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PE & VC News

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, or have simply just seen a few weak months of growth (after all, +138K net new jobs is still a good figure by most measures)?  The answer to this question, of course, depends on the respondent.

jobs report Source: BLS

Acknowledging that recession and boom forecasting has a fair amount of art contained therein, one might wonder if perhaps a sector of the economy acts as a leading indicator to where the economy is heading.  Since the financial industry employers a large chunk of economists and financial analysts, one might guess that employment growth in the financial sector may provide a leading indication of where the economy is heading.

So, what do recent results from the financial sector portend for the future of the U.S. labor market?  Here’s a look.

The Financial Jobs Picture

First, a look at the financial jobs picture on a month-over-month growth basis.  Interestingly, the financial employment chart looks surprisingly similar to the economy-wide employment chart.

MM Growth in Financial Industry Employment Source: BLS

Here’s a look at two together on going back to the year 2000.  They move so closely together that it’s difficult to tell whether one could be a leading indicator for the other.

One interesting aspect is how much of a laggard the financial industry has been this time around compared to the economy as a whole.  While overall employment is far past its prior boom’s peak, and has been since mid-2014, financial employment is just now getting back to where it was in 2007, the year when the economy headed south.

YY Growth in Economy-wide Employment and YY Growth in Financial Industry Employment Source: BLS

The Financial Jobs Picture’s Connection with the Overall Economy

The previous charts show visually what is likely to be the case – the financial industry moves lock-step with the overall economy and probably doesn’t have any better information on where the economy is heading than professionals in any other industry.  Too bad for all those CEOs in the financial industry employing all those high-paid economists.  Perhaps they just need to pay more attention to their economists?

Conclusion

Last Friday’s employment report came in much weaker than expected, although still at a healthy +138K in net new jobs.  In looking at whether the financial industry might be a leading indicator of where the overall employment picture is heading, it appears that the financial industry tends to just move in sync with the overall economy, rather than provide an early indication of where the economy is heading.

Perhaps financial industry employers don’t have much more information about the state of the overall economy than any other industry.

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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 most active list may surprise you.

Interestingly, the most active private equity firm in the U.S. was HabourVest Partners, with a first quarter deal count of 12.

Rounding out the top five are Audax Group, ABRY Partners, Kohlberg Kravis Roberts, and TA Associates Management.

Other active firms include CI Capital Partners, The Blackstone Group with 9 and 8 deals respectively. They are followed by The Carlyle Group, Providence Equity Partners, Shore Capital Partners, The Riverside Company, Maranon Capital, and Genstar Capital, all with 7 deals each.

pe most active u.s. Source: Pitchbook

Europe

How does the picture look in Europe?

On top is Bpifrance at 15 deals.  The next closest are Inflexion Private Equity  and Ardian Holding at 8 deals each, Business Growth Fund , LDC, and the Carlyle Group each with  7 deals.

Other top deal makers are in the following table.

pe most active europe Source: Pitchbook

What Does the Exit Picture Look Like?

With the number of deals depicted, how does the exit picture look?  Here’s a look a the top exiting firms across the globe in the first quarter of 2017.

On top is 3i Group with 6 exits.  The other top exiting firms, according the Pitchbook include Epiris, the Blackstone Group, Kohlberg Kravis Roberts, Apollo Global Management, Ardian Holding, and the Riverside Company each with 5.

A host of other exiting firms with 3 or 4 exits is given in the following table.

most active pe Source: Pitchbook

Venture Capital Firms

Now shifting to the venture capital picture.

Most Active in the U.S.

The top venture capital firms in the U.S. include New Enterprise Associates at 24 deals, followed by Greycroft Partners at 19, Kleiner Perkins Caufield & Byers at 17 deals, and Anreessen Horowitz at 15.

Other top investing firms include Y Combinator at 14, Techstars and GV each at 13, Correlation Ventures and Accel have 12, SV Angel, True Ventures, First Round Capital, Foudry Group, and Bessemer Venture Partners are each at 11.

vc active Source: Pitchbook

Venture Capital Deals in Europe

The top venture capital firms in Europe in the first quarter of 2017 include High-Tech Grunderfonds at 15, followed by Index Ventures (UK) at 12, Octopus Ventures and Enterprise Ireland each have 10, Scottish Enterprise at 8, Mercia Technologies at 7, and a host of others at 6 deals.

vc europe Source: Pitchbook

Conclusion

Overall, in a fascinating look at the state of private equity and venture in the U.S. and Europe, Pitchbook’s first quarter of 2017 Global League Tables show some interesting results – worth looking into if you’re at all interested in the private equity and venture capital investing universe.

