Private Market Playbook - Smart Cities by PitchBook

The urban landscape as we know it is shifting. Massive inflows of people into increasingly populated metro areas are affecting housing prices, traffic congestion, air pollution, energy usage, mobility, the quantity of resources and a lot more. As the global population grows and urbanization intensifies, cities are having to find solutions that lead to increased efficiency, accessibility and sustainability. On the other hand, new innovations, as well as investment in real estate and infrastructure, are helping alleviate these issues and fueling an evolution in how cities operate and how their residents live, work, play and get around .
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
Market private Market PlayBook Market PlayBook 3Q PitchBook private Market company year
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
Market private Market PlayBook Market PlayBook 3Q PitchBook private Market company year
3Q 2018
SMARTER 
CITIES
How private markets 
are reshaping the 
urban landscape
The future of urban mobility  
has two wheels (or so VCs think) 
Page 4 
 
Barbarians repairing the gates?  
Why infrastructure is primed for  
more PE investment  
Page 8 
 
Uber's positioning in  
the race to autonomy  
Page 56
Page 20
1
PitchBook Private Market PlayBook 3Q 2018
2
PitchBook Private Market PlayBook 3Q 2018
Perspectives
Contents
4
2
20
34
56
The Feature
Market Trends
Analyst Insights
30
Connecting leading companies 
with today’s and tomorrow’s 
industry leaders
EXECUTIVE SEARCH | COACHING | ADVISORY
www.uberhiatt.com • info@uberhiatt.com • 310.598.2816
10250 Constellation Blvd. Suite 2300, Los Angeles, CA 90067
The future of urban mobility has two wheels (or so VCs think)
4-7
Barbarians repairing the gates? Why infrastructure is primed 
for more PE investment
8-10
Cultivation in the skies: How vertical farming is aiming to  
eliminate food deserts from the urban landscape
12-14
Looking past clichéd headlines and rethinking real estate  
investment strategies
16-19
Smarter cities: How private markets are reshaping the  
urban landscape
20-29
US venture capital
36-39
US private equity
40-43
European venture capital
44-47
European private equity
48-51
Global M&A
52-55
Uber's positioning in the race to autonomy
56-61
Performance persistence
62-64
Blockchain market map
66-69
Restaurant tech market map
70-73
A letter from the Editor
2
As the global population grows and urbanization intensifies, cities have 
to become more efficient and sustainable. Companies and investors in 
the private markets are helping to drive this transformation.
Twin Brook Q&A: Navigating the competitive middle-market  
lending landscape
30-32
2
PitchBook Private Market PlayBook 3Q 2018
George Gaprindashvili 
Editorial Director
CREDITS & CONTACT
PitchBook Data, Inc.
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Founder, CEO
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Vice President, Market 
 
Development & Analysis
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Editorial Director
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Research & Analysis
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Senior Analyst, PE
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Analyst, Emerging 
Technology
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Analyst, VC
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Analyst, VC
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Analyst, PE
Cameron Stanfill 
Analyst, VC
Dylan Cox 
Senior Analyst, PE
Anthony Mirhaydari 
Senior Financial Writer
Kevin Dowd 
Associate Editor
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Senior Financial Writer
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Financial Writer
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Manager, Analysis
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Private Market PlayBook
A letter from  
the Editor
Cover illustration: Alessandro Gottardo
Timeline
22-Nov-2013
The urban landscape as we know it is shifting. Massive inflows of people 
into increasingly populated metro areas are affecting housing prices, 
traffic congestion, air pollution, energy usage, mobility, the quantity 
of resources and a lot more. As the global population grows and 
urbanization intensifies, cities are having to find solutions that lead to 
increased efficiency, accessibility and sustainability. On the other hand, 
new innovations, as well as investment in real estate and infrastructure, 
are helping alleviate these issues and fueling an evolution in how cities 
operate and how their residents live, work, play and get around.
Throughout this issue of our magazine, we cover several areas where 
private companies—and the investors who back them—are making 
an impact on the urban environment. In the Perspectives section, this 
includes the topic of mobility and the meteoric rise of bike and scooter 
startups like Lime, Bird and Mobike; and how one sector within agtech 
is working to eliminate urban areas with limited access to affordable 
healthy food options, known as food deserts.
