Category: downturn
February 15, 2025 Pitchbook : Record highs for down rounds
In 2024, one-quarter of Series D+ venture financings in the US were completed at a lower valuation—and that's actually a lower percentage than the year prior. Down rounds have been spiking for the past few years, unsurprisingly. Those same Series D+ rounds were being completed at lower valuations at a 7% occurrence in 2021. Receiving equity interest from investors, even in a down round, is a step in the right direction away from shutting down. (read more…)
May 22, 2024 Emergence Capital : Beyond Benchmarks 2024
ARR growth rates decreased significantly in 2023, and growth stage companies were impacted the most. Fundraising is meaningfully harder today than it has been in the past few years. 60% of companies leveraged GenAI in a 2023 product release. Public Markets no longer reward "Growth at All Costs"; however, Public Markets still value Growth at 2-3x Profitability (read more…)
March 4, 2024 Business Insider : ‘2024 will be the year of the zombie VC reckoning.’
PitchBook says the number of VCs in US deals peaked at 18,504 in 2021 and fell to 9,966 last year. The term "zombie VC" first came into vogue after the Great Recession when a wave of firms slowly met their demise. But the destruction happening now will likely be much uglier considering the abundance of new VC funds started during the height of the tech boom from 2018 to 2022 — more than 1,100, according to PitchBook data. (read more…)
August 12, 2023 Pitchbook : Down rounds at a high for US VC since 2017
Dealmaking and valuation figures have stagnated or declined across nearly all VC stages, perpetuated by a lifeless IPO market that continues to trap value. About 15% of all funding rounds completed during the second quarter of the year have been down rounds, the highest quarterly figure since Q4 2017. (read more…)
July 10, 2023 Pitchbook : LP-led secondaries volume is expected to overtake GP-led volume this year
LP-led deals are poised to lead the secondary market in 2023. Fueled by more favorable pricing agreements, LP-led deals could overtake GP-led volume by a 60/40 (or maybe even a 70/30) split. (read more…)
CATEGORY: capital, downturn, secondaries
May 25, 2023 Juniper Square : The State of Venture Capital in 2023
While 63% of VC firms plan to raise capital this year, 66% believe the process will be more difficult than in the past. 45% of respondents say that their LPs are pressuring them to find exit strategies for the portfolio. (read more…)
CATEGORY: downturn, resilience, VC
September 22, 2022 Pitchbook : Down Rounds, Impacts, and Exit Opportunities
Companies taking on a down round often continue growth. Just 13% of companies raising a down round from 2008 to 2014 were unable to raise a new round or exit immediately after the down valuation investment. Nearly 20% of post-down round exits occur via PE buyout, which is a significantly higher proportion than what is seen in the broader venture exit dataset. The data also shows that investing into a down round could prove to be an investment strategy with decent returns. The fact that 88% of known exit valuations for companies taking a down round were higher than the down round valuation should increase the confidence in down round participants. (read more…)
CATEGORY: downturn, leadership, resilience
June 17, 2022 Crunchbase : Surviving Down Rounds
Raising money at a sky-high valuation feels like a big win on the day you close. But it also raises expectations that much higher. The consequences of failure are asymmetric. If you stumble and need a down round, the VCs just write a check or even buy more on sale. Whereas you can lose all your shares, all your vesting, or even your job. Those are years you cannot replace. So be prudent. Leave enough room to be sure of raising the share price in the future, even if you make mistakes and even if the markets are down. In short, enjoy your swim. Just please keep your suit on. (read more…)
CATEGORY: downturn, leadership, resilience
November 16, 2021 Oaktree Capital : Global Opportunity Knocks: The Evolution of Distressed Investing
The evolution of this investment style has been a gradual process. In the late 1980s, investors like Oaktree’s principals, who focused on distressed assets, were primarily targeting U.S. high yield bonds. The opportunity set eventually expanded to include bank debt, mortgages and opportunities in growing non-U.S. markets. In the 1990s, distressed opportunities investors increasingly began exploring situations that were complex but not classically distressed, especially those in illiquid markets or niche industries in which companies’ access to capital was limited.
In the decade following the GFC of 2008-09, investors began finding opportunities in an ever wider array of areas, such as direct lending, portfolios of non-performing bank loans, real-estate-related debt, specialty-finance platforms and structured credit, among others. Experienced investors found that private credit and other complex opportunities could – like traditional distressed debt – provide the combination of significant upside potential and strong downside protection.
(read more…)CATEGORY: debt, downturn, leadership
February 9, 2021 Institutional Investor : Private Equity Firms ‘Try to Manipulate Their Performance’ When Raising Money
The researchers found that when private equity firms exhibited high fundraising stress index scores, they were more likely to engage in “upward earnings management” in portfolio companies. A one-unit increase in the stress index resulted in a 10 percent increase in discretionary working capital accruals. The researchers found that a firm’s reputation — as measured by the Private Equity International ranking — did not have an effect on whether or not a firm engaged in this practice. However, the level of dry powder on hand does matter, but only in cases of extreme stress, the research showed. (read more…)