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Companies owned by private equity firms are landing in default more frequently than other speculative-grade borrowers, according to a report from Moody’s Ratings.
Private equity-backed companies defaulted at a rate of 17% between January 2022 and August of this year, twice the rate of non-private equity-backed companies, Moody’s said in the report released Thursday. Among the 12 largest private equity sponsors — as ranked by Moody’s — the default rate was slightly lower at around 14%. READ MORE
Private equity has had quite a boom over the last couple of decades. Here are some stats: The number of private equity firms has grown from just 24 in 1980 to 17,000 in the U.S. alone today. In 2000, the global private equity market was $579 billion. Today it’s over $8 trillion.
We’ve reported on how private equity firms have bought up companies in everything from nursing homes to restaurants and real estate. But is there trouble ahead for private equity? READ MORE
JPMorgan Chase & Co CEO Jamie Dimon recently confronted public pension fund managers about channeling more of their investments into private assets, a trend he said could be at odds with their stated policy concerns.
"You call me up and talk to us about all the issues you're interested in. But when you make huge investments in the private side, you don't get that kind of transparency," he told a meeting of the Council of Institutional Investors in New York on Sept 10.
The gathering included many public pension fund officials, whose decisions Dimon said are a major reason many more companies are now choosing to raise capital outside U.S. public equity markets. READ MORE
Whenever I ponder the enormity of the multitrillion-dollar industry known as private equity, I picture the lavish parties thrown by Stephen Schwarzman – and then I think of the root canals. Schwarzman is the billionaire impresario of Blackstone, the world’s most colossal private equity firm. In August, he hosted a 200-person housewarming party at his $27m (£21m) French neoclassical mansion in Newport, Rhode Island. It was a modest affair compared to the grand soiree he threw himself at his Palm Beach, Florida, estate for his 70th birthday, in 2017. That black-tie bash was itself a sequel to his multimillion-dollar 60th, in 2007, which became a symbol of the sort of Wall Street excess that led to the global financial crisis. The Palm Beach party, which some reports say cost more than $10m, featured Venetian gondolas, Arabian camels, Mongolian acrobats and a giant cake in the shape of a Chinese temple. “Brilliantly stimulating” was the billionaire industrialist David Koch’s review. Gwen Stefani serenaded Schwarzman as Jared Kushner, Ivanka Trump and several members of her father’s cabinet looked on. It was a world in miniature, ruled over by a modern Croesus – the perfect symbol for a form of money-making that has infiltrated almost every facet of modern life. READ MORE
Global venture capital funding rounds decreased in both deal value and volume in the third quarter.
Deal value from July to September amounted to $61.32 billion, down 7.8% from $66.54 billion during the same period in 2023, according to S&P Global Market Intelligence data.
The number of announced transactions during the quarter also fell to 3,341 from 4,025 in the year-ago period. READ MORE
I was at a venture investor dinner last month where our host asked each of us to stand up and, as part of our self-introductions, to state where we needed help from the group and where we could help others. One of my fellow investors, a partner at a well-known firm, joked that he was “looking for this thing called liquidity” and asked if anyone knew where to find it. The wave of laughter from the crowd spoke volumes. This also caused me to reflect on the things we’ve learned about liquidity over the last few years. Fortunately, it appears that the decline in interest rates means that many of us will begin to find liquidity in 2025 and beyond. READ MORE
Data is fueling the AI machine—but amid unprecedented expansion, its engine shows signs of strain.
That’s why investors are pumping money into data infrastructure startups. These companies design tools and frameworks to collect, manage, process, store and analyze massive amounts of data. They are a core part of the foundation for the large language models on which generative AI is built. READ MORE
Nearly half — 49% — of unicorn startup founders have previously started at least one company, according to Endeavor. In Europe, it’s even higher at 65%, Mosaic Ventures estimates.
On the surface, these figures seem to validate a common assumption in venture capital: Prior entrepreneurial experience leads to better outcomes. READ MORE
The Central Intelligence Agency is responsible for collecting information relevant to national security, updating policymakers and conducting top-secret actions. Also running an investment firm called In-Q-Tel. According to its website, its mission is to “be the premier partner trusted to identify, evaluate, and leverage emerging commercial technologies for the U.S. national security community and America’s allies.” READ MORE
The closed IPO window has forced venture investors to take whatever liquidity they can get.
