Tim DeGraw

A few highlights from the Jefferies '24 secondaries outlook + Prequin's H1 '24 secondaries report. We have seen an increase in secondaries activity on Sydecar over the last few months + we just updated our secondaries guide - link in comments! - Secondaries fundraising hit a record $93.8bn in 2023, a 159% increase from 2022. - LPs consider secondaries the most attractive private equity strategy over the next 12 months, with 64% favoring it. - Small- to mid-market buyouts and special situations are less popular, favored by 49% and 48% of LPs, respectively. - Historical returns for secondaries have been strong, with even the bottom quartile delivering positive returns. - The market comprises 181 secondaries and secondaries direct funds, targeting a combined $129.9bn. - Fundraising cycles can cause peaks and troughs in secondaries fundraising. - There is a significant time lag in market for funds, with an average of 23 months for funds closed in 2023. - Dry powder in the market represents about one and a half years of capital needed for the current pace of transactions. - Jefferies estimates 2023 transaction volume at $112bn and forecasts over $130bn for 2024. - There were challenges in closing deals due to the gap between buyer and seller expectations, but more than $100bn in deals were completed in 2023. - The market is undercapitalized, especially at the larger end, due to high barriers to entry. - Supply and demand are fairly balanced, but there is more volume of supply from sellers needing liquidity or portfolio rebalancing. - New entrants, including sovereign wealth funds, are expected to enter the secondaries market, expanding capital supply. - Discounts are important, but the main value driver is buying assets with growth potential over a three-to-five-year horizon. - The secondary market has significant growth potential, with currently low trading volumes compared to other asset classes. - The secondary market is expected to become a tool for active portfolio management at any point in the cycle.

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Summary: The article discusses the FBI's investigation into Hone Capital, a venture firm funded by a Chinese private equity firm, to determine if it was funded by the Chinese government and if it shared sensitive startup data with Beijing. It also mentions Hone's legal conflicts with former executives and the impact of US-China tensions on venture funding and startup creation. Key takeaways: The FBI is investigating Hone Capital for potential ties to the Chinese government and sharing of sensitive startup data. Hone Capital has faced legal disputes with former executives and denies any wrongdoing. US-China tensions have led to a decline in venture funding and startup creation in China. Counter arguments: Hone Capital and CSC deny any involvement with the Chinese government, arguing that their funding comes from private investors. Some may view the FBI's investigation as a result of heightened US-China tensions rather than concrete evidence. #venturecapital #vc #startups

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Very similar and a complement to Independent Sponsor led transactions targeting $15 million to $100 million plus EV, search fund deals target acquiring companies for around $15 million EV, priced at approximately seven (7x) times EBITDA or less. Over the years, companies tracked by Stanford have shown annualized equity returns exceeding 30%! The target universe for search funds and Independent Sponsors is substantial, with nearly 200,000 businesses valued between $10 million and $100 million, according to NAICS Association data. Search funds often seek out companies with retiring family founders looking for liquidity. Middle and lower-middle market financial sponsors generally avoid targeting companies worth $15 million due to high overhead costs and the need to deploy significant amounts of capital. However, for individual entrepreneurs, these micro-sized deals are not only accessible but also offer attractive bargains. This has led to the emergence of specialized search PE funds alongside Independent Sponsor transactions. Great article by the FT. #privatecapital #privatemarkets #privateequity #buyouts #growthequity #independentsponsor #searchfund #middlemarket #smallbuyout #sme #institutionalinvestor #alpha #moic #irr #privatecredit #privatedebt #familybusiness #founderowned #fT

