After three years of record capital investment in middle-market private equity deals, limited partners are taking a step back.
In the first half of 2022, middle-market private equity firms alone raised $55.6 billion across 70 funds, according to new data from PitchBook. While that figure is not something to sneeze at, it is a long way from recent years. Since 2019, middle-market companies have managed to raise more than $130 billion a year. At the rate we’re seeing now, private equity firms are unlikely to hit those same numbers by the end of December.
Macroeconomic factors such as rising interest rates and underperforming public markets have put pressure on private markets and private company valuations, and some correlated factors are contributing to the new lack of interest in new funds from the middle market. For example, exits have been few and far between in the middle market (which is generally defined to include companies with annual revenues between $10 million and $1 billion). Since capital is tied up in companies for longer, that means investors don’t have the cash available to reinvest in new funds. It’s also worth mentioning that institutional investors tend to prioritize larger, more established managers when their pockets are tight.
PitchBook projects that mid-market companies are likely to be hit hardest during the recession. They are feeling more and more pressure from companies raising funds of more than $5 billion. So far in 2021, middle-market funds have accounted for 40.6% of private equity fundraising, up from 52.2% in 2021.
“Mid-market GPs will have to work harder or be more innovative to hit their fundraising goals,” the PitchBook report reads, with first-time managers likely to be hit first.
Here’s a look at the data for the first half of this year:
Keep in mind… I incorrectly referred to Index Ventures as Index Partners in Friday’s newsletter. I am sorry about the mistake
See you tomorrow,
Jackson Fordyce handled the deals section of today’s newsletter.
– GiveCampusa San Francisco and Washington DC-based fundraising platform for nonprofit educational institutions, raised $50 million in funding led by Silver capital partners.
– rideAn electric vehicle charging management platform based in Copenhagen, Denmark, has raised €30 million ($30 million) in Series A+ funding. energize businesses led the round and was joined by investors including Creandum, pale blue dot, byFoundersY Headline.
– Sondera Waterloo, Australia-based wellness and security company has raised A$35 million ($23.47 million) in Series B funding. blackbird companies led the round and was joined by investors including SEARCH Investments, Second bedroom Businessand others.
– codea San Francisco-based workplace rental and office management solutions company, raised $16 million in Series A funding led by Andreessen-Horowitz.
– find minea New York-based content creation platform for brands, raised $8.2 million in funding. Seed capital led the round and joined Underline CV.
– A layera Tel Aviv, Israel-based enterprise security provider for private LTE and 5G networks, raised $6.5 million in funding from Koch Disruptive Technologies.
– assignmentsa Miami-based private marketplace platform, raised $5 million in funding. flexible capital, Genesis Acceleration, digital horizon, What if companies, garage union, W5 groupand other angels invested in the round.
– Andgo Systemsa Saskatoon, Canada-based provider of workflow automation solutions for absence onboarding, shift filling, and vacation mapping, raised CAD 5.6 million ($4.22 million) in Series A funds. First promotion companies Y waterline companies co-led the round.
FUNDS + FUNDS OF FUNDS
– North ZoneA venture capital firm based in London, New York and Stockholm, Sweden, has raised €1 billion ($1 billion) for a fund focused on investing in start-ups from startup to IPO.
– Undefeated Growtha venture investment manager based in Los Angeles, New York and San Francisco, promoted Laura Mason to the Director
– L Cattertonan investment firm based in Greenwich, Conn., hired Ian Friedmann as partner and managing director in the firm’s growth fund. He was previously with Goldman Sachs.
– QED investorsa venture capital firm based in Alexandria, Va., hired christian lemon as director. I was previously with Gemini Y ingenious gateway.
– Urban Innovation Funda San Francisco-based venture capital firm, hired Andrew Felbinger as director He was previously with grain technologies.
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