There is a lot going on in the venture capital, startup, and stock market spaces this year. Here are some investment insights and news now to know:
GP stakes deals have surged in popularity over the past five years, with tens of billions of dollars flowing into the strategy. Yet the blistering growth has some industry observers questioning its future—and what investment prospects may remain. Plenty, as it happens. GP stakes deals are in a lush opportunity landscape, with $100 billion-plus in potentially available value, our analysts argue in our latest research note. Among the takeaways: The middle market offers the best supply-and-demand dynamics compared to larger or smaller GPs, with less than $10 billion currently targeting the space and over $40 billion in capacity. Buyout firms have long been the favored choice for GP stakes investors, yet growth equity targets have become increasingly attractive based on their return profiles, fees and holding periods. Private capital managers are opting for more IPOs, signaling a change in how they view outside ownership. More may be willing to sell stakes—or the top end may have less capacity than expected if firms go straight to the public markets.
Opportunities are only growing for GP stakes investing GP stakes activity is reaching levels never seen before. In the last couple of weeks, three GP stakes deals have been announced: Blackstone bought a stake in GTCR, Azimut Alternative Capital Partners purchased a piece of Pathlight Capital, and Blackstone and RidgeLake invested in Sentinel Capital Partners. This fervent pace is unprecedented, and the remainder of the year may see this flurry continue; an expected rise in capital gains tax rates is driving many private capital founders to sell minority stakes in their firms. All of this activity has some LPs looking to allocate to GP stakes funds and asking, "How much opportunity remains?" As it turns out, the answer is plenty. In our latest research on the GP stakes space, we dive into the total investable landscape and size up capital deployment opportunities. A few takeaways: Despite the record number of GP stakes deals, there are more non-backed firms now than ever before—and the number rises each year. The mid-market appears to have the best supply-demand dynamics for investors with the best ratio of available capital to capacity. The total equity value of all non-backed firms in the top end, middle market, and small buckets is nearly $1 trillion. For more detailed findings, including a methodology overview, download our free research: "GP Stakes Deployment Opportunities" Please feel free to email me if you're an LP thinking about allocating to the space or a GP considering selling a stake.
What investment strategy best prepares for increased infrastructure spending? As plans for US infrastructure spending continue to unfold, the size and scope of the possibilities have drawn the attention of the private investment community. In entering that marketplace, some investors will choose direct investment in projects, while others will acquire portfolio companies that provide supporting products and services. What's the best strategy? It can depend on the scale and scope of the project, and the investor's size and expertise. Infrastructure projects resemble lifecycles, and investors are likely to play different roles along the way. Designing, building, operating and maintaining these projects requires one specialized skillset, operating portfolio companies another. Industry-specific qualifications will be important for both investors and service providers.
A look at why America's investing boom goes far beyond Reddit message boards, GameStop and Robinhood traders. Many buyout firms are bidding for publicly traded companies in the UK at a faster rate than they have in years. The reason? Investors think big assets are going for cheap in a post-Brexit world. Cross-contamination in the prescription drug industry is rampant. Just ask Brady Ellison, a three-time US Olympic medalist in archery who was almost disqualified because traces of a banned drug were found in his thyroid medication.
Ask these questions before you commit to any investor record-keeping system Investors are increasingly demanding about reporting, leaving managers who rely on homegrown approaches or disjointed systems struggling to meet expectations. Ask these 10 questions to frame up your true needs regarding investor record keeping and reporting. For starters, find out whether you're considering one integrated system or many separate ones. Understand whether a system will strengthen your brand or compete with it. Who owns the technology—and how often do upgrades occur? Can you get the development team's attention? This checklist-style guide is relevant from marketing to compliance, so you'll be confident about getting your money's worth while best serving your investors.
NotCo, a plant-based milk and meat creator, has raised a $235 million Series D led by Tiger Global at a valuation of $1.5 billion. Other investors including DFJ Growth Fund, The Social Impact Foundation, Zoma Lab, and follow-ons L Catterton and SOSV also joined the round. The Santiago, Chile-based startup matches animal proteins to ideal plant-based ingredients with the help of proprietary AI technology named Giuseppe.
