PitchBook Capital Perspectives 2020 was a one-day virtual conference covering the state of the private markets in the context of the COVID-19 pandemic, U.S. presidential election and a shifting investment landscape. Each session combined the latest market data, research and expert analysis to bring unique, informed perspectives to viewers across the web.

Miss the conference? Don’t worry—it is all recorded and available here. We’ve detailed each session below and linked to the recording so you can watch it at your own pace.

The conference agenda

Explore any of the sessions below. Plus, keep an eye out for our upcoming webinars and join when you can.

PitchBook Capital Perspectives sessions and takeaways

 

December 10, 2020 | 57 minutes

How will the recent election affect private markets?

A discussion on how the 2020 US presidential election may impact venture capital and private equity.

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This panel was moderated by Nizar Tarhuni, PitchBook’s Director of Research & Analysis. He was joined by Bobby Franklin, the president and CEO of the National Venture Capital Association (NVCA), Jeff Farrah, general counsel of NVCA, and Chris Hayes, Senior Policy Counsel for Institutional Limited Partners Association (ILPA). PitchBook is partnered with both organizations.

Below is a short excerpt from the session. Make sure to watch the recording for the full discussion. Please note that the following excerpt has been edited for length and clarity.
 

Nizar Tarhuni: From a venture capitalist's perspective, what do you think were the main concerns or issues that you think your members were thinking about leading up to the election over the past couple of years?

Bobby Franklin: Washington impacts every part of our life and every industry. If you're engaged in anything, chances are Washington is going to do something that benefits you or hurts you. I think that if you want to be engaged in the process, as we like to say internally, you can be at the table or you can be on the menu, it's your choice.

Unfortunately, politics has gotten very expensive. The currency of the political process is donations and involvement in the electoral process. It's a bit of an arms race that doesn't seem to have a ceiling. I think we're going to see it continue to grow unless something changes like Supreme Court decisions and Citizens United and things like that. 

Leading up to the election, our conversation with our membership was all about, "If Trump wins, these are the things we will prioritize. These are the things we'll have to play defense on." In a Biden administration, same thing, you're going to have offense and you're going to have defense. It's just going to be different in terms of what plays you run.

It's always a balance. It's true in every election. From the perspective of good government, I would say that we're in a good place. My own personal view is that when you actually have legislation that has to be bipartisan and you have to get both parties to work together, at the end of the day, you're probably going to lead to a better result. As opposed to one party trying to push a bunch of stuff through, and then the next party coming into power and undoing all of that, you actually have more productive policymaking.

Nizar Tarhuni: Chris, I'd love to get your take on that question as well, from our private equity and limited partners perspective, of what you're seeing circulate the minds of some of your members that you represent leading up to the election.

Chris Hayes: Our goal is really around a balanced regulatory framework. Our members, obviously, are investing trillions of dollars into funds, and we think it's really helpful to have—just making sure that folks are following what they're agreeing to with the managers, in terms of what they agreed to with their investors.

Our hope is that, with [the Biden] administration going forward, we might be able to see some reforms that we think can help improve transparency, improve governance, things that ILPA cares a lot about, and our members care a lot about in the industry going forward in the private fund space. From an ILPA perspective, we often work with the managers, and there are many times where our interests are very aligned with the managers. COVID-19 relief is one.
 

 

 

December 10, 2020 | 49 minutes

How has private equity fared in the era of COVID-19?

A look back at how the deal, valuation, and exit environment has shifted during 2020 and what industry professionals foresee in the coming months.

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This panel was moderated by Dylan Cox, lead private equity analyst at PitchBook as part of our Institutional Research Group. He was joined by Bob Grady, partner at Gryphon Investors, Brett Hickey, founder and CEO of Star Mountain Capital and Martin Brand, co-head of PE acquisitions at Blackstone.

Below is a short excerpt from the session. Make sure to watch the recording for the full discussion. Please note that the following excerpt has been edited for length and clarity.

