Raising a first-time PE fund is difficult. Although there have never been more high-quality firms entering the market—and although institutional investors' appetite for PE is only growing—established managers are taking bigger and bigger slices of the fundraising pie. Many prospective first-time general partners (GPs) are interested in taking anchor or seed capital to kickstart their fundraising process. And some institutional investors and fund seeders are seeding and anchoring to save on fees or enjoy increased upside potential. But there's a problem: The world of seeding and anchoring is opaque and difficult to navigate. Definitions vary across the industry, and market standard terms are virtually nonexistent. We detail common commitment structures and the range of possibilities, including fee discounts, revenue shares, and tapering mechanisms. profile the five principal seed/anchor limited partners (LP) types: sponsors, large institutional LPs, funds of funds, family offices, and endowments. discuss recent developments in diversity-focused seed/anchor programs. review the trade-offs GPs and LPs must consider when entering into seed / anchor arrangements.
Private debt fundraising kept a steady course in the first half of 2021. Low interest rates, subdued default rates, and the longer-term pivot toward alternatives aided allocators in committing $72.5 billion across 81 vehicles, according to our latest Global Private Debt Report. A few key takeaways: Direct lending continues to stand out, accounting for half of all capital raised, but opportunities for distressed debt may be hard to find due to the lack of distress in the market. Private debt fund performance has been up QoQ for the past several quarters, but early data suggests Q1 will drop below H2 2020 levels. Venture debt has emerged as a major source of financing for high-growth startups that have traditionally opted for equity funding.
Our Quantitative Perspectives reports let the data do the talking. And for our most recent research, we set out to capture how the US venture capital industry has fared in its recovery from the pandemic (hint: it's been unfathomably strong). In addition to our core datasets, we bring in several macroeconomic datapoints like interest rates and public market performance to provide a more holistic narrative around the record-setting pace we're seeing across VC investment and fundraising. Check out our visual storytelling on topics like: Is the current environment more startup- or investor-friendly? How much does nontraditional investor dry powder factor into overall capital supply? How have SPACs and direct listings changed the exits game?
2021 European Private Capital Outlook: H1 Follow-Up Have SPACs in Europe met our expectations from January? How about Brexit's impact on the UK as a venture hub? Our London-based analysts recently revisited their six 2021 predictions from the start of the year—and the results, so far, are varied. Some full-year projections have already been met, others are on track to come true, and one has played out very differently than we projected:
Startups are ahead of incumbents when it comes to cloud security and developer-focused security. At least that's what record exit sizes are showing, as seen with SentinelOne's $9 billion IPO and Auth0's $6.5 billion acquisition by Okta. Other takeaways from our new research: The $16.6 billion in exit value last quarter was by far a record and 2021's total has already surpassed past years. Recent cyberattacks are encouraging medium-size enterprises and industrial companies to adopt advanced infosec tooling, which is driving industry growth and elevated VC activity. One standout product category driving funding growth: passwordless authentication tech.
After a rush of public listings, several mobility companies have no doubt had a rough ride recently. Stock prices have plummeted. SPAC deal valuations have been cut sharply. Nikola, Lordstown Motors and Canoo are facing federal investigations. This turbulence hasn't constrained private investment in the space, however, as high demand for low-cost, convenient and environmentally oriented solutions persists. Highlights from our new research: Venture investors poured $23.1 billion into mobility tech startups in Q2—putting the year on pace to break a record. While late-stage valuations have risen in tandem with the public markets, attractive terms can still be found at the early stage. Emerging opportunities we've identified include teleoperations startups and battery tech.
"Don't forget that this is only the first six months of 2021 and not a full-year chart." That quote from this week's webinar could've summed up a lot of the trends we covered across US VC dealmaking, exit activity, fundraising and beyond. So, will this pace continue in H2? What sectors are the hottest? What are the latest developments in tax policy and antitrust concerns? We discussed it all with our panelists from the NVCA and Silicon Valley Bank.
