From the category archives:

Private Equity Jobs

Pitchbook, the private equity and venture capital data provider is out with a fascinating look at venture capital returns and venture investments by city within the Bay area (broader San Francisco area).

Before looking at the map of amount of funds investment and the associated returns, take a guess at which cities you think would be on top?  Would you guess Palo Alto?  Or San Jose?  Or perhaps the city of San Francisco itself?  Do you think the return figures will generally align with the amount invested by city?  Or, will cities with perhaps a smaller amount of attracted capital produce higher returns?

Amount Invested

Reported first below is a ranking of the top ten cities in the San Francisco Bay area according to the amount of attracted capital.  Perhaps unsurprisingly, the city attracting the largest amount of invested capital is San Francisco, having attracted a massive $88 billion in capital from 2010 to 2017.

Interestingly, although not that surprising, in second place is Palo Alto at about $15 billion (pretty paltry in comparison to San Francisco).  In third place is Redwood City at $12 billion.  Rounding out the top five are San Jose ($10 billion) and Mountain View ($10 billion).

The bottom half of the top ten includes Menlo Park ($8 billion), San Mateo ($7 billion), Santa Clara ($7 billion), Sunnyvale ($7 billion), and South San Francisco ($5 billion).

map 1 Source: Pitchbook


Let’s now switch to the top ten cities ranked according to the median multiple on invested capital.  Another way of saying this is that the rankings presented in the map below are based upon the ratio of exit value of the companies relative to the total amount of venture capital funding raised.

With the total investment universe now known, do you want to take a second guess at which cities produce the highest returns in the San Francisco Bay area?

Interestingly, and somewhat surprisingly, San Francisco is not only tops in the amount of investment capital attracted to companies headquartered there.  Companies based in San Francisco also produced the highest return at 5.7x.

The other members of the top five include Palo Alto at 5.1x, San Mateo at 4.6x, South San Francisco at 4.3x, and Santa Clara at 4.1x.  Unsurprisingly, this top five list is not the same list as the top five cities for investment capital.  South San Francisco shows up as perhaps the largest outlier, with companies headquartered there producing the third highest investment return even though South San Francisco shows up in tenth place on the amount of investment capital attracted.  San Mateo and Santa Clara are also out-performing what the invested capital would predict.

The remaining return figures are San Jose at 4.1x, Mountain View at 4.0x, Redwood City at 3.8x, Menlo Park at 3.7x, and Fremont at 3.3x.  Interestingly, Fremont shows up on the top ten of return cities even though Fremont is missing from the top ten cities for attracted investment capital.

map 2 Source: Pitchbook


In a fascinating look at the returns companies have produced according to cities within the Bay area, companies in San Francisco attracted not only the largest amount of investment capital, but also produced the highest investment return.  Pitchbook’s study also provides a fascinating look at how companies headquartered in other cities have fared.


Private Equity International is out with their annual PEI300 report, which details the top 300 private equity firms by amount raised.  Before looking, which companies would you guess would be on top?

The Broader View

Before taking a look at the list of the top 25 private equity firms, how much would you guess the top 300 firms (according to Private Equity International) raised in the past five years?  How much of the total would you guess went to the top 50 firms?  How much of the total would you guess went to just the top 10 firms?

Amazingly, over the past five years, the top 300 private equity firms raised about $1.352 trillion.  The private equity industry is certainly not dead.  Of that total $1.352 trillion, how much went to the top 50 firms?  Interestingly, about 56 percent of private equity capital raised went to the top 50 firms.  How much went to the just the top 10 firms?  An astonishing 24 percent went to the top 10 firms.  The private equity industry sure is top heavy.

The Top 5

Perhaps completely unsurprising, taking the top spot is Blackstone.  The New York City-headquartered firm raised a massive $58.3 billion from 2012 to 2017.  In second place is KKR, also headquartered in New York.  KKR raised a total of $41.6 billion over the past five years.  In third place is Washington, DC-based The Carlyle Group at $40.7 billion.  Rounding out the top five are Fort Worth-based TPG Capital at $36.1 billion and New York-based Warburg Pincus at $30.8 billion.


Ranks 6 Through 10

The top 5 probably provided little surprise to individuals closely connected with the industry.  What about the bottom half of the top 10?

Interestingly, in sixth place is Advent International Corporation at nearly $27.0 billion (headquartered in Boston).  The other four members of the bottom half of the top 10 include Apollo Global Management ($24.0 billion, New York), EnCap Investments ($21.2 billion, Houston), Neuberger Berman Group ($20.4 billion, New York), and CVC Capital Partners ($19.9 billion, London).

Of all the surprises in this list is perhaps the observation that only one private equity firm – CVC Capital Partners – is headquartered outside of the United States.  Businesses headquartered outside of the United States are growing, but they still lag behind the massive advantage U.S.-based private equity firms have.


Ranks 11 Through 25

Let’s round out the top 25.  Before looking at the list, which firms were you surprised missed the top 10?  Were you surprised that no west coast firms headquartered in the U.S. showed up in the top 10?  What about China-based private equity firms?  Were you surprised by the lack of any Chinese firms at the top?