 

Dylan Cox: I think it’s safe to say that capital markets have recovered more quickly than many expected over the last six or eight months. Bob, what are your expectations for the next 6-12 months in capital markets, and how does that affect your strategy as it relates to private equity?

Bob Grady: I think we were all surprised by the speed of the snapback. As you said, the S&P is up 50% from March 18th, from 2,447 to 3,675. Even more shocking, it's higher today than it was in January 1st. We're up like 14% for the year.

I don't think growth in the public markets going forward is going to be explosive given that we're at all-time highs, but I also don't see it declining rapidly either because most people have discounted the fact that the current severe problem with the pandemic is pretty short-term in nature. It's going to be solved once we have a widely distributed vaccine.

We're bracing from a private equity perspective, for a continued era of high prices. I think as a strategic matter, and we'll get into it in more detail as the panel goes on, it means you have to have ankles. If you're in an auction, you really better know why you're there and have either some proprietary insights, some proprietary executives, some proprietary acquisition, something that makes you want to pay the high price in what's clearly a competitive environment.

Martin Brand: I would very much second everything Bob said. Obviously, we don't have a crystal ball and nobody has a crystal ball, but low rates appear here to stay. There are so many debt securities outstanding—that's really the underlying cause. As a result of low rates, valuations are going to remain elevated. Elevated valuations, of course, means it's more difficult to create future returns, so we need to differentiate ourselves in a number of ways.

 

 

December 10, 2020 | 76 minutes

GP stakes in the middle market

A panel discussion on why this niche strategy is compelling and how it differs from the top end, how investors should be thinking about risks and returns, and how long GP stakes partnerships typically last.

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This panel was moderated by Wylie Fernyhough, senior PE analyst at PitchBook who recently published his own research and analysis on GP stakes. In the session, he was joined by Ajay Chitkara, head of Bonaccord Capital Partners, Craig Shortzmann, managing partner at Stonyrock Partners and Robert Hamilton-Kelly, managing director at Goldman Sachs. 

Below is a short excerpt from the session. Make sure to watch the recording for the full discussion. Please note that the following excerpt has been edited for length and clarity.

 

Wylie Fernyhough: I'd like to kick this discussion off by talking about the history of GP stakes. It's an industry and area that has been quickly evolving and growing from a niche corner of the market into a more mainstream section of private equity. A lot of people think of Blackstone's $100 million minority equity sale back in 1988 as really the first GP stakes deal. I'd like to begin by asking what are some of the ideas that the audience should understand about the history of GP stakes before jumping into how the landscape looks today.

Robert Hamilton-Kelly: I think you're exactly right. People often overlook those Blackstone early deals. They were obviously very successful investments of their vintage. I really think of it as starting in force in the '08 crisis and in that window after that, which is really when it started coming together in an institutional form. We as Goldman were participating as Petershill through a fund we'd raised to address that market in '07.

There was the early stage of funds looking to raise capital, which is what it's all about, and the importance of the role we play in the industry in those early large firms. But then, really in an institutional investment form, looking at it as a way to partner with firms and to generate returns for LPs. We at least really think of it as a starting off in that era. Then, the acceleration through the mid noughties as private funds have grown exponentially to raise capital to develop their platforms and go on from there. That's a very high-level background but maybe I'll pause there for Craig and Ajay to give a thought or two.

Craig Schortzmann: From my perspective, I think you hit the history exactly right, Rob. As you think about this, really starting in the mid-2000s, and then progressing to more fund form as we see today, the output of that across a number of different firms who are evaluating GP stakes. Also, it's helpful to remember that this is an industry when you think about asset management broadly defined, that's growing at 10 plus percent has really been self-funding for the last 20 plus years.

As you think about that, whether Blackstone and others who went public, it was in large part to create balance sheets for their organizations to help continue to invest via their GP commits and the like, product development. This is just a new form of that as you think about the privately owned firms and how they're evaluating their own growth strategies, their own institutionalization, and looking for partners, looking for capital to execute that over the long term.

