PitchBook’s Friday 5: Monetization, High Fashion & Angel Food Cake
October 11, 2013
Want to filter through private equity and venture capital news? Here are the top five takeaways through Oct. 11:
Private equity is going shopping, big tech brands may have found their avenue for monetization, the median PE purchase-price multiple has jumped and we’re wondering what the debt ceiling means for private equity and venture capital. Plus, yesterday was national angel food cake day, which gives angel investors something to cheer about.
IPOs are the new black
Private equity firms are going shopping, and iconic luxury fashion brands are on their wish lists. Large funds, such as KKR, are actively involved in several large fashion deals, and fashion superstars like Marc Jacobs have publicly announced a focus on their brand’s path to a public offering. Even family-owned (almost mafia-like) Versace is contemplating financial interest from international private equity firms. And after brands like Michael Kors and Salvatore Ferragamo completed highly successful IPOs, the fashion space is no doubt a portfolio allocation to consider.
Twitter has filed for an IPO, despite sustaining losses—even using EBITDA figures. Many investors are chomping at the bit to invest in Twitter, believing that secular trends are sure to propel the company to profitability. The VC firms behind Twitter are also some of the most reputable in the business, giving many investors a lot of confidence. Other companies, such as Facebook, have successfully implemented this “business backwards strategy”, in which they acquire users first and worry about monetizing later. This has seemed to work for Facebook, but not every company has more than 1 billion monthly users and a growth story like Instagram under their belt.
This week, Pinterest debuted their promoted pins, an ad placement strategy that is not only naturally integrated with their platform, but personalized to each user’s interest. For Twitter, Facebook and other social media companies, attempting to not only make profit but avoid upsetting your users may be easier if you find a natural, personalized way to generate revenue streams.
Angel food cake
In honor of national angel food cake day yesterday, here are a few angel must-reads:
AngelList and Beyond: What VCs Really Think of Crowdfunding – WSJ
What Angel Investors Know About Startup Investing that You Don’t – Forbes
New Rules Break Down the Walls for New Angel Investors – WSJ
Buyout leverage ratio
The latest private equity research from PitchBook shows that the median valuation-to-EBITDA multiple for buyouts has exploded to a decade high of 10.7x through the first three quarters of 2013. This spike in purchase price multiples can be largely explained by a significant increase in the median debt percentage — while this metric has decreased relative to the overall purchase price multiple, firms are leveraging almost 6.2x EBITDA, which is almost a full EBITDA multiple higher than 2012 (5.3x).
Speaking of debt, we’re wondering what the debt ceiling will mean for the future of alternative asset classes. Tony James, President & COO of PE titan Blackstone, took to the WSJ on Wednesday to call the current economic climate “catastrophic” and “a game of Russian roulette“. Watch out for a survey in our private equity newsletter seeking your input on how the debt ceiling may be affecting private equity deal flow.