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PE & VC News

Every now and then we review how the financial sector is doing.  Before looking, which U.S. state would you guess is #1 for financial sector employment?  Would you guess New York – the home of Wall Street?  Perhaps Chicago (Illinois), with its heavy focus on insurance services?  What about California, with its heavy focus on venture capital and private equity professionals?

What about growth?  Which states would you guess have the strongest absolute growth in financial sector employment?  Perhaps places with lower income tax burden, such as Florida or Texas?  Perhaps the largest population states – California, New York, Florida, Texas – would lead the pack here?  Or, perhaps the high cost of living in these states is pushing the financial sector to employment in other states?

Take your guesses now, because the answers follow.

Where is the Base of Financial Employment

First, a look at where the base of financial employment is headquartered.  The tree map below is average monthly employment in the financial sector by U.S. state for the first seven months of 2018.  Interestingly, financial firms headquartered in California hold first place, with about 5.9 million employees.

The remaining states in the top five include Texas (5.4 million), New York (5.0 million), Florida (4.0 million), and Illinois (2.7 million).

Unsurprisingly, the financial employment base in a state is moderately related to the population base of a state.  This correlation, though, is not perfect, and the industry is certainly changing where it wants to be headquartered.

Financial Employment1 Source: BLS

Where is Financial Employment Growing?

The relatively moderate connection between the population base and the financial industry employment base means that we need to look at growth measures to see how things are changing.  The following line graph has the growth in financial industry employment by state from 1990 through July 2018.

The chart provides no really big surprises.  The biggest population states show the strongest absolute growth in employment.  On top is California, with approximately 800,000 new financial industry employees in 2018.

Perhaps the most surprising finding is the strength of the financial industry in Texas.  Financial industry employment growth in Texas is closing in on California’s 800,000, and if the economy continues to expand, financial industry employment in Texas may surpass California within the next few years.  Guess it pays to have a reputation of light regulation, no income tax, and a population that is entrepreneurial and independent by nature.

Financial Employment Growth2 Source: BLS

Where is the Growth Rate in Financial Employment Strongest?

The previous two sections had a fair amount of connection with the population base, meaning that financial industry employment grows by more the larger the population of an area is.  Reported here is the growth rate experience.

Before looking, take a guess at which states have the strongest financial industry employment growth rate?  Would you guess small states, such as Massachusetts or perhaps states with no income tax, such as Nevada?  The result follows.

Interestingly, the top state for financial industry employment growth rate is … drum roll please … none other than … New Mexico.  The financial industry has expanded by an average of 4.3 percent for 2018.  Surprised?  We were too.

The other top growing states for the financial industry include Idaho (4.2 percent), Wyoming (3.7 percent), Washington (3.4 percent), and Florida (3.0 percent).  Interestingly, only one of the largest states with a financial industry base also shows up with a strong financial industry growth rate.

Financial Employment, Growth Rate3 Source: BLS

Conclusion

In a look at the financial industry’s employment base, some interesting and unsurprising results appear.  Perhaps the most interesting result is the growth of the industry in certain states, while the weakest of the financial industry in other states.  Times are changing, and so is the financial industry.

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Private equity data provider Pitchbook is out with their annual report on which universities produce the most venture capital (VC)-backed companies?  Before looking, which universities would you guess show up on the list?

Would you guess Ivy League schools, with their highly ambitious, academically fresh graduates?  Perhaps you’d guess universities in places where the state government’s tax policy and regulations are more favorable to entrepreneurship?

Here’s the look.

The Top 10

The top university for creating VC-backed companies is – drum roll please – Stanford.  The California-based institution has seen 1,178 VC-backed entrepreneurs, 1,015 companies, and a whopping $28.84 billion in capital raised.  Stanford has been in first place for a while.  Will a university ever knock the Cardinal out of first place?

Interestingly, another California-based university sits in second place.  The University of California at Berkeley has had 1,137 entrepreneurs, 1,012 companies, and $20.78 billion in capital raised.

Rounding out the top five are third place Massachusetts Institute of Technology (941 entrepreneurs/819 companies/$21.24 billion capital raised), Harvard University (900 entrepreneurs/799 companies/$25.35 billion raised), and the University of Pennsylvania (838 entrepreneurs/757 companies/$15.82 billion in capital raised).