Ajay Chitkara: These guys have covered it well, but one further point—even prior to the advent of sponsor-backed activity, you did have a situation where a lot of institutional investors were looking to allocate money to the managers and they wanted to have a strategic stake there. Now, with the advent of sponsors being able to help bring in more than one strategic partner to these GPs it’s really important. Also, the fact that just to be able to be in the midsize space and go after LPs globally is something that's important to them and they want to be in.

This is something that a lot of the sponsor-backed activity players can help both on, helping them think about curating a diversified LP base globally and also helping them get into different channels as private markets continue to grow.

 

 

December 10, 2020 | 59 minutes

Technology roundtable: Where should investors be paying attention?

Analysts will present on the key trends and predictions for their coverage areas including mobility, AI and fintech.

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This session featured four PitchBook emerging technology analysts who primarily focus on the venture-backed ecosystem and work to identify trends across various market sectors. Although the emerging technology research team covers 12 verticals extensively, this roundtable delved into three areas that are poised for significant growth: artificial intelligence, fintech and mobility technology. 

Moderator and lead emerging technology analyst, Paul Condra was joined by three senior analysts to talk through their respective coverage areas and where they see the industries heading. 

First up was senior analyst Brendan Burke, who focused on artificial intelligence, followed by Robert Le, a financial analyst and rounded off by lead mobility technology analyst, Asad Hussain. 

Below, we’ve included short excerpts from the session. Please note that the following has been edited for length and clarity.

 

Paul Condra: AI is clearly one of the more disruptive technologies in venture these days. What's so striking about it to me is that the most cutting-edge products and services all seem to incorporate AI in one way or another. It’s technology that's really starting to seep into all corners of the venture ecosystem and it's going to soon become very common in the digital world.

Brendan Burke: Yes, I think that's a really good introduction. AI has increasingly become table stakes for startups to integrate into their products and what we've seen is that there's been a maturation of the technology in commercial applications in recent years, from what has been historically an academic technology becoming a commercial technology just in the past decade. 

We're seeing leading institutional investors and mutual funds enter the late stages of venture activity which is keeping AI investment high throughout the pandemic and really driving towards new records here in the last quarter of the year. As we see these funding tunnels remain high, there are certain trends that are really encouraging AI to disrupt the existing SaaS industry and there are a few scientific developments that we'll see on the next slide as to how it's doing that. Watch the recording to see the AI trends »

Paul Condra: Fintech continues to be the land of the mega-deals. We had a $600 million round for Robinhood in September. I think Stripe is looking at potential $100 billion valuation. Maybe it won't go that high but there's some talk. Give us a state of the industry, Robert, what are you seeing?

Robert Le: Yes definitely. We see that investors continue to be bullish in fintech as there are still many frictions in financial services. Whether it's the ability to clear payments instantaneously, facilitate an asset trade between two counterparties or settle a small insurance claim, these processes are still very bogged down by legacy practices and infrastructures. With all the innovation that we've seen happen in financial services during the past decade or even two decades, we believe there's still a lot of room for growth for innovation. Investors definitely think so. Overall VC feel valued through the first three quarters of 2020 is almost at $24 billion, which is on pace to surpass last year's four-year record of $26.1 billion. It was interesting as what you mentioned there, Paul, was some late stage companies.

They have secured over three quarters of the capital so far in 2020. When you see the investors continues to favor the more established players like Robinhood and Stripe, with who has a greater market share. With that, we believe there are a few technology trends to look out for that will continue to drive investment capital into fintech companies. Watch the recording to see the fintech trends »


Paul Condra: Finally, let's talk about mobility and transportation. We've all been staying out of planes and Uber's this year but we're also watching Tesla's stock go through the roof and every week there's a new electronic vehicles SPAC. Give us an update, what's been going on, what do you expect, Asad?

Asad Hussain: Yes, I think mobility is a sector that has been clearly impacted by this pandemic. I think it's an area that investors should be really focusing on. If you look at the deal flow in terms of venture activity, what we've seen is overall the sectors remain pretty strong despite city-wide shutdowns and a more challenged fundraising environment.

