It is always interesting to take a step back and see how money valuations are performing across the world. This week’s view is the European venture capital (VC) valuations.

Europe Angel & Seed Pre-Money Valuations

The first view is the angel and seed pre-money valuations by quartile. Amazingly, angel and seed pre-money valuations continue to explode upward. The most recent average valuation stood at 7.2 million euros and the 75th percentile of valuations stood at 7.5 million euros.

Perhaps even more amazing than the average and 75th percentile valuations are the median and 25th percentile values. The median valuation was 3.9 million euros and the 25th percentile (remember, these are the lower end of the early-stage companies receiving VC money) was 1.9 million euros. Value inflation has hit early-stage European VC-backed companies, big time!

Source: Pitchbook

Angel and Seed Deal Sizes

The next view is angel and seed deal sizes by quartile. Some of these figures are incredible to see. The most recent estimate of the average deal size in 2021 is 2.3 million euros. For the 75th percentile of companies, the deal size reaches 2.4 million euros. The median deal size is 1 million euros and the 25th percentile is 0.4 million euros. Demand for early-stage investing options is still quite healthy across some of Europe’s tech hubs.

Source: Pitchbook

Late-Stage Pre-Money Valuations

The next view is late-stage pre-money valuations. Give that we just saw some incredible numbers for early-stage pre-money valuations, one might think that late-stage pre-money valuations might be through the roof. If you thought that, in some cases, you would have been spot on.

The following graphic shows the average late-stage pre-money valuation at a whopping 382.3 million euros. Simply amazing. Northvolt’s 2.3 billion funding round in the second quarter of 2021 had perhaps a little to do with the massive increase in average valuation across Europe. With the average zooming ahead, did the other measures of late-stage pre-money valuation confirm such rapid increase in values?

The answer is, generally, yes. The 75th percentile of companies rose to 75.4 million euros, while the median rose to 20.4 million euros. Even the “lowly” 25th percentile of late-stage companies came in with pre-money valuations of 8.0 million euros. Simply, simply amazing.

Source: Pitchbook

Summing Up

Overall, venture capital investing is alive and well across the Europe. Driven by the potential for large returns and investing firms swath with investable cash, early and late-stage companies seeking venture capital investment are in a very good position today. May the good times live on forever.

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It’s a relatively sanguine question with explosive consequences – Why are U.S. venture capital (VC) valuations exploding? The answer lies in a complex cocktail of money, value creation, and expected future valuations. Let’s take a look.

Some Background

Before looking at some explanations behind the explosion in U.S. VC valuations, we need some background. The following figure looks at median angel valuations through June 2021 by quarter. Amazingly, the average median angel valuations in the second quarter of 2021, according to private equity data provider Pitchbook, reached $15.9 million, well above any prior valuation. Part of this rise in valuation stems from growing valuations at the high of the angel universe. Interestingly, the 75th percentile of pre-money angel valuations has generally plateaued, stuck at around $10 million for around a year.

Source: Pitchbook

Seed valuations continue to grow

Moving to seed valuations, the following is Pitchbook’s take on seed valuations since 2011. As one might expect, pre-money seed valuations continue expanding, with the 75th percentile up to $13.7 million through the second quarter of 2021. The average pre-money seed valuation reached $11.2 million at the end of June 2021, while the median reached $8.0 million and the 25th percentile rose to $5.0 million.

Source: Pitchbook

Angels continue to acquire a steady stake in early-stage companies

Perhaps a more interesting view than the previous two charts, the following figure is the percentage of early-stage companies acquired at the angel stage by quartile. Interestingly, the 75th percentile declined to 21.0%, while the average dropped to 15.2%, the median stood at 15.0%, and the 25th percentile held steady at 7.9%. The American early-stage company continues to be in healthy territory.

Source: Pitchbook

And larger deals continue taking larger stakes

Perhaps the most interesting chart in the Pitchbook report is the percentage of companies acquired at seed stage by quartile. Interestingly, for the 75th percentile of companies, 37.7% of companies have been acquired. That is reasonably higher than the median at 31.6% and the median at 30.8%. The 25th percentile value stood at 23.2% at the end of the second quarter of 2021.

Source: Pitchbook

Why is all this happening?

The obvious question at this point is – Why is all this happening? Well, one part of the explanation lies in deal competition. The following figure has equity stakes across quartiles. Clearly, the declining share of equity stakes through June 2021 stems from increased competition. For the 75th percentile of companies, the equity stakes to VCs dropped to 33.3%, while the average declined to 27.2% and the median declined to 24.6%. Lastly, the 25th percentile declined slightly to 18.1%.

Source: Pitchbook

Another part of the answer lies in the momentum of step-ups. The following figure looks at the 4-quarter median valuation step-up from the first quarter of 2016 to the second quarter of 2021. Overall, the step up has grown from less than 2.5x to almost 3.5x. It may not seem like much, but that 1.0x increase is a lot of money.

Source: Pitchbook

Summing Up

Overall, U.S. VC valuations continue to expand at incredibly healthy paces. The current year may turn out to be the greatest on record.

