From the category archives:

Private Equity Jobs

Going into 2020, most analysts were predicting a healthy year for private equity (PE) and venture capital (VC). Then the pandemic hit, making observers wonder how well PE and VC would hold up in deal making and fundraising.

Now that we’re entering an end to the year, it appears that most PE and VC funds did fairly well over 2020.

What does this mean for 2021? Will 2021 be a booming year for private equity and venture capital? Let’s take a look at the view provided by private equity data provider Pitchbook.

The Biggest Moves in 2021 Might Be?

Of all the industries that could see big moves in the coming year, which one would you guess would outperform others? According to Pitchbook’s 2021 outlook, biotechnology and pharmaceutical deal activity may be the industry. The sector has had a good 2020, and with pandemic-related demand booming, it would not be surprising to see biotech and pharma experience an enormous year.

Overall, the trend for biotech and pharma over the past decade has been healthy, going from $4.8 billion (507 deals) in 2010 to $23.2 billion (865) deals in 2020 through November 18, 2020. The coming year may be even more impressive.

Source: Pitchbook

An even more positive picture for biotech and pharma is painted by the following picture. Capital raised by biotech and pharma through IPOs is at an all-time high in 2020, going from its previous all-time high of $5.1 billion in 2018 to $9.7 billion in 2020. The number of IPO deals so far in 2020 has reached 57, also close to its all-time high of 66 in 2014.

Source: Pitchbook

What About the Number of Funds Raised by Established and Emerging Firms?

Interestingly, although 2021 appears to have a bright outlook, the 2020 figures for the number of funds raised by established and emerging firms are somewhat weak. Through November 23, 2020, the number of emerging firm funds was at 144, down significantly from 316 in 2019. The figures for established firm funds was down by less, from 165 in 2019 to 140 in 2020.

Source: Pitchbook

Net Venture Capital Cash Flow

The Pitchbook report provides many other interesting views, including the following, which shows venture capital cash flows from 2010 to 2020. According to the figures, when annualizing the 2020 figures, the 2020 picture will probably show to have been quite bright. The trend has been up since 2010 and 2020 doesn’t appear that it will have provided a drop.

Source: Pitchbook

Summing up

Overall, the 2021 year may provide to be an enormously profitable year for private equity and venture capital firms making deals in a post-pandemic world. According to Pitchbook, early indications for a number of industries are quite positive.

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In March of this year, the world went into lockdown. Then, the lockdown phase began to ease. We’re now well into the economic recovery – although, for some, it may not feel that way.

One industry that has received considerable investment attention in recent years is the Internet of Things (IoT). This covers things like web-connected refrigerators, web-connected thermometers, and most anything else that used to exclude web-connected features that is now connected to the web 24/7.

The fact that the industry has attracted considerable investor interest is unsurprising. Some people like the idea of monitoring everything in their home, even if it comes at a cost of decreased privacy.

The question here is simple – How has the investor interest in the IoT industry changed in this brave, new COVID-19 obsessed world?

The answer, disappointingly, if you’re a IoT enthusiast, is that investors have taken a pause from IoT investments – generally.

The Picture

The IoT picture is shown in the following table from private equity data-provider Pitchbook. The figure shows venture capital and private equity exit activity from IoT investments from 2010 to 2020 year-to-date.

Clearly, in the early days of IoT, there was little interest in IoT, as evidenced by the weak exit activity when sliced by volume or number of deals from 2010 to 2013.

That changed in 2014, when 29 deals were made total investor exits from IoT reached $4.5 billion.

The picture weakened again in 2015 in terms of dollar volume, dropping to $500 million on 30 deals.

Since 2015, investor exits from IoT investments have been healthy. The number of deals in 2016 through 2019 ranged from a low of 44 in 2016 to a high of 54 in 2018. The 2020 figure year-to-date is a lowly 24 on less than $2.0 billion in dollar volume.

Source: Pitchbook

Which Companies Make Up the Exits?

With this background, the obvious follow-on question is – Who are the companies making up investor exits from IoT investments? That picture is shown in the table below.

The top investor exit from a IoT investment was Nest Labs at $3.2 billion on February 7, 2014.

Following Nest Labs lead, Cloudera reached $1.696 billion on April 28, 2017.

Rounding out the top five are Ring at $1.5 billion on April 12, 2018; Cisco Jasper at $1.4 billion on March 22, 2016; and Armis (USA) at $1.1 billion on February 11, 2020.

The remaining exits in the top 10 include Treasure Data at $600 million on August 2, 2018; Dropcam at $555 million on June 20, 2014; Espressif at $546 million on July 22, 2019; Ysten at $449 million on October 1, 2018; and DecaWave at $375 million on February 21, 2020.

