As market chaos mounts and coronavirus uncertainty persists, private markets are feeling the pressure.
According to PitchBook’s latest analysis, private equity and venture capital are equipped to alleviate pressures—but it won’t be a smooth ride. In the new report, PitchBook’s analysts examine how PE and VC fundraising, deal sourcing, and performance will be affected by the economic deterioration caused by COVID-19.
Here are a few insights:
— PE transactions will slow down: As consumer spending and business investment are set to decline, it’s likely that PE transaction volume will experience a slowdown following the expected economic contraction.
— PE firms are about to get more conservative: As lending tightens, PE firms will have to strike deals with more conservative capital structures that include a larger equity proportion. But don’t forget that PE firms still have a whopping $2.4 trillion in dry power (undeployed capital) sitting in private vehicles.
— Return profiles will likely face pressure: As earnings fall and the cost of capital rises, asset prices will decline across the board, which would hurt exit multiples.
— Performance may suffer: The recent market drawdown and volatility will likely be reflected in private market performance. “Our research has shown that PE and VC funds raised in the runup to a downturn, as prices are rising and excess capital is raised, tend to underperform,” the note says.
— There’s still plenty of capital out there: For both PE and VC, dry powder levels are at record levels on an absolute basis. This capital is likely to be deployed, albeit more slowly and perhaps more prudently than in the last few years. Capital efficiency strikes again!
NEOBANK FUNDING: One Finance, a San Francisco-based banking startup whose target market includes the nuclear family, raised $17 million in Series A funding and launched in private beta Tuesday. Investors include Foundation Capital, Core Innovation Capital, and Obvious Ventures.
My colleague Lucinda Shen has the latest:
While the average American holds multiple accounts, which makes it difficult to understand exactly how much cash they have on hand and how much they can spend, One Finance is betting that consumers want to simplify their spending and saving to just one place. The startup will offer a single account for savings and credit, allowing consumers to switch from their debit card to credit and back again with a tap of a button.
- Hashicorp, a San Francisco-based developer of applications for software managed datacenters, raised $175 million in Series E funding from Franklin Templeton Investments at a post-money valuation of $5.1 billion.
- Proxy, a San Francisco-based provider of digital identities for the physical world, raised $42 million in Series B funding. Scale Venture Partners led the round, and was joined by investors including Kleiner Perkins, Y Combinator, Silicon Valley Bank and West Ventures.
- Axis Security, a San Mateo, Calif.-based application access company, raised $17 million in funding. Investors include Cyberstarts.
- Airmeet, an India-based Bengaluru-based virtual meetup management startup, raised $3 million in funding. Accel led the round, and was joined by investors including VentureHighway and Global Founders Capital.
HEALTH & LIFE SCIENCES DEALS
- Nurix Therapeutics, a San Francisco-based developer of targeted protein modulation drugs, raised $120 million in funding. Foresite Capital led the round, and was joined by investors including Bain Capital Life Sciences, Boxer Capital (Tavistock Group), EcoR1 Capital, Redmile Group, Wellington Management Company, The Column Group and Third Rock Ventures.
PRIVATE EQUITY DEALS
- RFP360, a Kansas City, Mo.-based RFP issuing and responding software platform, raised funding of an undisclosed amount from Five Elms Capital.
- MarineMax, Inc. (NYSE: HZO) acquired Boatyard, a Fort Lauderdale, Fla.-based on-demand digital platform aimed at enhancing the experience of boating. Financial terms weren't disclosed.
- Riskonnect acquired Xactium, a UK-based GRC software provider. Financial terms weren't disclosed.
- Burger King India placed its IPO plans on hold amid market turmoil, Bloomberg reports citing sources. Read more.
- InnoCare Pharma, a Chinese cancer drug developer, raised $288 million in its Hong Kong initial public offering, Reuters reports citing sources. Read more.
- Thailand’s Siam Cement Group Pcl shelved the IPO of its packaging business, sources tell Reuters. Read more.
- Keros Therapeutics, a Lexington, Mass.-based biotech developing treatments for hematological and musculoskeletal disorders, filed for an $86 million IPO. Pontifax (32.6% pre-offering), Arkin Bio Ventures (14.4%), and Foresite Capital Fund (9.9%) back the firm. It plans to list on the Nasdaq as “KROS.” Read more.
- Checkmarx, an application security company, was acquired by Hellman & Friedman at a valuation of $1.15 billion. The seller was Insight Partners.