Our Analyst Insights section includes coverage of Uber and its 
positioning in the race to autonomy, as well as a market map of the 
restaurant tech space, which categorizes the vertical into segments like 
inventory management, food safety & sustainability and delivery.
The feature story focuses specifically on the urban technology 
ecosystem, which includes six primary verticals: mobility, food/
restaurant tech, construction tech, real estate tech, shared spaces and 
smart infrastructure. The article provides an overview of each space and 
helps put into context how the activity within each segment is impacting 
the overarching reshaping of today’s cities.
5
PitchBook Private Market PlayBook 3Q 2018
4
PitchBook Private Market PlayBook 3Q 2018
The future of urban 
mobility has two wheels 
(or so VCs think)
By Kevin Dowd
After more than 1,300 years of 
existence, traffic and pollution were 
overwhelming the ancient city 
of Ghent. So in 1997, the second-
largest municipality in Belgium did 
something drastic: It banned cars 
from an 85-acre area at its city 
center.
The move met significant initial 
opposition—to the point that the 
mayor began wearing a bulletproof 
vest. 
But in the past two decades, 
the citizenry has come around. 
A report from the European 
Commission described the initiative 
as a “great success,” and Ghent 
began implementing a plan last 
April to expand its regulation of 
transportation even further.  
With its commitment to pedestrians 
and cyclists—and to a cleaner, 
more sustainable way of living—
Ghent presents one vision of 
what the city of the 21st century 
could be. To various degrees and 
with varying amounts of success, 
other locales around the world are 
following suit. From San Francisco 
to Madrid, from London to Mexico 
City, a movement is afoot to make 
metropolitan centers less reliant 
on the automobile and friendlier to 
other ways of getting around.
And in recent months, an ever-
growing group of startups 
providing novel forms of personal 
mobility are raising billions of dollars 
from venture capitalists (VCs) in an 
effort to take advantage. 
Bikes and scooters go boom
In the past two years, what was 
at first a minor wave of funding 
for startups in the bike-rental and 
electric scooter spaces has turned 
into a tsunami. Graphs of recent 
global VC investment in the sectors 
give new meaning to the phrase “up 
and to the right.” 
The amount of venture dollars 
going into bikesharing companies 
like Lime, Ofo, Mobike and Hellobike 
has increased by at least 172% 
each of the past five years, per the 
PitchBook Platform, including a 
jump of more than 300% each of 
the past two years. And investment 
isn’t slowing down in 2018, as the 
industry’s leaders begin to establish 
their market positions and expand 
into an increasing roster of cities. 
While there are certainly more 
players in the bike-rental space, 
the VC mania is perhaps best 
encapsulated by the recent funding 
history of a single scooter startup. 
That would be Bird, a California-
based company launched last year 
by former Uber executive Travis 
VanderZanden. 
In fewer than 18 months since its 
launch—and by often deploying 
the sort of act-first, ask-questions-
later philosophy that made Uber 
infamous—Bird has collected a 
staggering $418 million in VC 
funding. Valued at $2 billion in June, 
it reached a billion-dollar valuation 
faster than any other current US 
unicorn. Not bad for a business 
whose product is still available in 
fewer than 35 cities.
Most of these companies have 
similar business models. They use 
their enormous cash reserves to 
build up their supply of dockless 
bikes and/or scooters, then deploy 
that inventory at a huge scale 
across busy urban centers. The 
aim for many is to solve the so-
called “last mile” problem, helping 
travelers complete the final legs 
of their trips after moving most of 
the way by car, train or any other 
method. For either a flat rate—
often $1 per ride—or as part of a 
subscription, users can scan one 
of the bikes or scooter with their 
phones and ride to wherever they 
need to go.
The sprint by venture investors 
in these spaces mirrors the flood 
of cash that companies like Uber, 
Lyft, Grab and Didi Chuxing raised 
several years ago as the ridehailing 
industry established itself as an 
economy-changing force. VCs are 
enamored with startups aiming to 
disrupt transportation. And at least 
one reason for the love affair is 
clear: Few other industries have the 
power to so completely change the 
way the world’s cities operate.
