Venture Capital – A Buyer's Market?

In a previous article, we outlined why professional investors are back or never even left private markets. We noted that while it will be prudent for some time to take recession, or even stagflation, as a base case when assessing the underlying macro environment for any deal, there are high-quality and high-potential companies that can be acquired at a discount to the primary market value and the company's "true" value.

In fact, we believe that, when it comes to sectors such as SaaS in the B2B space, Fintech, Mobility and Consumer, we are in a pronounced buyer's market.

Numbers back the hypothesis

In that context, we would like to point to The PitchBook VC Dealmaking Indicator, which, albeit on a much broader scale, appears to support our observations in the field. The indicator uses PitchBook's deal term, deal attribute, fundraising, and deal flow data to quantify how startup-friendly or investor-friendly the capital raising environment is.

Venture capital is becoming increasingly investor-friendly

Source: https://pitchbook.com/news/articles/the-pitchbook-vc-dealmaking-indicator, accessed 2 November 2022

The above chart indicates that since the beginning of 2022, both early and later-stage deals seem to be decidedly moving to favour investors over startups. This is in stark contrast to the previous two years, where PitchBook's VC Dealmaking Index appears to confirm what everyone in the market witnessed first-hand: the free money bonanza that led to crowded deals, inflated valuations, and less favorable terms for investors.

Curious to learn more about the index and its constituents? Why not start with the "Capital supply to demand ratio", which illustrates why those who are (back) in the market can expect to pick up valuation discounts.

Pitchbook VC Dealmaking Indicator