Are you surprised by which universities show up at the top of the list?  Stanford, University of California at Berkeley, Massachusetts Institute of Technology, Harvard, and the University of Pennsylvania.  All well-respected universities, two of which are Ivy League institutions and two of which are top California-based schools.

Perhaps somewhat surprisingly, two states – California and Massachusetts – make up 80 percent of the top 5.  This is generally consistent with the geographic breakdown of venture capital raised by state.

With the top 5 established, which universities would you guess show up ranks six through ten?

The bottom half of the top 10 includes Cornell University (750 entrepreneurs/693 companies/$20.10 billion in capital raised), University of Michigan (712 entrepreneurs/638 companies/$12.07 billion in capital raised), Tel Aviv University (640 entrepreneurs/531 companies/$7.91 billion in capital raised), the University of Texas (636 entrepreneurs/582 companies/$7.70 billion in capital raised), and the University of Illinois (526 entrepreneurs/484 companies/$9.94 billion in capital raised).

Interestingly, the top 10 of VC-backed companies and the universities their founders attended includes only one non-U.S.-based institution, Tel Aviv University.  We wonder how this list will look 20 years down the road with the ambitions of Chinese entrepreneurs.

Perhaps more interestingly is the lack of a European-based university in the top 10.  Given that the European Union is the largest common economic zone (the GDP of the combined European Union nations is about 20 percent higher than the United States).

Ranks1to10 Source: Pitchbook

Ranks 11 through 25

Shifting now to universities ranked 11th through the 25th.  Would you guess some European and China-based companies show up here?  Interestingly, the answer is no.  Of the 11th through 25th ranked universities, only one non-U.S. university shows up on the list – Technion – Israel Institute of Technology (Israel).

The 11th ranked university is Yale University – the fourth Ivy League school on the list thus far – with 504 entrepreneurs, 458 companies, and $11.44 billion in capital raised.  The remaining members of the top 25 includes Princeton, University of California at Los Angeles, Technion – Israel Institute of Technology, University of Wisconsin, Columbia University, Brown, University of Southern California, Carnegie Mellon University, Duke University, University of Waterloo, University of Washington, Brigham Young University, New York University, and Dartmouth College.

11to25 Source: Pitchbook

The Rest of the Top 50

The remaining members of the top 50 (ranks 26 through 50) are given below.  Lots of money being invested in bright-minded college graduates.

26through50 Source: Pitchbook

Conclusion

In an interesting review of the top universities for entrepreneurship, some interesting findings emerge.  Perhaps the most interesting finding is the dominance of U.S.-based universities in garnering capital from venture capital funds.  Of the top 25 universities, 23 of the 25 are U.S.-based.  Still good to be an American.

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Private equity data collector Prequin is out with a fascinating look at the top 100 private debt companies.  Which companies would you guess show up on the list?  Where would you speculate the majority of private debt companies are headquartered?  Make your guesses now, because the answers follow.

Where the Top 100 Private Debt Companies are Headquarters

First off, a look at where the top 100 private debt companies are headquartered.

Perhaps completely unsurprising, of the top 100 private debt fund managers, 68 are headquartered in the United States, as indicated in the following graphic.  Far behind in second place is the United Kingdom at 12 of Western Europe’s 23 fund mangers.

Interestingly, China only has 4 of the top 100 private debt fund managers and the broader far east only has 1.

Astoundingly, the aggregate amount of debt raised by the top 100 fund managers sums to approximately $626 billion over the past 10 years.  Private debt fund managers also have an estimated $186 billion in dry powder (unallocated cash) at their disposal.  The size of these figures are amazing given the general size of the global economy.  Private debt fund mangers are doing just fine.

Top 100 Geography Source: Prequin

Who are the Companies?

Switching to the top 100 companies, the following few graphics have the answer.  Before looking, take another guess given the geographic concentration of private debt fund managers in the United States and Western Europe.

Interestingly, the top spot belongs to Oaktree Capital Management.  Based out of Los Angeles, California, the fund has raised an aggregate of $51.5 billion over the past 10 years and has $12.9 billion in dry powder available.