Startups vs. cities
Cities are full of people. Those 
people need ways to get around. 
And for millennia, the way they get 
around has helped shape the way 
those cities are designed. 
One of the Roman Republic’s 
earliest codes of law regulated 
the width and upkeep of the city’s 
growing network of roads, the main 
method of transport for that era’s 
carts and animals. Jump forward 
a couple millennia to London and 
New York, where the spread of 
the Underground and the subway 
system helped drive and organize 
those cities’ rapid growth. And in 
the 20th century, Los Angeles and 
its never-ending sprawl of suburbs 
are a clear example of a metropolis 
built for the car.
Bike-rental and scooter-rental 
services have a long way to go to 
reach that sort of city-shaping level. 
It’s quite possible they never will. 
But in cities like Ghent, the changes 
to the cityscape are already 
occurring. In that case, as cars are 
slowly pushed out of some of the 
world’s busiest places, bike and 
scooter startups only need to step 
into a newly opened vacuum. 
Perspectives
7
PitchBook Private Market PlayBook 3Q 2018
6
PitchBook Private Market PlayBook 3Q 2018
One of the headline issues from 
the rise of ridehailing during the 
previous decade was the way those 
private startups interacted with 
cities and other representatives 
of the public sphere. Take, for 
instance, Uber and Lyft’s ongoing 
battle with New York City’s taxi 
drivers. In August, the Big Apple 
passed new regulations limiting the 
number of ridehailing cars allowed 
on its streets—a potential hindrance 
to those companies’ ability to 
generate piles of cash.
Already, bike and scooter 
companies are facing similar issues.
Earlier this year, after startups like 
Bird and Lime had already flooded 
the city’s streets with scooters, San 
Francisco passed a law regulating 
their spread. Nashville issued a 
cease and desist letter to Bird 
after the company launched there 
in May. The Seattle City Council 
passed a new law in July charging 
bike-rental startups for the right to 
maintain their fleets there, the sort 
of regulation that’s caused Chinese 
companies like Ofo and Mobike to 
pull out of several major markets 
in the US. In August, Bird and Lime 
halted their scooter offerings in 
Santa Monica—Bird’s hometown—
after the city opted not to work 
with the startups on a test program.
The presence of such test programs 
in the first place, though, is a sign 
that several cities are trying to find 
ways to work with the new crush of 
personal mobility startups. Denver 
seized hundreds of illegally parked 
Bird and Lime scooters when the 
startups first began operating 
there in June, but the city has since 
begun a new pilot program that will 
allow limited numbers of electric 
bikes and scooters on its streets. 
Portland, OR is in the midst of a 
four-month test run with Bird and 
fellow scooter startup Skip.
In most places, it seems, neither 
side—the startups nor the cities—
wants it to be a battle. But they 
do have different (and at times 
competing) motivations. And then 
there are the city-dwellers, who 
Scooter deal value ($M)
Bikesharing deal value ($M)
# of scooter deals closed
# of bikesharing deals closed
$428$554$2,918$2,48026
22
43
26
0
5
10
15
20
25
30
35
40
45
50
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2010
2011
2012
2013
2014
2015
2016
2017
2018*
just want sidewalks free from the 
clutter of a hundred technicolor 
bikes. Much thinking, talking and 
negotiating remains to be done 
between the public and private 
sectors if bike-rental and scooter-
rental services are to reach the 
potential VCs see.  
The electric future
By the time such questions are 
resolved, however, it’s possible 
many of those VCs will be cashed 
out. If a recent spate of deals 
pairing bike and scooter startups 
with ridehailing giants are any 
indication, the personal mobility 
space could be on the brink of 
serious consolidation.
Earlier this year, Uber acquired 
electric bike startup JUMP for a 
reported $200 million, and in July, 
the ridehailing colossus announced 
a partnership with Lime to make the 
startup’s scooters available through 
the Uber app. A week before 
Uber’s Lime deal, Lyft acquired 
Motivate, a major bikeshare 
operator that operates specially 
branded bikeshares in several 
North American cities. And Didi 
Chuxing (along with co-investor Ant 
Financial) is reportedly considering 
a $2 billion takeover of Ofo, the 
bike-rental company in which Didi’s 
has been a longtime investor.