Source: Pitchbook

Summing Up

The global COVID-19 pandemic has changed the world in many ways, some for the better and some for the worse. When it comes to private equity and venture capital investment in the Internet of Things, the picture is less than rosy. Perhaps 2021 will bring greener pastures.

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The financial industry’s success is intricately connected with the performance of the economy’s labor markets. 

In 2019, the labor market taught us many things, here are five.

#1 The Economy Can Boom During Trade Wars

Perhaps the most surprising result of the 2019 year is the economy and its labor market can continue to boom when trade wars are on the docket. 

When measuring the jobs market performance from peak to peak (meaning the number of months from the prior business cycle’s peak to the next peak), the current period, which peaked last in 2008, is now at 142 months.  At this time last year, there was a chorus of naysayers saying the U.S. economy was heading into a recession, largely due to the trade war.  Such views have continually failed to materialize.

Source: Econometric Studios, BLS

#2 Wages Can Be Slow When the Economy is Booming

Wages, what we all enjoy as take-home pay, has been moderately good, but not great.  This has surprised many experts who find it odd to have an economy with such low unemployment continue to see no “boom” in wages.  According to these experts, wages should be growing above 4% on a year-over-year basis.  Wages are far from this at 3.65% and slowing.  This likely signals that the economy can keep growing for many more years.

Source: Econometric Studios, BLS

#3 The Number of Unemployed Can Stay Low for a Long, Long Time

Another surprising finding of 2019 is that the number of individuals classified as unemployed can stay low for a long, long time.  In the prior expansion, the number of unemployed individuals bottomed at 6.7 million individuals.  In this expansion, the number of unemployed individuals has been below this 6.7 million since September 2017.  This is almost unbelievable to many observers.  May the economy live on forever!

Source: Econometric Studios, BLS

#4 Professional Services, Education, and Healthcare Still Dominate

The fourth finding is that the economy still likes professional services, education, and healthcare.  And, they like to travel and relax.  The top three growing industries in 2019 so far have been Education & Health Services (up 2.6%), Leisure and Hospitality (up 2.1%), and Professional and Business Services (up 1.8%).

Source: Econometric Studios, BLS

#5 The Older Generation Really Likes to Work

Perhaps one of the most reasonable explanations for why the economy continues to expand for such a long period is that the older generation continues to want to (or needs to) work.  The population aged 55 years and over continues to be largest age group in the labor force, and there’s no sign that the group plans on leaving the labor force anytime soon. 

Source: Econometric Studios, BLS

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Who are the Top 10 Investors in Blockchain?

March 18, 2019

Blockchain is all the rave in today’s early-stage investing world.  If you are in any way interested in the future of money or accounting or ledgers, it is impossible to avoid a discussion about blockchain. Given the popularity of blockchain, can you guess which entities are the top 10 venture capital (VC) investors in blockchain? […]

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2018 was a Massive Year for Buyouts

January 24, 2019

2018 was lots of things to lots of people.  Some may remember the year as the year America gained back respect from China by addressing its unfair trade practices.  Others may focus on the terrible fires in California.  Others may wish to focus on the positive, such as the amazing PyeongChang Winter Olympics.  Still others […]

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A Look at Pitchbook’s 2018 Startup Graveyard

October 29, 2018

In an almost interesting fashion, Pitchbook, the private equity data provider, is out with a look at the 2018 startup graveyard.  The tally reviews companies that died in the year of 2018. Before looking at the list, which companies would you guess are on the list?  Does a certain blood-testing company come to mind?  Perhaps […]

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Where is Financial Employment Booming?

September 17, 2018

Every now and then we review how the financial sector is doing.  Before looking, which U.S. state would you guess is #1 for financial sector employment?  Would you guess New York – the home of Wall Street?  Perhaps Chicago (Illinois), with its heavy focus on insurance services?  What about California, with its heavy focus on […]

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Which Universities Produce the Most Venture Capital-Backed Companies?

September 3, 2018

Private equity data provider Pitchbook is out with their annual report on which universities produce the most venture capital (VC)-backed companies?  Before looking, which universities would you guess show up on the list? Would you guess Ivy League schools, with their highly ambitious, academically fresh graduates?  Perhaps you’d guess universities in places where the state […]

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Will VC Values Continue to Explode Through 2018?

May 28, 2018

Happy Memorial Day!  Is there any better way to celebrate the day than to postulate on where venture capital (VC) valuations are heading  for the remainder of 2018?  Well, yes there is, but for the moment let’s think about valuations. Where Valuations Have Been First, here’s a look at Pitchbook’s recently released first quarter valuation […]

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How Do the Bay Area’s Returns Vary By City?

April 3, 2018

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 […]

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