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Southeast VC Update: Q2 2024 PitchBook Venture Monitor Highlights The Southeast continues to hold its position in the VC regional landscape #5 in dollars raised for Q2 2024 🥉 #3 in deal count (just behind the West Coast and the Mid-Atlantic) H1 2024 Southeast Breakdown:  📊 10% more deals than Northeast  📈 30% more deals than Mountain region, 20% more than South  💰 5% more dollars raised than Mountain region  💸 23.5% more dollars raised than South YoY Funding Trends:  📈 Southeast: Up 29% 📈 Mid-Atlantic: Up 136%  📉 Midwest: Down 67%  📉 New England: Down 11%  📈 West Coast: Up 59% Key Trend: While closing in on Mid-Atlantic numbers, we are seeing more deals but smaller rounds. This could indicate strong activity occurring in the seed & early-stage funding, despite the macro challenges. (Pitchbook classifies the Southeast as AL, FL, GA, KY, MS, NC, SC, TN, Puerto Rico, & Virgin Islands) #BuildInSE

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Surprising to see two mega mergers getting past antitrust: - The $53B Chevron-Hess merger - The DirecTV-Dish merger where AT&T is selling its stake in DirecTV for $7.6B to TPG and DirecTV buying Dish for $1 and taking on its $10B in debt What does it mean for consumers? And what does it mean for the M&A market? These approvals may signal a shift in antitrust policy. Looks like they're prioritizing global competitiveness over strict market share considerations. This might invite additional scrutiny on how these mergers impact innovation in bigtech. These mega mergers usually tend to have a strong impact on consumer choice and pricing. The industry dynamics will be closely watched by regulators and investors.

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Summary: The article discusses Palantir's role in the growing defense tech startup sector and its efforts to become a driving force in the industry. The company's CTO, Shyam Sankar, is determined to help Palantir create a defense tech ecosystem and maximize its impact beyond its government contracts. Key takeaways: Sankar has initiated the First Breakfast program to provide guidance and tools to defense tech startups, aiming to secure a head start in the industry and identify potential "next Palantirs." Palantir has spawned a whole ecosystem in its wake, as evidenced by the success of former employees who have gone on to start their own successful defense tech companies. Sankar is driven by an existential fear of America's war-readiness and believes that more innovative and adaptable solutions are needed to ensure national security in the future. Counter arguments: Some may argue that Palantir's efforts to support and influence the defense tech industry could raise concerns about its potential for monopolizing the market. Critics may point out that Palantir's controversial partnerships with government agencies, especially ICE, raise ethical concerns and contradict its stated mission to protect Western values.

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Venu Sports was supposed to launch this fall but now it’s being blocked by a federal judge ❌ What led to this? Netflix pioneered the subscription video-on-demand (SVOD) market with the launch of its digital streaming service in 2007. Growth was driven by the rise of broadband internet, improved video compression technologies (i.e. H.264), and the consumer trend of "cutting the cord," which attracted new competitors like Hulu, Amazon Prime, Disney+, and ESPN+. Proliferation of direct-to-consumer services by IP-rights holders (i.e. The Walt Disney Company, Warner Bros. Discovery, and NBCUniversal) led to consumers needing multiple subscriptions to access desired content. Companies also struggled as competition became intense as subscriber growth stalled due to high churn and rising customer acquisition costs. Content became siloed across SVOD platforms (i.e. House of Dragons on HBO Max, Stranger Things on Netflix, Marvel on Disney+, and the English Premier League on Peacock). As a result, 36% of consumers feel the cost is no longer worth it, according to a Deloitte study, reflecting growing frustration with the fragmented streaming landscape. 75% of Gen Z and millennials want a bundle that lets them search for content across all streaming video services according to Deloitte. Sports streaming became increasingly valuable as consumers continued to cut the cord and seek flexible options that let them choose specific games to watch at any time. Due to growing demand for a centralized sports streaming offering, Venu Sports was formed through a joint venture between Disney, Fox Corporation, and Warner Bros to combine their live and on-demand sports offerings across multiple major leagues including the NFL, NBA, MLB, NHL, and various college sports. This “skinny” bundle was a contrast to the traditional TV bundle that required consumers to pay for channels they did not want. However, fuboTV Network filed an antitrust lawsuit based on their belief that Venu Sports would create an unfair monopoly in the sports streaming market. But do IP-rights holders (i.e. Disney and Warner Bros) have the right to go direct-to-consumer with this “skinny bundle” or do they need to allow other companies to offer similar content which sustains the consumer fatigue issue? Now fuboTV will need to prove its claims of anticompetitive behavior that would cause them to unfairly lose out on business from the launch of Venu Sports. Stay tuned… — In week 17, I ran 23.0 miles at an average pace of 7:52 minutes per mile. I’m raising money for the non-profit, Active Plus, that is promoting mental health through physical activity for the at-risk youth in NYC. 👇Please Donate Below👇 http://bit.ly/44JQeb9 #sports #streaming #media #entertainment #business #investing