Since the start of 2017, VC investors 
have poured more than $6.3 billion 
into bike-rental and scooter-rental 
startups, creating a new herd of 
unicorns in the process. Now, larger 
and more powerful companies 
are taking notice. They’re betting 
that cities like Ghent will be the 
model for the 21st century—that the 
pollution and traffic of the car is on 
VC global bikesharing & scooter investment 
Most VC raised among bikesharing startups
Company
HQ
Total VC raised ($M)
Ofo
Beijing
$2,486
Hellobike
Shanghai
$1,533
Mobike
Beijing
$1,010
Lime
San Mateo, CA
$467
Ninebot
Beijing
$180
Bluegogo
Beijing
$90
Alta Motors
Brisbane, CA
$42
SpeedX
Beijing
$36
Superpedestrian
Cambridge, MA
$44
Zagster
Cambridge, MA
$34
Source: PitchBook 
*As of August 8, 2018
Source: PitchBook 
*As of August 21, 2018
its way out in major metropolitan 
centers around the globe, and that 
the era of shared transportation is 
here. 
It’s not a sure bet. Obstacles still 
stand in their way. But if it pays 
off, names like Lime and Bird could 
become the Ford and Chevrolet of 
the 21st century.
In most places, it seems, neither side—the startups nor 
the cities—wants it to be a battle. But they do have 
different (and at times competing) motivations.
9
PitchBook Private Market PlayBook 3Q 2018
8
PitchBook Private Market PlayBook 3Q 2018
Barbarians repairing 
the gates? Why 
infrastructure is primed 
for more PE investment
By Adam Lewis
When PE firms make headlines, it 
typically involves the closing of a 
billion-dollar fund, the completion of 
a billion-dollar deal or a PE-backed 
company saddled with debt finally 
going bankrupt. 
Infrastructure fundraising on the 
front page? Not so much.
But last year proved the exception 
when Blackstone announced plans 
to raise a $40 billion infrastructure 
fund, with the Public Investment 
Fund of Saudi Arabia pledging 
to match up to $20 billion in 
LP commitments. The fund’s 
goal: Invest more than $100 
billion in infrastructure projects 
predominantly in the US, using 
debt financing to come up with 
the other $60 billion+. The vehicle 
will reportedly target businesses 
involved in midstream energy, 
telecom, water and renewables, as 
well as public-private partnerships. 
 
The fundraising announcement 
came more than a year after 
Blackstone co-founder Stephen 
Schwarzman first met with Saudi 
Prince Mohammed bin Salman, the 
chairman of the PIF, and urged him 
to back Blackstone’s latest infra-
focused vehicle. Bin Salman agreed, 
and, despite initial difficulties in 
raising capital and a reported 
power struggle over who would 
ultimately control the investments, 
Blackstone finally closed its first 
round of fundraising on $5 billion 
in 2Q, with the PIF investing $2.5 
billion as promised. 
Though it has yet to reveal any 
investments, don’t expect the 
vehicle to stay quiet for long. 
Schwarzman said on the firm’s 
most recent earnings call that the 
infrastructure team in charge is 
“fully in deployment mode and (is) 
evaluating a pipeline of interesting 
opportunities.” Former Blackstone 
president Tony James, meanwhile, 
said in a February interview that 
fundraising could take a decade or 
so, a rare timeframe in a PE world 
where it typically takes an average 
of about a year to raise a PE fund, 
per the PitchBook Platform.
Improvements are needed for 
aging highways, bridges and other 
infrastructure across the globe. 
That became especially apparent 
in August, when a bridge collapsed 
during a rainstorm in Genoa, Italy, 
killing 39 people and prompting 
Italian prime minister Giuseppe 
Conte to declare a 12-month state 
of emergency in the country’s 
Liguria region. 
Perhaps it’s no surprise alternative 
investors are pouring capital into 
infrastructure investments, which, 
in general, typically involve less risk. 