The share of exits in which VCs made back less than their initial investment is at the highest level since at least the global financial crisis of 2007-09. READ MORE
Venture capital investors in the United States remained cautious about dealmaking amid economic uncertainty, according to a PitchBook-NVCA report released on Thursday, underscoring challenges in the industry despite a rally in public markets.
About $37.5 billion of deals were clinched in the third quarter ended Sept. 30, nearly 32% lower than the preceding quarter, the report said. READ MORE
If you’ve recently endured surgery or some illness that required hospitalization, here’s something else to make you feel ill: Private equity has fueled a medical debt spiral in pursuit of profit, according to an industry watchdog.
A just-released report from the Private Equity Stakeholder Project reveals that medical debt now impacts 14 million people and totals at least $220 billion. Remarkably — sickeningly, even — this averages $15,714.29 per person or roughly one-quarter of the median American salary of $59,436 per the U.S. Bureau of Labor Statistics. READ MORE
Startup investors were looking to M&A in 2024 as the fast track to getting liquidity. But while Crunchbase data shows deal volume for venture-backed companies is likely up year over year, it remains sluggish compared to earlier years.
That’s despite the fact that the public markets have been historically slow and private company valuations have come down, which should make acquisitions more compelling for buyers. READ MORE
With private equity deals under harsh scrutiny from the Department of Justice, it is critical that sponsors follow appropriately structured pre and post-acquisition best practices to avoid enforcement exposure and best position their assets for exit sale. After a decade of successive policy announcements, the DOJ has at long last provided real opportunities for private equity sponsors buying or selling companies in regulated industries to protect themselves and their portfolio companies against criminal or civil penalties and protect the value of their assets. READ MORE
A top banker at JPMorgan Chase said that the initial public offering (IPO) market for companies backed by private equity firms is heating up.
Keith Canton, JPMorgan’s head of Americas equity capital markets, said the market for such companies is “very much open,” as firms seek to lower their debt loads or provide existing investors an opportunity to cash in, Bloomberg reported Wednesday (Oct. 2).
“The deals pricing in the next 10-15 days are largely sponsor-backed assets,” he said in a Tuesday interview with Bloomberg. “That gives us a higher degree of confidence for volumes next year just given the number of high-quality assets that sit within sponsor portfolios.” READ MORE
The NATO Innovation Fund, the “world's first multi-sovereign venture capital fund,” made its first investments earlier this summer in deep tech companies including British aerospace manufacturing company Space Forge and AI companies ARX Robotics and Fractile.
Modeled like the U.S. intelligence community’s venture capital arm IQT (In-Q-Tel), the fund’s intention is to focus on spurring innovation in areas including biotechnology, AI, space tech, and advanced communications. READ MORE
OpenAI wrapped up its $6.6 billion financing at a $157 billion valuation—a remarkable achievement that raises the stakes for CEO and founder Sam Altman to build on the lofty price tag for an eventual IPO.
The San Francisco-based company is now worth far more than any VC-backed company at the time of their IPO—including Meta, Uber, Rivian and Coinbase, according to an analysis of PitchBook data. READ MORE
Following the 2008 financial crisis, underperforming PE general partners (GP) found themselves in a pickle. Their portfolio was underperforming and their limited partners (LP) were nervous about their return on investment. This made it difficult for GPs to raise money.
Some came up with an idea: carve out their portfolio’s best performers into a new fund, a “continuation” fund, while selling the rest of the portfolio. Those sales returned some money to LPs. They could then either buy into the new continuation fund or call it a day. The GP, armed with a sexier fund and a sexier pitch, could also hunt for new LPs. READ MORE
Why should you care about VC math as a startup founder? Well, because you should know who you’re getting into business with and their incentives which explain a lot of their actions... Alright, let's dive real deep into the VC world. Grab your scuba gear, because we're going all the way down! READ MORE
Venture capital firms raise money — lots of it — and invest it in start-ups in hopes of generating big returns. One thing they rarely do is give the money back.
Yet that is what CRV, one of the industry’s oldest firms, is planning. The firm will tell its investors this week that it will return the $275 million that it has not yet invested from its $500 million Select fund, which is designed to back more mature start-ups. READ MORE