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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 and deal volume.  Overall, a slow start to the year.  Deal Value came in at about $71 billion in 2016, a decline from the $79 billion in 2015.  By way of comparison, the current Deal Volume through the first three months of 2017 is $17 billion – or $68 billion on an annualized basis.  Not bad – about what we saw in 2014 – but not real hot either.

On the number of deals closed, the count through the first three months of this year is 1,808 – or 7,232 on an annualized basis – a moderate decline (or what looks like could be a calendar year decline) from the 10,482 in 2015 and the 8,469 we saw in 2016.

Overall, not bad conditions, but certainly not white hot.

1 - Activity and Deal Volume Source: Pitchbook

#2 – Median Deal Size Hasn’t Dropped Off

Although the number of deals and deal volume is off to a slow start in 2017, median deal size hasn’t experienced any drop off yet.  Overall, median deal size is either slightly higher (or hasn’t dropped off).  Hmm.

2 - Median Deal Size Source: Job Search Digest

#3 – A Bad Signal is Coming from Angel and Seed Deals

Of the volume and deal count decline, angel and seed deals are down the most.  Pitchbook’s most recent count has the deal value through the first quarter of 2017 down to $1.5 billion, a fairly moderate decline from the $1.7 billion in the first quarter of 2016.

The deal count is also down, from about 1,200 in the first quarter of 2016 to about 800 in the first quarter of 2017.  The signals should probably give business cycle observers some room for caution.

3 - Agels Source: Pitchbook

#4 – Late Stage Deal Volume is Picking Up

Perhaps surprisingly, although early stage deal volume is slowing down, later stage deal volume is ticking up.

Pitchbook’s accounting of the number of deals closed has the number of late-stage deals coming up in the past few quarter, from about 320 in the third quarter of 2016 to about 380 in the fourth quarter of 2016 and to about 450 in the first quarter of 2017.

Deal Value is also up over the same time period, from $7.4 billion in the fourth quarter of 2016 to about $9.4 billion in the first quarter of 2017.

LateStage Source: Pitchbook

Conclusion

Overall, in a fascinating look at the state of venture capital in the United States, Pitchbook’s data shows some interesting contradictions.  On the whole, deal value and deal counts are declining, with the strongest declines showing up in early stage investments.  On the other hand, later stage venture capital deals are ticking up and median deal value is still going up or staying flat.  We will continue to monitor the data to see how things shape up over the course of the year.

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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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Thinking About the 2017 PE Outlook – Is Re-acceleration on the Horizon?

February 20, 2017

This year is off to an interesting start.  Markets are hanging around all-time highs and the global economy looks to be re-accelerating.  Will private equity follow suit? Private equity research firm Pitchbook recently released their perspective on what 2017 has in store. Global Deal Value and Transaction Counts The 2016 year ended in a state […]

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Looking at the Top Private Equity Firms in 2016

February 7, 2017

Every year, Pitchbook – a provider of private equity dealflow data – provides a look at the top private equity firms according to various characteristics.  Here’s a review. Most Active U.S. Firms Before looking at Pitchbook’s figures, which firm would you guess comes out on top in the number of deals in 2016?  Interestingly, it’s […]

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Thinking about Carried Interest In Light of the Incoming Administration’s Tax Proposals

January 23, 2017

With the 2016 U.S. presidential election over, and tax reform at the top of the agenda, now seems like a good time to think about particular aspects of the incoming administration’s tax proposals.  One of ideas floated by the Trump administration is to tax carried interest. What is Carried Interest? Simply put, carried interest is […]

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The Income Tax Rate Probably Does Matter to Unicorns

January 10, 2017

Given that the Trump Administration plans on lowering the individual income tax rates and corporate income tax rates for pretty much all taxpayers, economists and other observers have been debating what type of effect this might have on economic growth (hint: the debate will never end). Within this vein of discussion on the overall effect of […]

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Which Cities are Winning in the Venture Capital Return Game?

December 27, 2016

If you work in the world of finance, return is everything, perhaps the only thing.  We decided to take a look at which cities are winning in the venture capital return game. If you’re like most, you might guess the San Francisco area – after all that’s where a large – very large – percentage of […]

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