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PE & VC News

In a fascinating look at the performance of the top 20 venture capital-backed companies, Pitchbook recently provided us with a view of how the top 20 companies have performed from 2019 to 2021.

The Top 10

Before looking, take a guess at the which companies you think would show up on top of the list? Hint: the top venture capital-backed company in 2019 – as measured by company value – is different than the top venture capital-backed company in 2021.

In 2019, the most valuable venture capital-backed company was SpaceX at $31.5 billion. SpaceX held that position into 2020, growing to a value of $46.0 billion. Unfortunately for Elon Musk, his leadership dropped to second with a value of $74.0 billion.

The most valuable venture capital-backed company in 2021 was Stripe. The payments processor saw its value explode in 2021 from $36.0 billion in 2020 (second only to SpaceX in this year) to $95.0 billion in 2021. The $95.0 billion put Stripe worth at least $21.0 billion more than the next most valuable venture capital-backed company.

The third most valuable venture capital-backed company in 2020 and 2021 was Instacart. The groceries delivery company saw its value explode in 2021 from $17.7 billion in 2020 to $39.0 billion in 2021. Perhaps it pays to operate in an industry that benefited from the pandemic. Interestingly, Instacart was only worth $7.9 billion in 2019.

In fourth place for valuation in 2021 (15th place in 20202) was Databricks. Databricks saw its value rise meteorically over the course of the pandemic, going from $6.2 billion in 2020 to $28.0 billion as of March 19, 2021. Databricks was worth $6.2 billion in 2019.

Rounding out the top five for 2021 is Rivian Automotive at $27.6 billion. The electric car maker was new to the list of the top 20 in 2021.

Other members of the top 10 for 2021 included Epic Games ($17.3 billion valuation), Chime ($14.5 billion valuation), Samumed ($12.4 billion valuation), Robinhood ($11.9 billion valuation), and Ripple Labs ($10.0 billion valuation).

Source: Pitchbook

The 11 – 20 Ranks

Shifting to the 11th through 20th most valuable venture capital-backed companies, the 11th most valuable company in 2021 was Tanium at $9.0 billion. Behind Tanium were Tempus Labs at $8.1 billion and cryptocurrency exchange Coinbase at $8.0 billion. Rounding out the top 15 included Discord at $7.0 billion and Automation Anywhere at $6.8 billion.

The 16th through 20th most valuable venture capital-backed companies in 2021 included Compass at $6.5 billion, Airtable at $5.8 billion, SoFi at $5.7 billion, Samsara at $5.4 billion, and Pony.ai at $5.3 billion.

Source: Pitchbook

Conclusion

Overall, the past few years have been incredibly fruitful for the top 20 venture capital-backed companies. Although the pandemic has been quite disruptive for economies around the world, fortune has favored the innovators during this time of unprecedent risk.

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Asset returns of financial equities depend upon many factors that often get missed when looking at a single figure. These factors capture underlying relationships between economies and markets and the simultaneous change in asset prices. The list of factors includes, among others, interest rates, inflation, and economic growth. The best of analysts can find the effect of these relationships on current period returns. Pitchbook’s recent innovation does just that – they applied a factor-based framework to create a new Private Equity Barometer.

In addition to offering a single score that quantifies the state of the current return environment, Pitchbook’s barometer also offers:

  • Insight into the market and economic exposures in aggregate PE returns.
  • Insight into the drivers of current period returns by connecting them with key indicators.
  • Insight on a monthly basis of private equity returns before quarterly fund returns are released.

Interestingly, Pitchbook creates with new private equity barometer using a simple linear regression that is simply a function of the indicators that passed the initial screening.

The Model

For technically inclined individuals, the model details, such as the signal, beta coefficients, and the 95% confidence level values may provide some interesting insight. The table follows.

On the macro level, Pitchbook’s barometer includes the National Activity Index, the Composite of Leading Indicators, Consumer Confidence, and Business Confidence. Each of these are estimated with their level effect and trend effect.

On the credit level, the model includes high yield spreads, lending standards, and a financial stress index.

Lastly, the model also includes an equity section, which comprises an implied equity volume measure and a small cap equity measure.

Source: Pitchbook

The Relationship

The development of the index would be useless if it didn’t connect to private equity returns. Luckily, according to Pitchbook, their new barometer index has a strong relationship with private equity returns, as shown by the following figure.

The figure has on the y-axis the standardized private equity returns and, on the x-axis, Pitchbook’s private equity barometer score. The relationship is strongly linear, suggesting that Pitchbook’s barometer may provide a leading indication of where returns will be reported at.

Source: Pitchbook

The Time Series View

The scatterplot view shows a healthy relationship. Pitchbook also released a time-series view. In the following figure, the blue line is Pitchbook’s private equity barometer, and the green line is the standardized private equity return values. Overall, the two move closely together, although interestingly, the most recent values have the private equity barometer a little weaker than the standardized private return measure.