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Great overview by Chris w/ example of how anti-dilution works in down-rounds. Biggest misconception I hear from founders is that it results in top-up shares today. Wrong - just results in adjustment in the conversion price of preferred shares if/when converted to common; impacts the liquidation waterfall and fully diluted cap table (which accounts for the lower conversion price).

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Neat view of M&A volume trends (YoY% by period) across time and interest rate environments by PwC. The broader article has another key call out: "Business imperatives don’t suddenly disappear because interest rates remain higher than the market would like." Current conditions don't eliminate the need to do deals, but they can shape how teams approach deal-making and competing. Stand out as a preferred deal partner and win opportunities. Pearl IO gets to key deal insights FAST and efficiently. Let's connect! https://lnkd.in/ectAQqrY

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Summary: This article discusses various venture capital news, including insights and analysis of VC firms, trends in investments, and the impact of technology on the industry. Key takeaways: The article mentions that Insight Partners is potentially raising over $10 billion for its 13th fund, and OpenAI may be altering its complex corporate structure. There is a growing trend of Silicon Valley companies following China's lead and a discussion of how VC Mike Moritz believes the pace of work in tech companies should be "furious." Y Combinator is expanding the number of cohorts it runs, a new decentralized music streaming service called Tune.FM is introduced, and there is discussion about startups working on addressing climate change. Counter arguments: There may be concerns about the potential drawbacks of following China's lead, and the idea of a "furious" pace of work may raise questions about work-life balance and company culture. Some may argue that expanding the number of cohorts may lead to a decrease in the quality or effectiveness of Y Combinator's program. The article does not mention potential challenges or limitations facing the new decentralized music streaming service or startups working on climate change solutions. #venture #venturecapital #vc

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A few observations on the recent #investment mix and growth trends in the #space #economy. Thank you to BryceTech and Space Capital for their publicly available data.

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Excited to share key insights from the “Shift Happens 2024” report, which I've been working on alongside Lotan Levkowitz, Or Git and Niv Yungelson. The report highlights the transformative potential of Gen AI across the software development lifecycle. Special thanks to Zack Smocha, Guy Sayar, Philip Tannor, Amit Attias, Ofer Kirshenbaum and Ron Netzerel🎗️for their valuable contributions. I'll be presenting the report and some more insights at our #Shift_Happens summit tomorrow. Don't miss it! Read the full report in the comments below! 👇 Amazon Web Services (AWS), Grove Ventures

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Series A or B wondering when to bring in a VP of Finance or CFO? It’s a crucial decision that can shape the future of your company. At this stage, financial leadership is not just about managing numbers but also scaling processes, securing funding, and driving strategic growth. My colleague Paul breaks down key signs that it’s time to hire and indicators for choosing between VP of Finance and a CFO #FinanceLeadership #CFO #StartupGrowth #SeriesA #SeriesB #NextGenLeadership

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Can you have your cake and eat it too? 🍰 Blue Owl Capital's recent decision to sell a slice of its GP Stakes III fund to a continuation vehicle it controls highlights a growing trend in the private equity space. Here are a few key takeaways and the potential industry impact: 1. Accelerated Cashflows: By selling 5% of its assets to the newly launched Blue Owl GP Stakes Atlas Fund I, Blue Owl can return capital to investors more quickly, maintaining strong relationships and potentially attracting more capital for future funds. 2. Retaining Control: The deal allows Blue Owl to generate liquidity without sacrificing control over the majority of its investments, showcasing a balance between immediate returns and long-term growth. 3. Continuation Vehicles on the Rise: This transaction underscores the increasing use of continuation vehicles in private equity. These vehicles offer an innovative way to provide liquidity to investors while retaining valuable assets, which could become a standard strategy for funds looking to extend the lifecycle of their investments. Deals like this highlight the evolving strategies within private equity to address the growing demand for liquidity while maintaining a strong asset base. As continuation vehicles become more common, we can expect to see more firms adopting similar approaches, further enhancing flexibility in fund management and investor relations. This transaction is more than just a financial maneuver—it's a signal of how the industry is adapting to meet the needs of both investors and fund managers.