Included in the top 25 are Bain Capital ($18.2 billion, Boston), Thoma Bravo ($17.2 billion, Chicago), Vista Equity Partners ($17.2 billion, Austin), Apax Partners ($17.0, London), Clayton, Dublier & Rice ($16.7 billion, New York), Cinven ($16.6 billion, London), Leonard Green & Partners ($15.9 billion, Los Angeles), Ares Management LLC ($14.7 billion, Los Angeles), BC Partners ($14.2 billion, London), Permira Advisers ($13.6 billion, London), Riverstone Holdings ($13.1 billion, New York), Goldman Sachs Principal Investment Area ($12.0 billion, New York), Silver Lake ($11.7 billion, Menlo Park), Ardian ($11.3 billion, Paris), and Hellman & Friedman ($10.9 billion, San Francisco).



In an interesting review of the top 25 private equity firms across the world according to Private Equity International, perhaps the most surprising finding is the continued dominance of U.S.-based firms within the private equity realm.  Financial firms headquartered in other areas of the globe are catching up, but still lag by significant amounts.

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A couple of professors out of Stanford University and the University of British Columbia are out with a new, fresh look at the intricacies of venture capital valuations (Squaring Venture Capital Valuations with Reality, National Bureau of Economic Research Paper #23895).  Their topic is unicorn valuations, and specifically whether so-called unicorn valuations are frequently overvalued.  Before discussing their results, what would you guess their conclusions are?  Would you guess – simply out of preconceived notions or an expert guess – that companies achieving unicorn valuations are typically overvalued or undervalued?  Remember, investors that agree with unicorn valuations are usually sophisticated investors, not some new guy off the street.  Take your guess.


The authors reviewed 135 venture capital-backed private companies with a post-money valuations of $1 billion or more.  The value of the unicorn was determined using financial terms from legal filing and reported post-money valuations.  Overall, they find that, on average, unicorn firms are overvalued by 50 percent, with 15 of the firms studies being over 100 percent overvalued, compared to their fair market value.

Their findings are based upon calculations of values for each share class, which produces lower valuations because most unicorn companies offer recent investors preferred status, such as IPO return guarantees (14 percent), vetoes over down-IPOs (24 percent), or seniority to all other investors (32 percent).  Investors with common stock shares lack such protections and are thus, on average, around 58 percent overvalued.  Interestingly, after adjusting for these valuation-inflating measures, around half of all unicorns eventually lose their unicorn status.

Here’s a look at the valuation figures by percentage overvalued.  the peak occurs around 25 percent, meaning that 25 of the 135 valuations were overvalued by around 25 percent.  Interestingly, none of the authors’ sample firms were undervalued, representing a potential flaw in the study.

Picture1 Source: Gornall and Strebulaev (2017)


The following figure provides another view of the results.  The blue line represents the fair value of the unicorn companies.  The orange line is the post-money valuation.  Unsurprisingly given the authors’ views on valuations, the fair value of the unicorn companies is always less than the post-money valuations.

Picture2 Source: Gornall and Strebulaev (2017)



In an interesting look at the intricacies of venture capital valuations, authors William Gornall and Ilya Strebulaev find that unicorn companies – companies with post-money valuations of greater than $1 billion – are frequently overvalued, and that even sophisticated investors often do not understand the workings of specific venture capital valuations.  Overall, the authors find that, on the average, unicorn firms with venture capital-backing are highly overvalued, perhaps by around 50 percent.  So, the next time you think it is or would be cool to be a venture capital investor, remember that it’s highly likely that many of the deals you come across will be terrible financial investments.  Invest with caution.

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The 2017 Startup Graveyard

January 23, 2018

Pitchbook  is out with a fascinating look at the so-called 2017 “startup graveyard”.  There are 11 companies on Pitchbook’s list. Let’s take a look. The Startup Graveyard On top of Pitchbook’s list of notable 2017 failures is Jawbone.  Jawbone manufactured speakers and wearable technology, and at one point had a valuation of $1.5 billion, with […]

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How Did Financial Job Growth Compare in 2017?

December 12, 2017

The year is almost over, which makes now a perfect time to take a look back and see how job growth in the financial industry did compared to other industries.  Here’s a look. The Broad View Before looking at the growth in jobs in the financial sector compared to all other sectors, here’s a background […]

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An Update on Private Equity Fund of Funds

November 13, 2017

Preqin, the investment intelligence data provider, recently released their special report on the state of private equity funds of funds across the world.  Here’s a look. Where are the Private Equity Fund of Funds Managers? First, a question – where would you guess the most managers of private equity fund of funds are located?  The […]

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What Does the Trend in Private Equity Fees Look Like?

October 16, 2017

Private equity data firm Pitchbook is out with their third quarter of 2017 report on trends in global private equity (PE) deal multiples and other interesting data points.  Among the many interesting findings in the report is a section on the trend in PE fees.  Without looking, what would you guess the trend in PE […]

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Looking at the League Tables – Who’s on Top?

September 10, 2017

Every now and then, we like to take a look at Pitchbook’s league tables.  Before taking a look, which entity would you guess is the most active, when measured by deal count?  Which deals were the most significant in the second quarter of 2017?  Which U.S.-based private equity funds raised the most capital in the […]

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A Look at the Private Equity Fund Manager Outlook

August 7, 2017

Every half of the year Preqin, the private equity and venture capital research group, does a “Private Equity Fund Manager Outlook”.  They’re out with their second half of 2017 picture.  Here’s a look at what private equity fund mangers think on deal flow and competition, investor appetite, and outlook and future plans. Deal Flow and […]

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Private Equity in Europe

July 10, 2017

Europe is known for a lot of things – good food, amazing vacation locations, obsessive regulations, slow economic growth, densely packed housing, and a host of others. Finance is also something Europe generally does well.  This led us to wonder which European country  has the largest private equity investments as a percentage of Gross Domestic […]

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