Much is spoken about global warming but right now Climate Tech is facing an unwelcome spell of ‘global cooling’ as deal values decline.Although far from becoming an Ice Age, the level of funding for Climate Tech has reached a three-year low, with quarterly deal value down 50% from its high point in Q3 2021. According to Pitchbook, start-up firms attracted $5.7 billion in new capital in the first quarter of this year. VC managers will be praying to the rain gods that the current environment doesn’t turn in to a prolonged drought.
Toshiba’s board has given the green light to a $15 billion buyout that, if approved by shareholders, would make it Japan’s biggest ever take-private deal.And provide a timely turbo boost to the country’s private equity industry. At the front of the grid is Japan Industrial Partners, along with five other financial institutions and 17 domestic companies. The next turn of events will see Toshiba’s board convene a special committee to assess the deal. It is believed that several of the conglomerates largest shareholders were comfortable with the valuation formula used. As the chequered flag approaches, all eyes will be on the completion of this historic deal.
Not everyone enjoys buying a round. It depends how much money you have on you and how big the round is!It seems that a lot of SVB’s start-up tech clients also had trepidation over the fears of down rounds, preferring instead to opt for debt over equity; and so delay inevitable lower valuations. This helps, to some extent, explain why private market valuations remained relatively strong last year, while public market tech stocks got eviscerated as investors grew concerned over long-term growth and profitability in a rising rate environment. The consequence of SVB’s implosion will be significant, with far less venture debt leading to an inevitable slew of lower valuation down rounds, tech failures and employee layoffs. Jay Powell’s hopes to combat high inflation could come true sooner than he thinks.
And so it ended. In the space of 24 hours, Silicon Valley Bank, the go-to bank for many US tech start-ups and VC funds, succumbed to a classic bank run as depositors scrambled to get their money out. And so it ended. In the space of 24 hours, Silicon Valley Bank, the go-to bank for many US tech start-ups and VC funds, succumbed to a classic bank run as depositors scrambled to get their money out.
Private equity can boost absolute returns when added to traditional diversified portfolios and remain a star performer among alternative asset classes.With inflation showing signs of persistence, investors will be hoping that PE funds can continue to turbo charge their overall risk-adjusted returns in the coming years. KKR’s latest white paper – Regime Change: The Role of Private Equity in the ‘Traditional’ Portfolio – outlines why the firm remains bullish in the current macro environment, in particular highlighting the importance of PE’s illiquidity premium. The report’s authors main punch line is that nimble value creation opportunities, efficacy in timing investments and exits, and company selection have been important drivers of performance. Investors will hope to remain entertained and applauding future returns as they continue to tap in to the power of PE.