ByHeart has raised a $90 million Series B led by D1 Capital Partners, with participation from OCV Partners, Polaris Partners and others. The New York-based company is a developer of infant nutrition products. Founded in 2016, ByHeart was valued at $177 million in April 2020, according to our data. The startup launched a new platform in June that's designed to provide parents with resources and education on feeding decisions.
Embark Veterinary has raised a $75 million Series B led by SoftBank's Vision Fund 2. The Boston-based company is a developer of DNA testing kits for dogs that provide breed, ancestry, health and other genetic information. Existing investors F-Prime Capital, SV Angel, Slow Ventures, Freestyle Capital and Third Kind Venture Capital also participated in the funding. Embark has a long-term goal of increasing the lifespan of dogs by three years within the next decade.
Teamflow has raised a $35 million Series B led by Coatue. The San Francisco-based company offers a virtual office platform to help remote and hybrid work teams collaborate and manage operations. Teamflow was valued at $70.7 million this past March, according to our financial data.
Thoma Bravo to take software company Medallia private in $6.4B deal Thoma Bravo has agreed to acquire Medallia, a San Francisco-based customer experience management provider, in an all-cash transaction that values Medallia at $6.4 billion. As part of the public-to-private agreement, Thoma Bravo will pay $34 a share for Medallia, which represents a 20% premium to the company's closing stock price on June 10, the day before initial reports of the deal surfaced.
Stonepeak set to pick up Lumen's Latin American business for $2.7B Stonepeak Infrastructure Partners has agreed to acquire the Latin American division of Lumen Technologies, a publicly traded telecommunications company, for $2.7 billion. AustralianSuper, Australia's largest pension fund, will invest alongside Stonepeak. Lumen currently controls some 450,000 route fiber miles and serves customers in more than 60 countries. The Latin American unit, which manages data centers and subsea and terrestrial fiber communications, will operate as an independent company based in the US, with the current Latin American leadership team remaining in place.
Bruin lands sports simulator Full Swing Bruin Capital has purchased Full Swing, a Carlsbad, Calif.-based golf technology and performance company, from North Castle Partners. Full Swing is a producer of multi-sport simulators for commercial, residential and entertainment venues, offering experiences in more than 13 sports. PGA TOUR pros Tiger Woods, Jordan Spieth and Jon Rahm are company ambassadors.
Leeds Equity Partners nearing $1.25B close for seventh buyout vehicle New York-based Leeds Equity Partners is nearing a close of $1.25 billion for its seventh namesake buyout fund, according to The Wall Street Journal. The fund is reportedly expected to be wrapped up by the end of July. Leeds Equity closed its sixth vehicle in the series on more than $750 million in 2018. The firm typically targets middle-market companies in the education, information services, training and software industries.
SoftBank's Didi investment $4B in the red SoftBank's investment in Chinese ridehailing giant Didi Chuxing is reportedly down some $4 billion after alleged data security lapses at the company. In 2019, SoftBank's Vision Fund paid a reported $11.8 billion for a 20.1% interest in the company. That stake is now worth about $7.8 billion on the NYSE. Didi Chuxing went public last month.
Aon, Willis Towers scrap $30B tie-up Aon and Willis Towers Watson have agreed to call off a merger that would have created the world's largest insurance broker, after the Department of Justice sued to stop the deal on antitrust concerns. Aon originally agreed to acquire Willis Towers in March 2020 for around $30 billion in an all-stock transaction. The DOJ filed its lawsuit last month, arguing that the two companies' sale of assets in Europe didn't go far enough in avoiding a monopoly. As part of the cancellation, Aon will pay a $1 billion termination fee to Willis Towers.
S4 to absorb Australia's Destined London-based S4 Capital has agreed to acquire Destined, an Australian Salesforce partner providing cloud and marketing services to clients including Spotify, Panasonic, Opal HealthCare and others. The deal will allow the British ad group to expand its presence in the Asia-Pacific and on the Salesforce platform.
"The pipeline of new startups also remains strong, as evidenced by capital pouring freely into first-time rounds. While first-time deal value has remained consistent in recent years, it reached €2.7 billion in H1 2021 and is on course to set a new annual record at the end of 2021."