“Just the nature of core 
infrastructure is that these are 
stable investments that can 
generate a stable set of returns, 
which on a risk-adjusted basis 
are quite attractive,” said Cherian 
George, a managing director of 
infrastructure & project finance 
at Fitch Ratings. “You don’t have 
the same boom or bust cycle that 
you have in other sectors like 
technology, retail and other things.”
Infrastructure investors have 
been particularly busy this year. 
Stonepeak Partners, a New York-
based firm headed by former 
Blackstone execs, closed its third 
infrastructure fund on a $7.2 
billion hard cap in July, more 
than doubling a predecessor that 
brought in $3.5 billion in 2016. 
Later that month, news broke that 
Sweden’s EQT is planning to raise at 
least ¤8 billion for an infrastructure 
fund of its own.
The level of sustained fundraising 
seen in the accompanying chart 
bolsters a global infrastructure 
sector that’s had capital pouring 
in so far in 2018. Consider: 13 
infrastructure funds have already 
raised a combined $27.8 billion, 
according to PitchBook data, on 
pace to crush last year’s $31.1 billion 
total. With a strong finish, this year 
could surpass the largest annual 
infrastructure fundraising total in 
at least a decade, when 25 funds 
nearly brought in some $40 billion 
in 2016. 
Why has infrastructure fundraising 
surged?
The answer is multitiered, as 
covered in a 2017 analyst note 
from JP Morgan. Infrastructure 
targets can be a bargain in today’s 
high-valuation environment, and 
these deals are often largely 
independent of the volatility swings 
that can affect other asset classes 
including fixed income, equities 
and real estate. Not to mention, 
they provide steady cash flows 
in many instances, with utilities 
contracts, for example, that can 
span 30 years. The sector can also 
be more immune to an economic 
downturn or inflation because of 
the monopolies some infrastructure 
companies (e.g., utilities) hold over 
their respective markets. 
There’s also a need for 
infrastructure investment in the US, 
in particular. The American Society 
of Civil Engineers gave the US a 
D+ in its 2017 report card grading 
the country’s infrastructure, with 
the cost to make the necessary 
improvements estimated to be 
worth nearly $4.6 trillion. Of all 
the specific categories graded, 
only “Rail” got better than a C+, 
checking in with a B.
11
PitchBook Private Market PlayBook 3Q 2018
10
PitchBook Private Market PlayBook 3Q 2018
President Donald Trump has 
pushed for increased infrastructure 
spending, promising to introduce 
a $500 billion infrastructure bill 
during his 2016 campaign. But more 
than 20 months into his presidency, 
no such bill has materialized. 
Granted, the administration made 
a lackluster attempt earlier this 
year, pledging $200 billion in 
federal-backed funds that would go 
toward grants and incentives over 
the next decade. State and local 
governments and private investors 
would then come up with the rest, 
in hopes of exceeding $1.5 trillion. 
Trump called it “the biggest and 
boldest infrastructure investment in 
American history.”
“We will build gleaming new roads, 
bridges, highways, railways, and 
waterways all across our land,” 
Trump said. “And we will do it with 
American heart, and American 
hands, and American grit.”
That sounds great, in theory. But 
the US still needs to come up with 
enough money. 
“I think they are faced with the 
same fundamental problem that 
there isn’t a (public) revenue 
source,” George said. “It should be 
an easy thing to do, but it hasn’t 
been.” 
A Wharton School study out of 
the University of Pennsylvania, 
Trump’s alma mater, determined 
that the package, even if somehow 
funded, would come up more than 
$1 trillion short of what’s needed. 
But not doing anything could make 
things much worse, with the ASCE 
noting that failing to launch a major 
infrastructure spending package 
would lead to estimated losses of 
$4 trillion in the US GDP and 2.5 
million jobs by 2025.
It remains to be seen what role PE 
will play in improving the country’s 
public infrastructure, and not all 
of the existing data about public-
private infrastructure projects is 
positive. For instance, a 2014 report 
from the Congressional Budget 
Office found that of the 10 privately 
financed road projects from 1995 
to 2012, three filed for bankruptcy 
and one needed to be bailed out by 
the government with a private-to-
public buyout.
