today we wanted to provide a more comprehensive look at the numbers. READ MORE

Can private equity and public investors reconcile?

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In the 1984 pilot episode of Miami Vice, Sonny Crockett and Rico Tubbs tear through neon-lit Miami in a Ferrari while Phil Collins sings “I can feel it coming in the air tonight.” There’s little dialogue in a tense four-minute scene, punctuated by the song’s terrific transitory drum solo. Crockett stops off at a phone booth to ask his estranged wife, “It was real, wasn’t it?”, while Tubbs loads a shotgun for a showdown with a drug trafficker. The air is thick with suspense and anticipation. Jump to today, and equity capital markets bankers can feel it coming in the air, but they’re not sure what “it” is. Banks have bulging pipelines of exciting IPOs, even after discounting the hype and hyperbole. But those same bankers know that after two years of deal doldrums, the higher-ups’ patience is wearing thin. The expected flow of IPOs last autumn dried up after a soggy after-market performance. The IPO boom of 2020-21 was real, wasn’t it? Or will 2024 be a reckoning? READ MORE

VC world rocked by allegations against Carta, a fintech as core to startups as SVB

Carta, a fintech startup that rode its message of democratizing startup ownership to a $7.4 billion valuation, is facing mounting blowback after a client accused one of the company’s sales employees of trying to use confidential customer information to broker trades.

Carta has been celebrated by Fast Company and others for giving startup employees the tools to reap the benefits when their companies go public. It primarily makes software used by many early-stage ventures to track ownership. READ MORE

What to Expect in Private Equity and Venture Capital in 2024

Many professionals in alternative investments are relieved that 2023 is behind us. Despite the challenging year, there are potential significant 2024 tailwinds that make investing in Private Equity (PE) and more specifically Venture Capital (VC) attractive again.

For instance, the U.S. VC fundraising environment is expected to rebound because the 2023 exit market was pretty much closed. In 2023, the rate at which capital has been distributed back to limited partners is at the lowest level since 2003. Lack of liquidity contributes to how much capital can be invested into new VC funds. Predicting the full reopening of the U.S. IPO market is very subjective but there are encouraging indicators. READ MORE