Analyzing impact investing focus areas and where the capital is flowing When I was an institutional investor, I noticed that it was an interesting conundrum to find impact investment funds that perfectly matched with the things we hoped to impact. While there might've been funds that targeted affordable housing or health, few did both and none targeted the geography we were attempting to influence. (And we've heard from GPs who feel the same about finding the LPs most interested in what they're offering.) When I arrived at here, I learned that while we had some funds tagged in our platform as "Seeks Impact Investments," the list seemed incomplete and the tagging wasn't terribly helpful if you had particular categories of impact in which you were especially interested. After over a year of work, we have created a new dataset by tagging private market impact funds not only as impact funds but with a second level of tagging for the types of impact they hope to provide. We partnered with the Global Impact Investing Network (GIIN) to use their IRIS+ framework to tag approximately 1,300 impact funds into 16 categories. A sample of the 16 IRIS+ categories we used in our analysis. The paper we released this week is the first attempt to use this dataset to report on trends in the impact funds ecosystem. We look at the landscape geographically, by strategy type (VC, PE, etc.), and then at the funds broken down by category. Some highlights: VC represents a larger share of impact funds than of the broader private fund universe, as do funds raised in Africa and for infrastructure. European impact funds tend to have been the primary source of Climate impact funding (though maybe not after this month...), while North American funds have been more likely to fund Diversity & Inclusion and Health. Energy (clean energy) is a perennial target of impact funds, as it can absorb a ton of investment dollars, while Biodiversity & Ecosystems garners infrequent attention. Beyond the massive TPG and Brookfield Climate funds in the market, a wide variety of impact funds are currently fundraising across diverse geographies, fund types, and impact categories.
Healthy stock market returns. Cheap financing. Executives confident in economic growth and eager to make deals. A lot of factors are driving strong M&A activity worldwide, and a rush of public listings this year could bode well for future dealmaking, according to our new Global M&A Report. Amid these bullish signs, we're also tracking growing antitrust pressure in the US, Europe and China. This could shape M&A going forward, putting a damper on the largest deals and giving breathing room for smaller combinations to take place. Plus, we're seeing conflicting effects from the macroeconomic whiplash of pandemic-induced supply reductions followed by faster-than-expected demand rebound. Check out our data and analysis across core regions and sectors.
Despite continued uncertainty around COVID-19, the European VC industry set multiple annual records in the first half of the year alone. This unrelenting pace could see deal value land near the €100 billion mark by year-end as late-stage capital has continued to dominate and drive deal value upward. Our latest European Venture Report highlights key trends shaping VC dealmaking, exits, nontraditional investment, and fundraising. This report also contains a spotlight on the emerging VC scene in the Baltics. Key takeaways from H1 include: European VC deal value reached a new annual peak of €47.1 billion, beating the record of €45.1 billion set in 2020. Exit value topped €46.8 billion and eclipsed the previous annual best of €43.1 billion set in 2018. Capital raised by VC funds hit €9.4 billion and is on course to exceed 2020 figures.
Autonomous Trucking Gains Traction While self-driving cars get most of the tech buzz, the trucking industry may be first to adopt autonomous driving at scale. Venture investors have noticed the potential, too, as VC funding is on the rise and valuation growth for autonomous trucking startups is outpacing that of robotaxis. In our premium research for investment clients, we dive deep into the unit economics, identify the key players in the space, analyze the cost-savings breakdown, and provide new market-size estimates for an autonomous trucking industry that we expect to experience tremendous growth over the next decade.
Fintech analyst Robert Le weighs in on Robinhood's high-profile public listing after the stock trading app closed its first day of trading below its IPO price: "We expected a highly volatile first day of trading for the stock. "We believe the downward pressure on the stock on trading day was due to a combination of a large allocation to retail investors, allowing employees to sell, and negative sentiment from outspoken customers. "A poor IPO performance will likely limit companies from issuing large allocations of shares to retail investors in future IPOs. "Longer-term, we believe that Robinhood will be pressured to diversify its revenue streams as stock, forex, and crypto trading has become highly competitive and commoditized. "Further, regulatory risks are on the horizon pertaining to the ban of payment of order flow, which should only accelerate the company’s plans to expand into adjacent businesses like banking and asset management.”