George, though, said the results 
of public-to-private projects have 
recently trended positive. 
“It isn’t an all or nothing kind of 
scenario,” he added. “Sometimes 
when the projects don’t work out, 
it’s because the government has 
structured a project with the private 
involvement in a way that can’t 
be successful. And sometimes it’s 
because the private sector fails 
at it. But very often, it’s because 
the public sector is trying to 
find the best formula for private 
involvement. That is the challenge.”
If an infrastructure package could 
get passed in the next few years, 
it would provide a PE industry 
that’s been oft-criticized for 
aggressive leveraging and lucrative 
management fees the chance to 
make an investment that could 
benefit the greater good. And 
in return, they’d still get a good 
return on their investment, with 
their limited partners coming away 
happy. 
Imagine a world where PE firms 
were no longer just viewed as 
corporate-raiding “barbarians” 
that look to milk every penny 
out of a business for a few years 
before selling the scraps. Instead 
of headlines about the lucrative 
salaries pulled in by Schwarzman 
and his rivals, attention might turn, 
at least somewhat, to helping shape 
the future of US infrastructure. 
In the end, that alone could be 
worth the risk.
The public 
sector is trying 
to find the 
best formula 
for private 
involvement.  
That is the 
challenge.
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industry professionals—with custom content informed by our accurate 
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the board. States have been losing 
revenue, and accordingly are making 
individual calls. They are justified, after 
all — they are only collecting on a tax 
that currently nobody pays.
Why do high-growth companies face 
bigger challenges than others?
As mentioned earlier, there has been 
a significant shift in the past several 
years when it comes to favoring 
staying private for as long as possible. 
That has contributed to the explosion 
in the number of highly valued, 
venture-backed private companies 
that garner multiple headlines, 
whether within the context of the 
venture industry or merely for their 
impact upon traditional industries. But 
the fact of the matter is high-profile 
companies will typically be targeted 
for audit first. One of the trends we 
see when we speak with state auditors 
is that, as they determine which 
businesses to pursue, they’ll look to 
get a sense of customer segments and 
evidence of those customers paying 
sales tax. Given the inroads made by 
relatively younger businesses into 
more staid, traditional industries such 
as enterprise software, there can be 
double exposure on the part of the 
new, fast-growing businesses that 
are dominating headlines for their 
transformative offerings, particularly 
if they’ve been especially disruptive. 
Let’s use Amazon as an example. 
New York’s Amazon Law remains 
one of the more infamous examples 
of “click-through nexus”: Part of that 
was because brick-and-mortar chains 
fought hard to level the playing field 
when it comes to ecommerce and 
collection of sales tax. What that did 
was end up incentivizing Amazon to 
open up regional producers closer to 
their customers in a given jurisdiction 
so they’d be able to reap the 
advantages of geographic proximity 
With more attention being placed 
on recovering sales tax revenue at 
the federal and state level, why isn’t 
it getting easier for companies to 
address these issues?
Many companies view not paying sales 
tax as a competitive advantage and 
consequently are finding it difficult to 
adjust. For a long time, it was simply 
the case that nobody paid the tax, 
even though it was on the books. But 
now, states are looking to recoup 
millions of dollars in uncollected sales 
tax from ecommerce transactions.
Auditors are like anyone else — they 
want to go out and find low-hanging 
fruit. States view every such sales tax-
collecting issue as a potential nexus 
situation, i.e. a case in which the target 
company needs to prove whether 
or not their presence is significantly 
physical and thereby comes under the 
determination of nexus as assessed 
under the due process and commerce 
clauses in the US Constitution. 
When it comes to software and 
services beyond retail alone, things 
become considerably muddier. With 
the recent decision by the Supreme 
Court to turn down an appeal 
challenging Colorado’s notice and 
reporting regime — which requires 
remote retailers to report in-state 
sales to the Department of Revenue 
and notify customers of their use tax 
obligations — more states are likely to 
jump on the bandwagon and adopt 
similar proposals.