In second place is Goldman Sachs Merchant Banking Division.  The New York, New York-based company has raised an estimated $37.4 billion over the past 10 years and has an estimated $3.1 billion in dry powder.

In third place is GSO Capital Partners at $33.3 billion and dry powder available of $13.2 billion.

Fourth and fifth place belong to Ares Management ($23.4 billion raised/$11.4 billion dry powder) and Intermediate Capital Group ($23.4 billion raised/$10.3 billion in dry powder).

Rounding out the top 10 are HPS Investment Partners ($20.6 billion raised/$8.3 billion in dry powder), Apollo Global Management ($19.2 billion raised/$5.1 billion in dry powder), Centerbridge Capital Partners ($18.9 billion raised/$5.5 billion in dry powder), Fortress Investment Group ($16.4 billion raised/$3.2 billion in dry powder), and Avenue Capital Group ($15.5 billion raised/$1.0 billion in dry powder).

Perhaps unsurprisingly, 7 of the top 10 are based in New York, two are in Los Angeles, and one is headquartered in London.

Top 50 Private Fund Managers Source: Prequin Top 61 to 100 Fund Managers Source: Prequin

What Sectors are the Institutional Investors From?

Last, a discussion on the sectors from which the institutional investors of private debt fund management are from.  Before looking, which sectors would you guess show up on top?  The results follow.

Interestingly, the top institutional investor in private debt is public pension funds, accounting for about 34 percent of all funds.  In second place are private sector pension funds.  The third through fifth places include insurance companies (14 percent), asset managers (14 percent), and other entities.

Top 100 by Tyope

Conclusion

Overall, a fascinating look at the private debt fund managers, institutional investors in private debt, and where private debt fund managers are headquartered.

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How is Financial Employment Doing Compared to Other Sectors?

August 6, 2018

The economy is booming.  Last week’s GDP figure – a measure of how large and strong an economy is – came in at $20.4 trillion.  This was the first time nominal GDP had come in above the $20 trillion mark.  On a year-over-year basis, GDP is growing at a 5.4% click.  Healthy, very healthy. Employment […]

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How Did Fundraising Look in the First Half of 2018?

July 23, 2018

The past few years have been quite good to private equity managers, with fundraising and pay reaching levels not seen in a decade (in some cases ever).  With this backdrop, Private Equity International (PEI) recently released its fundraising report for the first half of 2018.  How does the fundraising picture look?  Is private equity fundraising […]

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China’s Newest Unicorns

July 9, 2018

Pitchbook, the private equity data provider, is out with a fascinating new look at the companies headquartered in China with a valuation of $1 billion or more.  These companies are entities that surpassed the $1 billion valuation mark sometime in 2018. Before looking, take a guess at which companies you think would show up on […]

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Looking at Valuations: Does It Matter if You’re Public?

June 25, 2018

Pitchbook, the private equity data provider, recently released their second quarter Playbook report.  In the report is a fascinating discussion on the gain in valuations by companies that are public versus private. What Did Pitchbook Do? What exactly did Pitchbook do?  The data collection company took a group of private technology companies, so-called unicorns ($1 […]

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Why are Secondary Buyouts Doing So Well?

June 11, 2018

Second buyouts (SBOs) are on the rise.  What are they and why are they doing so well?  Here’s a look, according to a fascinating new research note from private equity data provider Pitchbook. What are Secondary Buyouts? The topic is secondary buyouts, but what exactly are secondary buyouts?  In private company investing, there are often […]

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Will VC Values Continue to Explode Through 2018?

May 28, 2018

Happy Memorial Day!  Is there any better way to celebrate the day than to postulate on where venture capital (VC) valuations are heading  for the remainder of 2018?  Well, yes there is, but for the moment let’s think about valuations. Where Valuations Have Been First, here’s a look at Pitchbook’s recently released first quarter valuation […]

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Unicorn Companies – Fastest and Slowest to $1B

May 14, 2018

Private equity data collector Pitchbook is out with a fascinating look at which unicorn companies were the fastest to $1 billion in valuation and which were the slowest.  (For newbies, a unicorn company is one with a private valuation of $1 billion or more). Before taking a look, which 10 companies would you guess show […]

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