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By most measures, the global economy is continuing on a healthy, expansionary path.  Leading the way is the American economy, with the most recent growth figure coming in at a 3.1 percent annualized pace.  The healthy state of the global economy begs the question: is private equity headed for a new buyout boom?

Here’s what the most recent Pitchbook data show.

The Data Table

Before going into the visually appealing graphic, here’s the cash flow data into and out of the private equity industry, according to private equity data provider Pitchbook.

The second column from the left is the total contributions to the private equity industry, in billions of U.S. dollars.  In 2002, total contributions summed to about $64 billion.  Total contributions continued to expand from 2002 to 2007, peaking at about $256 billion.  The global economy then went south, and so did contributions to the private equity industry.  Contributions initially dropped from $256 billion in 2007 to $228 billion in 2008, then continued to fall precipitously, bottoming out at $137 billion in 2009.  Following the bottoming, contributions began to come back, although in a marginally choppy pattern.  At the end of 2016, total contributions to the private equity universe summed to about $236 billion.  Healthy, but still below the 2007 peak of $256 billion.

The middle column, third from the left, is total distributions.  In 2002, total distributions were about $28 billion.  The amount of distributions continued to grow from 2002 to 2007, peaking in 2007 at about $182 billion.  When the global economy soured, total distributions declined quickly, bottoming out at about $61 billion in 2009.  Since 2009, total distributions have expanded quickly, with the most recent 2016 estimate at about $303 billion.  The $303 billion is a drop from the 2014 peak of about $360 billion.

The last column, the far right column, is the difference between total contributions and total distributions, titled net cash flow.  Net cash flow in 2002 was about -$36 billion.  Net cash flow then continued moving positive, to -$22 billion in 2003, and then to about $22 billion in 2004.  Net cash flow then flipped again, bottoming at about -$128 billion in 2008.  After peaking, net cash flow continued to move towards positive, peaking at about $155 billion in 2014.  Since 2014, net cash flow has turned the opposite direction again, with the most recent 2016 value at about $67 billion.

Net cash flow table Source: Pitchbook

The Visual View of the Net Cash Flow Picture

A picture is worth a thousand words – here’s the visual depiction of the previous discussion.  In orange is the net cash flow.  Given the cyclic nature of the private equity business cycle, and the recent turn towards negative net cash flow (the orange line), it appears private equity is headed for a new buyout boom (i.e. when net distributions are greater than net contributions).  Let the good times roll for private equity investors.

Net cash flow visual Source: Pitchbook

Conclusion

In looking at the most recent cash flow figures for the private equity industry, the picture looks bright.  Presuming the current downward trend in net cash flow continues through 2017 and into 2018, then the private equity industry is headed for a buyout boom, perhaps even surpassing the 2008 boom year by 2019 (it’s a very “big” perhaps, though).  Life is good in the private equity world.

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The question here is simple – which financial firms have the largest exposure to unicorn companies?  Take a guess, because the answer follows shortly.  But, before getting into the list, a review of the top unicorn companies follows.

The List of Unicorns

First, what is a unicorn?  A unicorn is a company with a private value of at least $1 billion.  These are some of the world’s most well-known companies, as well as companies you’ve probably never heard of.  Here’s the list.

On top of the list is Uber Technolgies, with the amount of venture capital raised in the past 18 months at over $6.6 billion.  Uber is followed by WeWork, which has raised about $1.8 billion over the past 18 months.

Other highly valued private companies that have raised lots of cash over the past year-and-a-half include according to Pitchbook’s most recent venture capital report include (amount raised over the past 18 months in parentheses) Airbnb ($1.0 billion), Pivotal Software ($653 million), Outcome Health ($610 million), Lyft ($600 million), Unity ($581 million), Wish ($500 million), Intarcia Therapeutics ($476 million), Moderna ($474 million), Domo ($473 million), SoFi ($453 million), Instacart ($449 million), Oscar ($400 million) and Houzz ($400 million).  The list gets quite large when considering companies that have raised less than $400 million in the past 18 months.

the companies Source: Pitchbook

How many unicorns are there?  According the the private equity data aggregator Pitchbook, the number of unicorn companies has exploded in recent years, going from 1 in 2004 to 128 as of August 11, 2017.  Interestingly, growth has tapered off recently, with only 7 new unicorns in 2017.  In 2016, the world saw 10 companies enter the unicorn realm.

unicorngrowth Source: Pitchbook

The Investment Firms Backing the Most Unicorns

Now the question at hand – which firms have backed the most unicorns?  Take your guess, because the answer follows.

Interestingly, the top backer of private companies with a valuation of $1 billion or more is Fidelity.  Fidelity owns a stake in 34 unicorn companies.

The list of firms with investments in at least 20 unicorn companies includes (number of unicorn companies in which a firm has a investment in parentheses) Sequoia Capital (30), Andreessen Horrowitz (30), SV Angel (29), T. Rowe Price (27), Kleiner Perkins Caufield & Byers (27), GV (23), The Goldman Sachs Group (22), New Enterprise Associates (22), IVP (22), SharesPost (21), Tiger Global Management (21), Wellington Management (21), and Khosla Ventures (21).

The list gets much larger when considering all the firms with a stake in at least 1 unicorn company.

investors Source: Pitchbook

Conclusion

In a review of Pitchbook’s most recent unicorn report, some interesting findings emerge.  Among the most intriguing is the list of companies that back the most unicorns.  Interestingly, the top 6 backers include Fidelity at 34, Sequoia Capital at 30, Andreessen Horowitz at 30, SV Angel at 29, T. Rowe Price at 27, and Kleiner Perkins Caufield & Buyers at 27.  Must be a good time to be a financial backer of some of the world’s most valuable companies.

