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Numis Private Market Pulse  - November pop-outs

Our latest Numis Private Market Pulse, a data-driven-window into growth capital markets, is now available.

Numis pulse nov22
Our latest Numis Private Market Pulse, a data-driven-window into growth capital markets, is now available.

The Pulse provides unique insights for founders and investors, as well as anyone with a keen interest in the most impactful trends shaping private markets. 

 Here are a few of the top private market pop-outs for November:

1.   Activity remains subdued, but a pick-up could be on the horizon
While October deal value was down 70% year-on-year, over half of investors in our latest (Q322) growth investor survey expect to increase the pace of investing in the next six months, despite indications of macroeconomic pessimism. The increasing activity is likely underpinned by the potential for compelling returns and an abundance of dry powder.

 

 Source: Numis GCS deal database; CB insights; Numis 3Q22 Growth investor survey

2. Founders must focus on fundamentals, say investors
Per our 3Q22 investor survey, nine in 10 investors expect to maintain a focus on profitability, not growth at any cost, for at least a year. Nonetheless, efficient growth remains most relevant as the ‘Rule of 40’ is more highly correlated to valuations over margins or revenue growth individually.

 
Source: Refinitiv, Numis GCS analysis. Public market data as of 10 November 2022. 
Note: (1) Rsq monthly rolling ‘Rule of 40’ (NTM revenue growth + NTM EBITDA margin) vs. EV / NTM Revenue. Based on Numis tech stock composite. 

 

3. Easing US inflation gives some ‘hope’ 
In October, inflation eased slightly in the US and rose in Europe. The Fed increased interest rates another 75bps in November; however, markets rallied amidst expectations that the pace of future rate hikes might be slower than anticipated in the next Fed update on 14th December. Nonetheless, our analysis of prior periods of elevated inflation shows inflation could remain at >3% through at least mid-2023. Consumer confidence tracked lower in November and levels of consumer debt are reasonable - for now.

 

 

Source: Trading economics, St. Louis FRED economic database; Numis GCS Analysis.
Note 1: 3% is upper range of the Fed’s target inflation.

 

4. Increasing activity levels over time will likely be broad-based across stages but more uneven across geographies and sectors. 
Series A and B fundraises have taken a chunk of deal share – 60% this year vs 40% 2021. But our latest insights show that nearly half of investors are considering later stage opportunities to an increasing extent (3Q22 Growth Investor Survey). Smaller deal sizes could still persist as the average deal size of series C and later are down c.50% from a peak in January. Amidst heightened macro risk, activity in emerging markets (LatAm, China and India) has stalled. While hungry for enterprise software opportunities, private market investors are shifting focus and capital to cleantech.

Source: Numis GCS deal database; CB insights; Numis 3Q22 Growth investor survey.

You can read the full report here and subscribe to our regular updates, or get in touch at gcs@numis.com to see how we can accelerate your journey. 

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