Adding to the difficulty, more and 
more states are adopting a newer 
definition of economic nexus when 
it comes to sales tax to increase the 
number of merchants eligible to 
collect from buyers. Such measures 
can depend solely on annual sales 
as a metric. For example, Ohio has 
Pat Falle
Chief Evangelist Officer
pat.falle@avalara.com
206-826-4900 ext. 1466
“People don’t look 
at it this way, but 
there’s no such thing 
as a free sales tax.”
adopted a “factor presence test” for 
determining what companies are 
subject to the Commercial Activity Tax. 
This basically means that businesses 
with no connection at all to Ohio are 
subject to the CAT if they have sales in 
Ohio of at least $500,000.
Individual states are pursuing or 
implementing their own initiatives 
as, frankly, the federal government 
has been sluggish about adopting 
federal remote sales tax legislation, 
which would standardize sales and use 
tax collection and remittance across 
Avalara’s Chief 
Evangelist on how to 
adapt
4 
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PitchBook Private Market PlayBook 3Q 2018
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PitchBook Private Market PlayBook 3Q 2018
Cultivation in the skies: 
How vertical farming 
is aiming to eliminate 
food deserts from the 
urban landscape
By Adam Putz
A leafy green salad or a juicy 
cheeseburger? For millions of 
Americans, the question’s a no 
brainer… and much of it has to do 
with a lack of fresh produce at 
affordable prices close to home.
According to the US Department 
of Agriculture, food deserts are 
defined as areas with limited access 
to supermarkets, supercenters, 
grocery stores, or other sources of 
cheap, healthy food. These deserts 
affect more than 20 million people 
in the US, per a USDA estimate, 
and they typically form in urban 
population centers—particularly 
low-income neighborhoods—as 
major food retailers followed waves 
of suburbanization to set up shop 
further from city centers during 
the latter half of the last century. 
However, food deserts can crop 
up anywhere with a pronounced 
lack of accessibility to inexpensive 
sources of nutrition, as measured 
by the distance to a store or by the 
number of stores in an area.
For those who must travel lengthy 
distances to eat a healthy dinner, 
there’s often no real choice 
between buying ingredients for a 
salad or grabbing a burger from the 
fast-food joint around the corner. 
And it’s not just Rust Belt cities like 
Cleveland and Detroit that have 
struggled to cope. San Francisco, 
despite its tech wealth and relative 
proximity to California’s Central 
Valley, is also home to its own food 
deserts such as Bayview-Hunters 
Point.
But rapidly maturing agricultural 
technologies like vertical farming 
have already started to produce 
food oases where deserts once 
dominated by taking aim at the 
twin problems that perpetuate 
them: the amount of unhealthy 
foods readily available nearby 
and the relative inconvenience of 
attaining cheap, nutritional options.
A novel form of mass agriculture
With supply chains that depend on 
trucking produce into city centers, 
sometimes from thousands of miles 
away, conventional agriculture is 
inefficient and expensive—to say 
nothing of the carbon footprint 
involved in shipping and storing 
foods. Alternative methods of 
production within cities are needed 
to eliminate food deserts, and those 
developments can’t come soon 
enough; global production will need 
to increase by 50% to feed another 
2 billion people in 2050, according 
to the UN’s Food and Agriculture 
Organization.
But alternative methods of 
production won’t solve everything. 
A higher cost of living in urban areas 
can also eat into disposable income, 
resulting in even those with greater 
means choosing unhealthy options 
to trim expenses. That highlights 
the need for alternative methods of 
distribution within cities as another 
way to drive down prices.
That’s where vertical farming 
comes in—though the term, much 
less the practice, hasn’t been 
around long. Credit for the concept 
has gone to retired Columbia 
University medical school professor 
Dickson Despommier for his 2010 
book, “The Vertical Farm: Feeding 
the World in the 21st Century.”
Just as the first farmers 
domesticated cereals in nearby fields 
before inventing techniques like 
irrigation to improve yields, vertical 
farmers have adapted existing indoor 
ag methods to grow leafy greens in 
tall warehouses and freighters using 
advanced technologies like LEDs to 
replace sunlight. 
