After three years of record capital pouring into middle-market private equity deals, limited partners are taking a step back.
In the first half of 2022, middle-market private equity firms only fundraised $55.6 billion across 70 funds, according to new data from PitchBook. While that figure is nothing to sneeze at, it’s a far cry from the last few years. Since 2019, middle-market firms have managed to raise more than $130 billion annually. At the pace we’re looking at now, it’s unlikely PE firms will hit those same figures by the end December.
Macroeconomic factors like rising interest rates and poor-performing public markets have put pressure on the private markets and the valuations of private companies, and a few correlating factors are contributing to the newfound lack of interest in new middle-market funds. For instance, exits have been few and far between in the middle-market (which is typically defined to include companies with annual revenue between $10 million and $1 billion). Since capital is being tied up in companies for longer, that means investors don’t have the cash on hand to put back into new funds. It’s also worth mentioning that institutional investors tend to prioritize larger, more established managers when their pocketbooks are tightened.
PitchBook projects that middle-market firms will likely be most impacted during the downturn. They are increasingly feeling pressure from firms raising $5 billion+ funds. So far in 2021, middle-market funds have made up 40.6% of private equity fundraising—down from 52.2% they accounted for in 2021.
“Middle-market GPs will have to work harder or be more innovative to hit their fundraising targets,” PitchBook’s report reads, and first-time managers will likely be hit first.
Here’s a look at the data from the first half of this year:
Please note… I incorrectly referred to Index Ventures as Index Partners in Friday’s newsletter. I regret the error.
See you tomorrow,
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Jackson Fordyce curated the deals section of today’s newsletter.
- GiveCampus, a San Francisco and Washington D.C.-based fundraising platform for nonprofit educational institutions, raised $50 million in funding led by Silversmith Capital Partners.
- Monta, a Copenhagen, Denmark-based EV charging management platform, raised €30 million ($30 million) in Series A+ funding. Energize Ventures led the round and was joined by investors including Creandum, Pale Blue Dot, byFounders, and Headline.
- Sonder, a Waterloo, Australia-based wellbeing and safety company, raised AU$35 million ($23.47 million) in Series B funding. Blackbird Ventures led the round and was joined by investors including SEEK Investments, SecondQuarter Ventures, and others.
- Codi, a San Francisco-based office management and workplace leasing solutions company, raised $16 million in Series A funding led by Andreessen Horowitz.
- FindMine, a New York-based, content creation platform for brands, raised $8.2 million in funding. XSeed Capital led the round and was joined by Underscore VC.
- OneLayer, a Tel Aviv, Israel-based enterprise security provider for private LTE and 5G networks, raised $6.5 million in funding from Koch Disruptive Technologies.
- Allocations, a Miami-based private markets platform, raised $5 million in funding. Flex Capital, Genesis Accel, Digital Horizon, Whatif Ventures, Garage Syndicate, W5 Group, and other angels invested in the round.
- Andgo Systems, a Saskatoon, Canada-based workflow automation solutions provider for absence onboarding, shift filling, and vacation mapping, raised $5.6 Million CAD ($4.22 million) in Series A funding. First Ascent Ventures and Waterline Ventures co-led the round.
FUNDS + FUNDS OF FUNDS
- Northzone, a London, New York, and Stockholm, Sweden-based venture capital firm, raised €1 billion ($1 billion) for a fund focused on investing in startups from seed to IPO.
- Invicta Growth, a Los Angeles, New York, and San Francisco-based venture investment manager, promoted Laura Mason to principal.
- L Catterton, a Greenwich, Conn.-based investment firm, hired Ian Friedman as partner and managing director in the firm’s growth fund. Formerly, he was with Goldman Sachs.
- QED Investors, an Alexandria, Va.-based venture capital firm, hired Christian Limon as a principal. Formerly, he was with Gemini and Nifty Gateway.
- Urban Innovation Fund, a San Francisco-based venture capital firm, hired Andrew Felbinger as principal. Formerly, he was with Grain Technologies.
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