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CB Insights, the financial data tracking firm, recently put out a list of a new US-based companies on the “unicorn” startup list (a unicorn is a privately-held company with a valuation of at least $1 billion).  Who’s on it?

Just a Little Background

Before getting into the list of companies with newly minted valuations of over $1 billion, some background seems useful.  In the prior quarter, the startup universe welcomed another 9 companies to the unicorn world, the highest quarterly total since the third quarter of 2015.

Interestingly, although the typical point at which a company reaches a $1 billion valuation is in later stage funding rounds, 3 of this quarter’s 12 companies earned their $1 billion-plus valuation at mid-stage funding rounds.

Additionally, 8 of the 12 companies saw funding raises of over $100 million, while 3 of the companies landed on the unicorn list with raises under $100 million, including Quora, Rocket Lab, and Symphony.

The List

#1 Outcome Health

First on the list is Outcome Health, with a massive valuation of $5.5 billion.  The company provides education content and interactive health assessments through tablets, in-office video screens, custom applications, and various other medium.  Not bad for co-founders Rishi Shah and Shadha Agarwal.

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#2 Quora

Second on the list is a hub for online discussion, which allows users to post questions and give analysis and opinions on posed question.  Perhaps fascinating, given the perceived simple nature of the business model, Quora came in with a valuation of $1.8 billion, a nice chunk of change for co-founder and CEO Adam D’Angelo.

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#3 Avidxchange

Third on the list is is the first fintech startup – Avidxchange.  Avidxchange came in with a valuation of $1.4 billion, a healthy amount of value for a company that automates invoicing and payment processing for midsize companies.

Perhaps the most interesting aspect of the funding round was that Canadian pension-plan investor CDPQ funded a third of Avidxchange’s recent $300 million round.

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#4 C3 IOT

Fourth on the list is the first internet-of-things company, C3 IOT.  The company offers a platform for design, development, and operation of enterprise-scale big data, predictive analytics, artificial intelligence, and internet-of-things applications.  The amount of the round was undisclosed, but the valuation came in at $1.4 billion.

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#5 Robinhood

Rounding out the top 5 is Robinhood, with a valuation of about $1.3 billion.  The company has a novel idea, allowing users to trade stocks without paying commission.

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#6 – #12

The remaining 7 members of this quarter’s “group of 12″ unicorns includes Rubrik, Peleton, Clover Health, Crowdstrike, Rocket Lab, Katerra, and Symphony.

Conclusion

Overall, valuation continue the upward climb.  In CB Insight’s most recent accounting of newly minted unicorn startups, the list includes 12 more companies, ranging from healthcare to cloud banking.  It’s a good day to be an owner of a super-successful startup.

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Where Are 2017 Private Equity-Backed Deals Heading?

July 25, 2017

We’re a little over half way through 2017, and so far it’s been as an interesting year as expected.  We’ve seen equity markets explode through the roof, home prices continuing to rise, a seemingly never ending investigation into potential Russian meddling in the 2016 Presidential election, rumors of war with North Korea, and a host […]

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How Might Pending Federal Reserve Rate Hikes Affect Venture Capital?

June 26, 2017

This past week the Fed announced another quarter point rate hike.  The Federal Funds target rate will soon range from 1% to 1.25%, a full 1% higher than the when the Fed began its so-called “tightening” cycle in December 2015. Question: How might the upcoming Fed tightening moves affect the venture capital markets?  Here’s some […]

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The Jobs Report Stunk. What Does the Financial Jobs Picture Portend for the Latter Half of 2017?

June 12, 2017

Friday’s jobs report could aptly be described as a stinker.  Month-over-month employment growth came in at +138K, a fair bit below analysts’ expectations.  Early month’s growth figures for 2017 were also revised lower, to +50K for March and +174K for April.  The May results beg the question – is the economy header for a recession, […]

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Who’s #1? Looking at the Global League Tables

May 17, 2017

We always find it interesting to see which private equity and venture capital firms are on top of Pitchbook’s Global League Tables.  Here’s a look. Private Equity Firms The U.S. Before looking, which private equity firms would you guess would be on top in the first quarter of 2017?  The firms on top of the […]

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Looking at the State of Venture Capital in 2017 So Far

May 2, 2017

Pitchbook, the private equity and venture capital data collection firm, is out with a look at the state of venture capital industry in the United States so far in 2017.  Here’s a look at what we find to be the 4 most interesting findings. #1 – A Slow Start to the Year First off, activity […]

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Looking Back – and then Forward – on the Financial Industry Jobs Picture

April 3, 2017

The jobs market looks good.  In 2016, the U.S. economy created about 2.2 million jobs.  That’s slightly lower than the 2.7 million in 2015 and 3.0 million in 2014. Wages, a laggard in the current economic boom, are also starting to show up stronger.  Wages accelerated to 2.8 percent year-over-year growth in 2016, a fairly […]

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A Look at What Happened to Private Equity Cash Compensation in 2016

March 6, 2017

Every year Job Search Digest reviews what happened with private equity cash compensation.  Would you guess cash earnings went up or down in 2016?  What percentage of earners made more than $1 million?  How many made less than $50,000?  Here’s a look. The 2015 Picture Before going into the 2016 results (the report’s entire results […]

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