Source: Pitchbook

Summing Up

Overall, in a new look at private equity data, Pitchbook’s new private equity barometer is a welcomed tool in gauging the state of private equity around the world.

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With an amazing, sad, crazy, and unprecedented year behind us, the private equity world is looking at 2021 for a boost in activity.

Before looking at the 2021 picture, what was the exit activity like in 2020? Let’s have a look.

Global Median PE Exit Size by Type

The first look is at the global median private equity (PE) exit size by type of exit. According to Datasite’s analysis of Pitchbook’s data, the global median PE exit for IPOs reached an incredible $697.9 million, well above the previous high of $588.0 million in 2013 and a healthy jump from 2019’s $503.1 million.

For buyouts, the median PE exit reached $292.5 million, also reaching a 15-year high. The previous high was 2019’s $272.0 million.

The picture for acquisition PE exits is a little less rosy. The median value for 2020 was $126.2 million, down from 2019’s $133.5 million and 2018’s $150.9 million. The pandemic was not exactly a wonderful experience for acquisition PE managers.

Sources: Datasite, Pitchbook

A Look by Region

The global PE picture is even more interesting when looking by region. In term of the number of PE exits, North America accounts for around half of all exits, up slightly from 2019. The area with the next highest percentage of global exits is Europe and around 40%. Areas making up the remaining 10% include Asia, Africa, the Middle East, and the rest of the world.

Source: Datasite, Pitchbook

Challenges and Marketing

The Datasite report provided an interesting view of PE’s take regarding two questions. The two questions were:

  • When marketing as asset for sale, how efficient and effective are PE’s current process of identifying, marketing to, and tracking potential buyers?
  • When marketing an asset for sale, what is the most challenging for PE?

On the former question, an amazing 70% was captured in the medium level, while on the latter question, an almost majority of respondents (49%) said that lack of insights on buyer behavior across mandates was the most challenging issue for PE.

Source: Datasite, Pitchbook

What Did PE Professionals Help Out With?

Lastly, shifting to what PE professionals actually did in moving the exit forward, the following figure from Pitchbook answers the question: “When PE thinks about sell-side M&A areas, which is the most time consuming?” Interestingly, a whopping 54% of PE’s time was spent on deal preparation. Far behind in second place was negotiation at 28%. Rounding out the top three was asset marketing at 14%. The remaining 5% of PE’s time was spent on post-merger integration, closing, and exit.

Sources: Datasite, Pitchbook

Conclusion

Overall, the 2021 year for private equity appears bright. New ideas are flowing, financing is cheap, and demand for professional investments is at an all-time high. The 2021 could turn out to be as positive year in private equity as the world has seen in a long time.

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How Did Financial Employment Do In 2020 Compared To The Other Industries?

March 2, 2021

The American jobs market went through a rollercoaster year in 2020. Leading up to March, forecasters had 2020 on track to be one of the greatest jobs markets on record. Then COVID hit. Unemployment claims soared through the roof. The American economy saw the largest jump in unemployment on record. Forecasters saw a prolonged shutdown […]

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Hot or Not in 2020 Europe

February 15, 2021

The pandemic reshaped our relationships in ways very few guessed would happen just a couple months before its effects materialized. In March, many prognosticators predicted a year of destruction for financial investors. Amazingly, that “consensus” view failed to materialize. Instead, private equity and venture capital markets across a good portion of the financial world heated […]

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What Were the Top 10 Deals of 2020?

February 1, 2021

Over the course of a pandemic-ridden year, more can happen than meets the eye. In an interesting take on what happened in 2020, private equity data provider Pitchbook put together its list of the top 10 deals to happen in 2020. Here they are. The Top Dark Horse Initial Public Offering (IPO) Before reading on, […]

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Pitchbook’s 2020 Private Equity Awards

January 18, 2021

The rollercoaster 2020 is over. It may seem odd in the year of the pandemic, but some amazing things happened in private equity. Here’s a look at private equity (PE) data provider Pitchbook’s take on awards they would hand out for things accomplished during the past year. Dealmaker of the Year In a year when […]

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Pitchbook’s 2021 Private Equity Outlook

January 4, 2021

The 2020 experience was likely nothing any of us has every experienced. For the private equity (PE) industry, the story is no less interesting. With a usual year behind us, what does 2021 have on tap? Here’s a look at private equity data provider Pitchbook’s view of the coming year. A Recording Breaking Year on […]

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Down Rounds Slow Down

December 7, 2020

Private equity has been through a roller coaster 2020, especially in terms of valuations. In a fascinating look at private equity conditions in 2020, Pitchbook provides us with a helpful overview. Values Across Quartiles – Angel Pre-Money Valuations Our first look from Pitchbook is valuations across the average, median, 25th percentile, and 75th percentile quartiles. […]

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How has financial employment held up during the pandemic?

November 23, 2020

How has financial employment held up during the pandemic? Every now and then, we like to take a look at the performance of the financial industry compared to other brought industry groupings. Today’s look goes through October 2020 – the most recent month for which data are available. As background As background of the situation, […]

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