PitchBook's New Venture Capital Dealmaking Indicator Estimates Fundraising Environment for Early- and Late-stage Financing

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Aug 10, 2021, 09:00 ET

SEATTLE, Aug. 10, 2021 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today announced the release of a new quarterly report, PitchBook's Venture Capital (VC) Dealmaking Indicator, which offers a new methodology for measuring who has more negotiating power at a given time in the VC ecosystem: startups or investors. The Indicator leverages PitchBook's wealth of deal term, deal attribute, and fundraising data to quantify the supply-and-demand dynamic at play in the VC funding environment, including the current amount of capital available to be invested by VC firms and other market participants, as well as the estimated amount of capital startups are seeking. The methodology allows PitchBook to develop a composite score, incorporating key deal terms and market attributes including: cumulative dividends, liquidation participation, anti-dilution terms, board voting rights, general voting rights, median years since last VC, median valuation step-ups, median percentage acquired and supply and demand of capital.

To download PitchBook's VC Dealmaking Indicator, click here.

"Startup and investor friendliness in the VC dealmaking environment constantly ebbs and flows over time," said Alex Warfel, data analyst at PitchBook. "Capital availability is key to understanding the power dynamics in the VC ecosystem, which dictates the ease with which a startup can raise funds, as well as how much investors can impose their preferences in negotiations. This new metric attempts to score VC dealmaking trends to help startups and investors navigate the capital raising environment. It can also be used by other market participants such as investment banks, advisors, and law firms as they help structure these deals."

See below some key takeaways from the report:

Liquidation participation and cumulative dividends have waned in popularity as deal terms since 2006.
Q2 2021 early- and late-stage deal terms have grown 2.7x and 3.3x more startup-friendly, respectively, since Q1 2010.
The late stage has been consistently more favorable to investors, while the early stages have favored startups.
Demand for both early- and late-stage capital has outpaced the growth in supply of capital available from VC firms over the last decade. Nontraditional investors have flooded the market to meet that excess demand and drive overall growth in venture investing.
For later stage VC, median valuation step-ups have led the way in startup friendliness at 3.5x friendlier, followed by the capital supply to demand ratio, which has become twice as startup-friendly over the same five-year period.

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 and London and serves more than 50,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

SOURCE PitchBook