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🤠 A massive win for Texas! The U.S. government is granting Samsung Electronics up to $6.4 billion to build chip-making facilities in Texas, the latest in a string of major subsidy awards from the Biden administration aimed at reviving semiconductor manufacturing in the U.S. Samsung is using the grant money to help hike its investment in Taylor, Texas, just outside Austin, to roughly $45 billion, adding a second chip-making factory, an advanced chip-packaging facility and research-and-development capabilities. This more than doubles Samsung’s commitment made in 2021 to build a chip-making plant in Taylor.

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Today, along with my Partner Liza Benson, I am thrilled to share the final closing and launch of MV Core Fund III! With $230M in fresh capital, our latest fund brings the firm’s total assets under management to more than $500M. Thank you to all of our investors, strategic partners, portfolio companies and friends of the firm - you are the foundation that propels our journey forward and we celebrate this milestone together with you! And of course, a huge thank you to the best-in-the-business Moderne Ventures team - your hard work is what keeps us growing and delivering results, quarter after quarter. Today’s venture investing environment is among the best we’ve seen in decades and we are thrilled to have fresh capital to deploy while continuing to scale our one-of-a-kind industry immersion program, the Moderne Passport, to help create customers for our companies and value for our strategic partners and the Fund. Even after two decades of venture investing, we are more inspired than ever for the innovation that lies ahead. Let’s GO! 🚀 Read the full press release here: https://lnkd.in/gimNQWbe Check out these stories featuring our news: The Wall Street Journal: https://lnkd.in/gszsXk3m Axios: https://lnkd.in/g_sEfta2 Crain's Chicago Business: https://lnkd.in/g6iy4wf5

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The private equity landscape has been facing significant headwinds over the past two years, with higher interest rates, inflation, and macroeconomic uncertainty reshaping the industry. As debt-fueled buyouts become more expensive and profits shrink, firms are holding onto portfolio companies for longer periods. Despite the challenges, there are glimmers of hope—recent interest rate cuts may revive dealmaking activity. However, the road to recovery remains slow, especially for firms without diversified revenue streams. It’s an interesting time to watch how the industry adapts to these changes. #PrivateEquity #Mergers #Dealmaking #Familyoffice https://lnkd.in/dsXeHFdX

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💡Insights on PE vs. VC In our latest webinar, Gain.pro’s Head of Insights Sid Jain and Carta's Head of Insights @Peter Walker explored key differences between PE and VC investments. Key Differences in Sector and Regional Focus: 🚀 Sector Focus VC: Targets early-stage companies in sectors with a strong appetite for innovation. In 2024, SaaS leads, followed by BioTech, HealthTech, and Energy. FinTech had dropped significantly in recent years but is now making a comeback as the funding winter eases. PE: Invests in mature, cash-flow-positive businesses, often founder or family-owned. Top sectors: Services, Industrials, TMT; the Consumer sector has seen a decline. 🌍 Regional Focus VC: In the US, capital is heavily concentrated in the Bay Area, accounting for >30% of investments. NY, Boston, and LA follow, collectively making up the next 30%. The Bay Area leads most sectors except for FinTech, where New York takes the top spot, and Consumer, where LA leads. PE: Investment is more evenly distributed across European cities. London accounts for 6% of total deals, followed by Paris at 3%. This spread is significantly lower than the high concentration seen in VC hubs, indicating a broader geographical approach by PE investors. Check out the full webinar: https://okt.to/T2SqX5 #webinar #privateequity #venturecapital #startup #investmentfocus #investmenttrends

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