We're seeing a divergence in valuations in the mobility tech space where late stage mobility tech companies continue to raise really strong rounds at really high valuations while early and seed stage rounds are a little bit more pressured. While this effect is pronounced between the early stage and late stage within mobility, it's also pronounced in terms of the sub sector exposure with some sub-sectors of mobility such as ride sharing, seeing a bit more pressure while others such as electric vehicles and last mile delivery have actually benefited significantly from the crisis.

Broadly speaking, I think funding in this space remains pretty strong. A lot of investors I think are looking through the current conditions and recognize the ongoing unmet need for cost effective, convenient and low emissions forms of transportation is going to be persistent and will be a long-term driver of the shift to connected autonomous shared and electric. That brings me to our three main trends that we're seeing in mobility. Watch the recording to see the mobility trends »
 

 

 

December 10, 2020 | 30 minutes

Healthcare in the private markets

A state of the landscape on healthcare in the venture capital space including biotech, wellness tech, telemedicine, and how COVID-19 has impacted these areas.

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This session was co-led by venture analyst Joshua Chao, Ph. D, and emerging technology research analyst Kaia Colban. While both analysts cover the healthcare industry, Joshua focuses on biotechnology and pharmaceuticals while Kaia covers health and wellness technology.

Below is a short excerpt from the session. Make sure to watch the recording for the full discussion. Please note that the following excerpt has been edited for length and clarity.
 

Joshua Chao: As many of you would imagine and have likely experienced firsthand, healthcare has been a standout industry in 2020. It's no surprise that the healthcare sector has experienced many tailwinds with the COVID-19 pandemic.

Taking a look at the top line numbers, we see that US VC deal activity in 2020 which, by the way, is not over, has already surpassed previous years and is currently sitting at a record $370 billion in deal value. This is pretty incredible, particularly after 2018 and 2019 were already exceptional years. As we've seen over the last several quarters, there is a bifurcation between deal value and deal counts this year. Much of that stems from the dramatic decrease in first VC financings.

A particular industry group within healthcare that has gained a lot of attention and momentum is biotech and pharma, which many investors realize is the industry that we'll be able to develop drugs and vaccines to get us to the other side of this pandemic. When we look at US VC deal activity within biotech and pharma, we see that this trend also carries over.

Kaia Colban: First, I'd like to talk about COVID's effect on a virtual health market. We have seen a lot more usage of telemedicine as many regulations have been with PR and consumers have needed to visit a doctor's without visiting hospitals in-person. At first, this was due to shortage of space available in hospitals, but then it became due to concerns visiting a hospital and catching COVID if you're previously ill with another disease.

Pre-COVID, only 11% of people were aware of telemedicine and said that they would happily use it whereas now, 46% of people know what telemedicine is and say they would happily use it. The market size for telemedicine platforms and providers has just grown rapidly basically overnight. 

You don't see ample opportunity for new startups to enter the healthcare space as market size has become more concentrated among the large players. However, we do see opportunity for health tech startups previously focused on other areas to break into telemedicine.

 

 

December 10, 2020 | 41 minutes

Insights into investment professional compensation

An in-depth discussion on compensation using the Thelander-PitchBook 2020 Investment Firm Compensation Survey including data on base pay, bonuses, carried interest, carry dollars at work and more for every role from entry-level analysts to managing general partners.

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This session featured founder and CEO of J.Thelander Consulting, Jody Thelander and Nicole North, a partner at Lightspeed Venture Partners. The Thelander-PitchBook Investment Firm Compensation Survey has run each year for the last seven years and inquires about all aspects of compensation for investment firms. The 2020 results published in September and included responses from about 1,600 investment firms and their portfolio companies. 

Below is a short excerpt from the session. Make sure to watch the recording for the full discussion. Please note that the following excerpt has been edited for length and clarity.
 

