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Private Equity Update 2000

The October 2000 update by Steven P. Galante discusses the rapid growth in private equity (PE) and highlights the remarkable returns of venture capital (VC) during this period. It addresses the increasing institutional demand and the re-entry of high-net-worth (HNW) investors. The report analyzes how PE growth is stabilizing amidst a slowing economy and contrasts the 'Nirvana' of the 1995-1999 boom with the emerging 'New Reality' of 2000 and beyond. Key insights include funding sources, valuations, commitments, and the performance of venture-backed companies.

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Private Equity Update 2000

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  1. Private Equity Update 2000 Steven P. Galante Publisher, The Private Equity Analyst October 16, 2000

  2. Rapid PE growth Remarkable VC returns Increasing institutional demand Re-entry of HNW investors Rapid economic growth PE growth stabilizes VC returns return to earth Institutional allocations sated HNW demand satisfied? Slowing economy ‘Nirvana’ versus ‘New Reality’ 1995-1999 2000-????

  3. Presentation Overview • Commitments • Investments • Valuations • Exits • Performance • Funding Sources

  4. Year-End Estimate US Private Equity Committed Capital Source: Venture Economics / NVCA

  5. US Private Equity Committed Capital Source: Venture Economics / NVCA

  6. US Venture and Buyouts Investments Source: Venture Economics / NVCA

  7. U.S. Venture InvestingTotal Investment by Quarter Source: Venture Economics / NVCA

  8. U.S. Venture InvestingAvg Invested per Company Source: Venture Economics / NVCA

  9. 2000ytd Venture Investments By Industry ($Bill) Source: Venture Economics / NVCA

  10. 2000 ytd Venture Investments by Stage ($Bill) Source: Venture Economics / NVCA

  11. Average Post Investment Enterprise Valuationof Venture Backed Companies Source: Venture Economics / NVCA

  12. 2000 Median Post Investment Valuationof Venture Backed Internet Related CompaniesBy Internet Sector Source: Venture Economics / NVCA

  13. Venture Backed IPOsIssues by Year Source: Venture Economics / NVCA

  14. Venture Backed IPOsIssues by MonthJanuary 1995- September 2000 Source: Venture Economics / NVCA

  15. Percent of IPOs Profitable at IssueVenture Backed Versus All Issues Source: Venture Economics / NVCA

  16. Public Market Returns: Venture-Backed Stocks vs. Indices As of December 31, 1999 As of September 15, 2000 Source: Venture Economics / NVCA

  17. US Private Equity Performance BenchmarksUS Limited Partnerships Formed 1969-1999Cumulative Performance Net to Investors as of 3/31/00 Source: Venture Economics / NVCA

  18. Rolling Five Year IRRsVenture vs Buyouts Source: Venture Economics / NVCA

  19. So Where Will Money Come From?

  20. Four Sources • U.S. Institutions (but in smaller quantities) • Foreign Institutions (just starting) • Funds of funds (but mainly established ones) • High-net-worth investors

  21. Heyday for Funds of Funds Commitments to Funds of Funds Est.

  22. ‘Market Share’ of Funds of Funds Five-Year Moving Averages

  23. Conclusions • Money remains available • You must expand universe of contacts • Track record is still important • Differentiation and relevant skill set are critical

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