Venture Capital Investors Must Stay Ahead of the Curve -- Preqin Reports

With weakened VC fundraising on the horizon, Preqin releases new features to its Company Intelligence solution to aid investment teams  

LONDON, Oct. 4, 2022 /PRNewswire/ -- Today Preqin, the global leader empowering the alternatives community with essential data and insight, has announced a significant update to its Company Intelligence solution – the latest product in its private markets data offering, launched in April 2022. The release of an upgraded deal database includes an enhanced deal: search, history tables, and new buyout profiles. Customers now have a complete view of the private capital lifecycle with interconnected company, fund, and performance data, increasing their ability to make investment decisions with confidence. 

Rising interest rates and inflation leave investors coy about capital commitments  

The deterioration of the macroeconomic climate over the past year, from inflation and rising interest rates to geopolitical threats, means investors are now operating in a more challenging environment. A key concern to emerge since last year lies in rising interest rates; companies with limited to no cash flow are typically impacted most when rates climb, putting venture capital (VC) investments under pressure.  

With global markets having experienced considerable turmoil and heightened inflation during 2022 so far, VC could be the most exposed private capital asset class. What is more, concerns over start-ups' high cash burn rate and limited exit options caused by the global equity sell-off are extending funds' holding periods and slowing capital distributions, while early indications suggest a knock-on effect on fundraising, as Preqin analysts expect a more pronounced slowdown in H2 2022.  

At the same time, global venture capital deals have declined by 21% year on year to 4,830 in Q2 2022, with deal-making in North America seeing the most significant impact. Preqin's H2 2022 Investor Outlook survey  found that 33% of global investors plan to deploy less capital into the asset class in the next 12 months, compared with only 13% in the 2021 survey. Moreover, only 26% of respondents intend to deploy more capital, compared with 43% last year. 

An increasing proportion of investors voiced concerns about near-term VC performance, with 55% of survey respondents expecting worse performance over the next 12 months. In addition, VC valuations are of most concern, with 42% of investors viewing the asset class as overvalued. 

In what is now a challenging macroeconomic environment, having access to the right data, tools, and insights is crucial for investment teams and M&A professionals across the alternative assets industry. The latest update to the Company Intelligence deals table will provide users with a consolidated and unique list of deals with key information, including a complete picture of a transaction covering the target, buyer, and seller, with the most relevant valuation information depending on deal types and acquired stakes. 

Venture capital offers investors pockets of opportunity 

Despite the current headwinds, VC has become the second largest asset class in the alternatives industry, surpassing $2tn in assets under management (AUM) as of September 2021 ($2.03tn) – a massive increase since December 2008, when VC AUM accounted for around $270bn. As investors take a long-term view, venture capital firms have continued to raise capital in 2022, and Preqin estimates that global VC dry powder currently sits at $529.7bn*. 

While deal activity in North America has slowed, there are still a lot of opportunities to put capital to work, especially across emerging tech hubs. For example, in India, VC deal value reached an all-time high of $39.1bn, while VC deal activity in The Association of Southeast Asian Nations (ASEAN) reached a record $20bn.  

Sola Akinola, Executive Vice President, Head of Company Intelligence at Preqin, says: "Staying ahead of the curve will be critical for investment teams and M&A professionals. Preqin's Company Intelligence solution adds tremendous value to our clients by improving their deal origination processes, enabling them to build even more precise target lists faster. In addition, the enhanced deal history tables, and new buyout deal profiles include new, more targeted, meaningful, and relevant data, including comparable valuations and multiples.".  

Note to editors: 

*Estimated dry powder number as of Aug 2022 — Preqin's accurate dry powder number has a 6-month lag. Therefore, VC dry powder at the end of December 2021 sits at $378.6bn. 

Please note that December 2021 is the most recent calculation possible for VC AUM. Preqin's calculation of AUM in private capital has two components: dry powder and unrealized value. Dry powder is an up-to-date estimated number calculated as the amount of capital that has been committed to funds minus the amount that has been called by the GP for investments, and unrealized value is a lagging indicator derived from GPs quarterly reports. 

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About Preqin  

Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for almost 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.