Our insights and data featured in the press: After a period of blitzscaling in the world of food delivery, there's now a lot of competition in the industry without much variation among the companies. Also, a look into the new ways DoorDash is trying to create value in the margin-strained business. Just how active has SoftBank been with its second Vision Fund? And how has its strategy changed? The factors pushing trucks past robotaxis in the world of autonomous driving. A deeper dive into the record-setting pace in European VC shows a growing but fluctuating and potentially risky market.
Stocks are cruising at record highs: how that connects to your wallet and rising inequality The stock market has been giving off manatee meme energy. While stocks dipped last week, they've been cruising around records thanks to vaccines, $6T in stimulus, and the Fed's economy-boosting rate policies. Low interest rates make borrowing cheaper (think: mortgages, business loans) — plus, they make stocks more attractive compared to less risky investments.
All these factors helped the S&P 500 soar a whopping 35% over the past year. But how is that translating to American wallets? Americans are getting richer. Last year, US household wealth surged to records as Americans accumulated a fresh $12T. In the first quarter of this year, wealth across all US households jumped about 5%. One third of the total increase in Americans' net worth last year went to the top 1%, just 3M people — the same as went to the bottom 60%, or 199 million people. The second half of 2020 also brought the sharpest rise in the US poverty rate since the '60s. It's expected to hit 14% by end-of-year, with poverty rates for Black and Hispanic Americans double those of white Americans. Now drop the stats... Income inequality is nearly the highest in at least half a century. The top 1% of Americans have 16X the wealth of the bottom half, compared to 6X in 1990. Here's why: Key stat: About half of the total increase in Americans' wealth last year came from rising stock prices (though soaring home values also played a role). Break it down: The wealthiest 10% of Americans own 90% of stocks and mutual funds held in the US. The bottom half of households hold less than 1%. Some benefit way more than others from a booming market. While most Americans got wealthier, the rich got way richer — that's because the top 20% of earners own nearly all the stocks held by US households. That could change as retail participation in the market continues expanding: last year, more than half of US households invested in stocks, up from one quarter in the '80s. Still: factors like wage gaps, technological changes, and globalization remain at the center of US wealth inequality.
Tesla posted record profit and deliveries for last quarter, and Apple had its best third quarter ever. The bad news: Apple and Tesla are the latest victims of the global chip shortage, which has been affecting everything from smartphones to cars. Apple warned that shortages will affect iPhone production, while Technoking Elon is worried about Cybertrucks. You’d think chipmakers like Intel and Samsung would be celebrating, but they're facing their own supply chain struggles. The crackdown continues... Chinese tech stocks lost hundreds of billions of dollars of combined market cap in July, as regulators came down on giants like Alibaba (Amazon of China), Didi (Uber of China), and TikTok-owner ByteDance. The latest victims: ed tech and food delivery companies. China wants to make it cheaper for families to have more kids, and education and food represent big costs. Now, some Chinese tech companies like Weibo and Didi are reportedly considering going private to avoid more volatility.
It's travel week, with Hilton, Hyatt, Marriott, Expedia, Tripadvisor, Booking, and Wynn Resorts all dropping earnings (now breathe). TSA traveler volumes are back to 80% of pre-pandemic levels, as you unwrap Biscoff cookies en route to Miami. US weekly hotel occupancy has reached its highest level since 2019, while room rates are pricier than ever. Hotel and travel stocks have soared this year as vacays return. But rising Covid cases and returning restrictions could put a damper on the rebound. Save the date... Dating legend Match Group unveils earnings tomorrow. Match owns Tinder, Hinge, OkCupid, and 20+ other e-romance apps. Last year, Match's sales jumped 17% as you spent romantic nights in bed swiping. Thanks to vaccines and reopening, happy hour dates are back and people are craving IRL connections more than ever. According to a WSJ survey: 87% of people plan to maintain or boost time spent on dating apps in the next several months. That could boost biz for Match and Bumble.
Stay tuned to future articles and blog posts on the Frugal Finance Blog to learn more about essential investing insights!
