PitchBook Introduces New Venture Category, Venture Growth

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Dec 06, 2022, 09:00 ET

New financing category examines the latest stage of VC to help investors more effectively analyze risk

SEATTLE, Dec. 6, 2022 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today introduced a new category within venture financing, the "venture growth" stage, to enable deeper analysis of the latest stage of the venture market. Over the past decade, deal sizes and valuations in the late stage have varied significantly, limiting investors' ability to identify key trends. For example, the top-decile late-stage valuation in the US peaked at $1.4 billion in 2021, while the bottom-decile late-stage valuation hit $15.0 million. The new venture growth stage category will allow investors to conduct targeted analysis of investment trends and track changes to risk profiles not traditionally associated with venture. PitchBook will be integrating the new stage into all quarterly reports across different regions and will be included within new VC research moving forward.

By the end of 2021, US VCs invested $237.2 billion in the late stage and nearly $70 billion was invested in Europe. These figures were roughly 110% and 130% higher, respectively, than those same figures from the year before. This infusion of capital in the late stage has allowed companies to extend their growth cycles, creating new risk and reward profiles for investors to consider. However, traditional characteristics and methodology of tracking companies raising late-stage capital has allowed outliers to skew analysis of investment trends.

PitchBook defines the venture growth stage as any financing that is Series E or later or any VC financing of a company that is at least seven years old and has raised at least six VC rounds. Based on PitchBook analysis, Series E companies demonstrate distinctly different characteristics from earlier investments, allowing for more accurate risk assessment. Companies that met these criteria in 2021, such as SpaceX, Stripe, and Databricks, accounted for 25.5% of all VC dollars deployed globally.

See below specific takeaways on the venture growth deal activity, according to PitchBook's new methodology:

Globally, the venture growth stage has remained a small portion of completed deals on an annual basis, reaching just 4.2% of completed deals in 2021.
Since the beginning of 2020, more than 24% of the capital invested into the global venture market has come from venture growth deals.
The average deal size in the venture growth stage nearly reached the average value of a megadeal in 2021, and since 2013, it has come in at more than double the value of the average late-stage deal.
The proportion of deals receiving participation from crossover and large non-VC investors is much higher at the venture growth stage than others. In 2021, nearly 20% of venture growth deals involved a crossover investor, and 25% received investment from a nontraditional investor.

"The venture capital market has changed tremendously since PitchBook developed a methodology for segmenting the asset class by stages, with the biggest shift coming from the late stage. Our updated methodology will increase our ability to analyze the very top of the market," said Kyle Stanford, Senior VC analyst at PitchBook. "Moreover, this research and dataset will be invaluable to clients as they use PitchBook to assess opportunities and risks associated with VC. Especially crossover firms and large institutions active in this late area of the market. We intend to use this new dataset to look further into the connection between VC and the public markets and support our clients in this evolving investment ecosystem."

To access the report and its methodology, click here.

About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York, London and Hong Kong and serves more than 70,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

SOURCE PitchBook