Unraveling the Impact of Institutional Investor Portfolio Moves on Startup Pitch Decks
What's Shaping Your Pitch Deck's Future?
Ever wondered how the intricate dance between investments and startups plays out? This time, we're not just uncovering insights – we're asking: How exactly are institutional investors turning the investment world on its head? And what's the scoop on how this impacts the dreams woven into those ambitious startup pitch decks? Let's unravel the story!
The Denominator Effect Unveiled Okay, let's start with some numbers, but we promise to keep it simple. Private markets fundraising globally took a bit of a dip by 11 percent, down to $1.2 trillion. Real estate and private equity took a hit (-23 percent and -15 percent respectively), while private credit managed to hold its ground (+2 percent). Blame it on rising inflation and interest rates, along with not-so-great public market performance (-17.7 percent). This combo triggered what's called the "denominator effect" and made big investors like pension funds scale back on new commitments.
Geography Matters: Where the Money Went Now, geography gets interesting. North America flexed its muscles with a modest 2 percent increase in private markets fundraising. Europe and Asia, on the other hand, had their share of challenges with fundraising plummeting by 28 percent and 39 percent respectively. Fun fact: China, which used to be the star of the show, saw its fundraising drop from 83 percent in 2017 to just 34 percent in 2022. Europe's fundraising party also took a hit due to political instability and exchange rate rollercoasters.
Betting on the Big Players When things get a bit shaky, people tend to stick with what they know, right? That's exactly what happened in the investment world. Investors went big and favored the large funds they were already familiar with. Those massive funds (over $5 billion) raked in a whopping $445 billion, a 51 percent increase. Meanwhile, smaller funds (under $5 billion) had a rougher time, seeing their dollars drop by 28 percent. New and smaller funds had a quieter year with fewer launches.
Cash Reserves Piling Up Total private markets assets under management soared to $11.7 trillion by mid-2022. Imagine a mountain of money! The kicker? Dry powder, which is investment lingo for uninvested cash, shot up to over $3 trillion, marking eight years of consecutive growth. Private equity's dry powder soared to 1.4 times its annual investment, the highest since 2013. This happened because there were fewer deals to invest in than there was money available.
Private Equity's Changing Face Private equity (PE) had a mixed year. Buyout entry prices dipped slightly, public market multiples shrank, and for the first time since 2008, PE posted a negative return. The performance spotlight shifted, with some PE strategies struggling and others holding steady.
Real Estate: Shielding Against Inflation Real estate has this neat trick of staying strong during inflation. Despite rising interest rates, real estate values managed to rise thanks to cap rate compression (don't worry, it's not as complex as it sounds).
Private Debt's Time to Shine While other asset classes struggled, private debt shone bright with 2 percent growth. Investors loved the stability and yield that private debt brought to their portfolios, especially in volatile markets.
Mega Funds and a Taste for Infrastructure Infrastructure fundraising hit an all-time high with some seriously big funds. The idea of infrastructure and natural resources has evolved, and investments are taking on more risk than before. The energy sector had its ups and downs, and sustainable investing gained momentum with a record $24 billion raised for ESG-focused ventures.
So, what does all of this mean for startups and their pitch decks? Buckle up, because institutional investors' portfolio moves are causing ripples that startups need to ride smartly. Stay tuned as we decode the impact on your entrepreneurial dreams.
Stay curious and stay tuned for more insights!