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The first half of 2021 has been nothing short of amazing for financial firms. With public equity markets reaching all-time highs for many indices, it would be unsurprising that publicly traded private equity firms took part in the euphoria. And that’s certainly true for the top five private equity firms that trade publicly.

Performance as measured by FRE

To show the incredible performance of the top five publicly trade private equity firms through the first half of 2021, the following two figures show quarterly FRE by manager (left pane) and TTM FRE by manager (right pane). Overall, for all members of the big five private equity firms, the first half of 2021 is coming in much stronger than the better-than-expected first half of 2020.

When looking at quarterly FRE, BX is up to $704.1 million, up more than $150 million from 2020’s $541.3 million. For KKR, the growth rate in FRE was almost 100%, with FRE up to $470.1 million from $279.7 million. For APO, FRE grew from $259.2 million in 2020 to $301.6 million in 2021. For CG, FRE grew to $143.2 million from $127.3 million. Lastly, for ARES, FRE grew to $146.9 million from $97.0 million.

Switching to TTM FRE, for BX, TTM FRE grew to $2.546 billion in 2021 compared to $2.001 billion in 2020. For KKR, TTM FRE went from $1.056 billion in 2020 to $1.577 billion in 2021. For APO, TTM FRE grew to $1.142 billion from $941 billion. For CG, TTM FRE went from $473 billion to $536 billion. Lastly, for ARES, TTM FRE grew from $365 billion in 2020 to $510 billion in 2021.

Source: Pitchbook

The View from Quarterly DE

Switching to the DE view, the following two panes provide that look. The left pane has quarterly DE, while the right pane has TTM DE.

Looking at quarterly DE by manager first, for BX, quarterly DE exploded from $548 million in 2020 to $1.070 billion in 2021. For KKR, quarterly DE went from $366 million to $926 million. For APO, quarterly DE went from $205 million to $502 million. For CG, quarterly DE went from $188 million in 2020 to $313 million in 2021. Lastly, for ARES, quarterly DE grew to $192 million from $105 million.

Switching to TTM DE, for BX, TTM DE went from $2.729 billion to $4.499 billion. For KKR, TTM DE went from $1.640 billion to $2.583 billion in 2021. For APO, TTM DE grew to $1.317 billion from $1.048 billion. For CG, TTM DE grew to $886 billion from $666 billion. Lastly, for ARES, TTM DE grew from $491 billion to $615 billion.

Source: Pitchbook

Summing up

Overall, the first half of 2021 has been an incredible time for private equity professionals. Discussed here was the performance of the top five publicly trade private equity firms and as suggested, performance of these five private equity firms has been quite good, aptly described as sizzling. May the good times keep rolling for the remainder of 2021.

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Who is Winning – VCs or Investors?

August 3, 2021

Private equity data provider Pitchbook is always on the move with indicators of the private equity and venture capital dealmaking world. One of their newest indicators – the VC Dealmaking Indicator – gets at the heart of a core question in investing – Who is winning – VCs or investors? Some important details In constructing […]

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All the big venture capital records will be broken

July 20, 2021

Looking back to March 2020, would you guess that all the major venture capital records would be broken in 2021? Amazingly, that’s exactly where the trend is heading. Here’s a look, according to investment data provider Pitchbook. Number and Amount of Venture Capital Investment The following has venture capital deal activity from 2011 through the […]

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Looking at Mergers and Acquisitions Trends

July 6, 2021

Around this time of year we like to take a stroll back at Datasite’s recent information, offering observers a view of the state of mergers and acquisitions (M&A) across the U.S. How do things look? Well, here’s a look. M&A Activity, 2018 – 2021 Q1 The first view is M&A activity from 2018 to the […]

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Where do top performing VCs invest early?

June 22, 2021

Private equity data provider Pitchbook is out with a new Emerging Tech Indicator (ETI) that offers a fascinating view of which startups that have received seed- and early-stage investments from top-performing venture capital (VC) firms. Overall, Pitchbook tracked 171 startups that received from 15 top-performing VC firms. Here’s a look at the new data. ETI […]

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The Amazing Picture of the European VC World

June 8, 2021

The European investing world has been through some rollercoaster years. Through the first quarter of 2021, how are things looking for the famed European venture capital (VC) investing world? Here’s a look. Angel and Seed Pre-Money Valuations The first view on European VC world is Pitchbook’s angel and seed pre-money valuations through the first quarter […]

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The American Employment Picture in 5 Views

May 25, 2021

Every now and then, it makes sense to take a broad view of the economic picture. Here’s a look at the American employment picture in five views. Total Employment The American employment base has been through some amazing ups and downs. Interestingly, the two most violet movements occurred with the past two – the housing […]

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Looking at some private equity benchmark views

May 10, 2021

It always pays dividends to peek at updated data out of private equity data provider Pitchbook. This month’s benchmark views are no different. Here are some interesting views on private equity benchmarks according to Pitchbook’s May 6th, 2021 release. Internal Rate of Returns by Vintage The first view is of internal rate of returns (IRRs) […]

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