Jody Thelander: What we've been able to accomplish in running these investment firm compensation surveys is to lower the veil. It’s to allow honest discussions using data that really sets some infrastructure in what has historically been a very unstructured type of comp philosophy and strategy. I'm working with a client right now, and the partner said to me, "Back in the day, no one ever discussed compensation, and people didn't share what they were making." That's not the case anymore, especially at the mid to more junior level positions. We've been able to provide more infrastructure so that these compensation discussions can be based on data.

Nicole North: That's right. We're seeing some normalization, and we're seeing some standards in your data, Jody, we'll confirm this is really at the post-MBA entry-level up to associate. We see compensation standardized there. That said, we'll always see a significant variance in compensation, particularly in cash and carry across the different funds, particularly as we look at different AUM. There's no one size fits all, but that the Thelander data is providing some really helpful benchmarks to really help guide philosophy and inform. To see the data from the survey, watch the recording »

 

 

December 20, 2020 | 50 minutes

COVID-19’s impact on the startup ecosystem

A discussion on how the pandemic has impacted startup product offerings, road maps, fundraising and the opportunities created as a result of the last six months.

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In the final session of the conference, PitchBook’s lead emerging technology analyst, Paul Condra, was joined by Rohit Iragavarapu, vice president of Technology Crossover Ventures. 

Below is a short excerpt from the session. Make sure to watch the recording for the full discussion. Please note that the following excerpt has been edited for length and clarity.
 

Paul Condra: How do you segment up the way tech startups have been impacted by this pandemic and the way that you're looking at the lay of the land now?

Rohit Iragavarapu: Yes, it's a great question. I would say I'd start, Paul, with the headline caveat that it's been incredibly hard to generalize about anything in this crisis. I would say if there's one thing that has surprised us more than anything else, it's that a lot of the pattern recognition from crises past has just been thrown out the window. This has been idiosyncratic across where the company or the buyer you sell to matters as much as the category that you're in, and the form factor of your product matters as much as either of those other factors.

Really, it's about where your customers were—if I had to point it to one thing, where your customers were in their digital transformation journey. The four categories as an overlay to that that I've seen are first, there've been COVID beneficiaries. Those are folks in telemedicine, last mile delivery, a number of e-commerce related startups, and then folks who help facilitate virtual selling (sales and marketing). COVID has certainly been an accelerant for those vendors. 

The second is good businesses that were slowed a bit by COVID. And the operative mechanism there is, budgets were hit. In Q2, in particular, I think a lot of companies who are buyers of technology took a step back and said, "What does my budget look like for the rest of the year? What do I absolutely need to buy to make sure that my workforces can succeed remotely, but what can I do without?" There's a wide range of enterprise software here that saw those budget pullbacks that had some layoffs early in COVID, and generally faced a high degree of uncertainty. What's interesting is most of the impact though, hasn't really been on the retention side or net retention for those software businesses. A lot of their existing customers seem to be growing their usage of software at the same or even a greater rate than they were before COVID.

The third bucket of companies that we've seen have been the center of the bullseye, which is what I describe it as. It's companies and travel technology, for example, with the notable exception of Airbnb, and pockets of sectors like restaurant and retail, where the macro challenges have overwhelmed the ability of the software to drive efficiency and gains at some level. That the lack of health in the customer base has also really hurt the startups.

Then the last are companies across a number of categories, business models who have had some underlying issues before COVID, and COVID was the straw that broke the camel's back. There have fortunately not been many of those, which is something I want to talk about in a second, but there have been some. Really, it's been about your ability to execute against a competitive landscape that's moving really quickly. If you had technology debt or you were on the wrong side of some underlying trends in terms of the move to the Cloud, for example, it's been pretty challenging to succeed.

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The PitchBook Institutional Research Group is a provider of research services to private market investors, advisers and market participants. The group provides investment strategy, fund performance and industry research through a differentiated, framework-driven approach. Built to track the lifecycle of private capital markets, the group brings to the private markets the insights, trends and forecasts that have long been available for public market investors.

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