Mobility tech analyst Asad Hussain weighs in on recent developments in the delivery space, including a Gopuff's $1 billion funding round: "We have noted an uptick in investment in last-mile delivery services. So far in 2021, $7.6 billion in venture capital has been invested in last-mile delivery startups in North America and Europe. "An increasing focal point for investors is ultrafast delivery. By delivering in narrow radiuses around dark stores in dense cities, delivery companies can maximize deliveries per route and generate positive unit economics. "Ultrafast is the future of delivery. Just as consumers have become accustomed to on-demand ridehailing and same-day delivery, ultrafast delivery will become the new expectation. "As ultrafast delivery becomes more widespread, increased car traffic from couriers will likely lead to concurrent heightened noise, congestion, and emissions in residential areas. Solving this problem will require looking beyond cars to multimodal transportation solutions such as micromobility. "Going forward, we anticipate growth in ultrafast delivery to lead to significant investment in fleets of e-bikes and e-scooters for couriers. "One startup leveraging this model is United Arab Emirates-based Fenix, which operates a scooter sharing service. In addition to one-time rentals, the company's free-floating scooters are also available through weekly or monthly subscriptions. "Its durable e-scooters incorporate swappable batteries for greater operational efficiency. Fenix also launched F10, an app that provides ten-minute grocery deliveries using couriers who operate out of the company's network of dark stores, which serve as both charging and fulfillment centers. "Fenix maximizes its drop rates by targeting dense cities, limiting delivery ranges to tight radiuses around the dark stores, and equipping its couriers with well-maintained, fully charged e-mopeds. The company also realizes cost synergies by sharing real estate costs between both businesses. "Fenix dynamically allocates vehicles and labor between subscription, shared, and delivery businesses as needed to offset seasonality."
Our insights and data featured in the press: Alternative protein startups have already raised more money this year than all of 2020. What's capturing the attention of investors, futurists and environmentalists? Nontraditional VC investors were more active in Q2 than any other quarter on record. We supported a deeper dive into the trend. Insurtech startups need to show steady profitability to win over investors. High-growth companies with high loss ratios are risky.
Measuring VC's pandemic resilience Despite the challenges posed by the pandemic, the US venture capital industry set several records in the past year and has continued its robust performance in 2021. Our recent data report provides a data-driven analysis on how the industry is charging full steam ahead, including insights on the correlation between public and private markets, mounting optimism from nontraditional investors and why the SPAC market has yet to establish itself as a game-changing exit route. Highlights from the report include: With large tech stocks including Amazon and Netflix driving the market upward, institutional investors are increasingly seeking value in the next crop of VC-backed tech companies. Investors have concentrated their capital into fewer industries over the past 15 years. IT hardware and energy are among the sectors seeing the largest reduction in capital investment. Already in 2021, mega-funds have nearly eclipsed 2020's annual record. With the supply of capital higher than estimated demand, companies are securing funding more quickly than expected. In recent months, de-SPACing activity seems unable to keep up with SPAC announcements. This could indicate a lack of worthy SPAC targets, and that capital may be returned in the coming year as many SPACs come up against the two-year deadline to deploy capital.
Is Africa fintech's next frontier? Africa's fintech sector is witnessing unprecedented growth as foreign investors try to get in on the ground floor of an ecosystem ripe for innovation. Fintech startups in Africa secured around $330.5 million in H1 2021, more than double the amount raised the entire year before, according to data from Disrupt Africa, a tech-focused research and news organization. The sheer size of the market and recent startup success stories have made Africa increasingly attractive to foreign investors. African startups may be undervalued due to various risks, but firms entering the market earlier stand to make solid returns as the ecosystem matures.
Going public: This new report highlights six key trends driving the IPO surge While we've all been shut indoors for a year and a half, quite the opposite has been happening with the public markets. IPOs grew 51% in 2020, and the trend is continuing into 2021 as worldwide exchanges flash new ticker symbols of recently minted publicly traded companies. Intralinks' new report, What's Driving the IPO Explosion, highlights six key trends that will shape the IPO marketplace and guide investment in the coming year: Inclusion of environmental, social and governance strategies in IPO offerings The rise and regulation of SPACs A spike in Asia-Pacific IPOs The ascent of Europe's exchanges Booms in tech and health & wellness Post-pandemic market confidence Be ready to capitalize on the IPO surge.
Assessing our 2021 predictions for Europe's private markets. Midway through the year, our analysts revisit their predictions in the 2021 European Private Capital Outlook: H1 Follow-Up. In January, we forecast that PE deal activity in the region would top a record €480 billion in 2021. Already, dealmaking is set to march past that—and perhaps beyond €500 billion—thanks in part to rising middle-market and micro-cap activity. As expected, VC activity has been equally buoyant, shrugging off the dual headwinds of the pandemic and Brexit. How have our other forecasts fared? In the report, we review 2021 predictions including: SPAC listings in Europe will reach double digits. Fundraising for distressed and restructuring strategies will hit record highs. The UK will remain the largest contributor to venture activity in Europe, with dealmaking surpassing €10 billion.
How Michael Dell turned his declining PC business into a $40 billion windfall. Dell is no longer on the decline! One silver lining of the pandemic was the democratization of remote work access that it provided. An in-depth look at how a mishandling of the transition to a hybrid model may threaten that. Since January, automakers and electronics producers have been dealing with a semiconductor shortage. Now the imbalance in supply and demand might be swinging the other way.
Stay tuned for more private equity news and investing insights each month!