Vertical farming tackles inefficiencies 
in production and distribution head 
on by growing healthy food near to 
where it’s sold. The evolution from 
simpler forms of indoor ag, such as 
growing tomatoes in greenhouses 
or producing several tons of kale 
in vertical farms, seemingly has 
a parallel in humanity’s rise from 
single-story dwellings to the boom 
in skyscrapers 100 years ago—and 
the engineering and technological 
advancements are no less 
impressive. 
By reducing inputs, eliminating 
crop protection products like 
pesticides from and incorporating 
machine learning tools into the 
growing process to optimize water 
and light levels, vertical farming 
has also started to combat many of 
the capital-intensive issues around 
growing nutrient-rich produce. 
Slowly but surely, companies 
operating in the space will draw 
down the price on fresh fruits and 
vegetables grown vertically. In the 
meantime, these companies have 
also boosted their bottom lines by 
targeting the cultivation of greens 
that carry higher premiums.
Those financial benefits and 
opportunities have lured deep-
pocketed backers to the industry to 
cut some sizable checks. Venture 
capital investment, including from 
corporates, into greater agtech 
last year represented roughly $1.9 
billion across 238 completed deals. 
Meanwhile, the indoor ag space rode 
that investment wave to hit a peak 
in 2017 of some $346 million across 
37 financings. But the bulk of that 
funding went to just one startup.
Plenty: SoftBank’s big bet on agtech
Last summer, SoftBank deployed 
its massive Vision Fund to lead a 
$200 million Series B for Bay Area-
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PitchBook Private Market PlayBook 3Q 2018
14
PitchBook Private Market PlayBook 3Q 2018
based Plenty. The deal represented 
the Vision Fund’s first major foray 
into agtech.
“By combining technology with 
optimal agriculture methods, 
Plenty is working to make ultra-
fresh, nutrient-rich food accessible 
to everyone in an always-local 
way that minimizes wastage from 
transport,” said Masayoshi Son, 
chairman & CEO of SoftBank, in 
a news release. “We believe that 
Plenty’s team will remake the 
current food system to improve 
people’s quality of life.”
Founded in 2013, Plenty raised 
a $26 million Series A in 2016 
from funds run by Amazon CEO 
Jeff Bezos and former Alphabet 
chairman Eric Schmidt alongside 
the likes of Data Collective, DCM 
Ventures and Finistere Ventures. 
Like others operating in the space, 
Plenty uses a tiny fraction—a 
measly 1%—of the water deployed 
on conventional farms and also 
leverages machine learning, the 
IoT and Big Data to optimize the 
growing environment for crops 
and minimize the energy used 
in production. Plenty’s vertical 
farms occupy a few-hundred-
thousand square feet—the indoor 
equivalent to a few acres of open 
field. Meanwhile, rows of arugula 
and kale sprout not from soil but 
columns covered in a growth 
medium comprising recycled 
bottles designed to hold roots in 
place and deliver nutrients.
Plenty’s buildout with SoftBank’s 
support should also encourage 
investments into the companies 
behind complementary agtech 
solutions like sensors and precision 
ag, the proprietary software 
programs created to provide data 
management and analytics for 
monitoring water and nutrient 
levels, along with the presence of 
plant pathogens.
A greener future
From early on in their rise, 
skyscrapers have been synonymous 
with the growth of urban 
populations. And from just as early 
on, some architects and engineers 
reveled at the prospect of farming 
in the sky.
In 1909, Life magazine ran 
an illustration by the popular 
cartoonist Alanson Burton Walker 
depicting a skyscraper containing 
single family homes complete with 
their own gardens. 
Although quaint to contemporary 
eyes, Walker’s depiction of 
cultivation in the skies should no 
longer feel so farfetched with 
companies like Plenty starting 
to bring comparable methods 
closer to reality—developments 
that could eventually result in the 
elimination of food deserts from the 
contemporary urban scene.
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Some 55% of the global population 
currently inhabits urban areas, and 
the UN estimates this figure will 
jump to 68% by 2050.
Some 55% of the global population 
currently inhabits urban areas, 
and the UN estimates this figure 
will jump to 68% by 2050. Mega-
cities of more than 10 million 
inhabitants are expected to number 
43 worldwide by 2030. These 
cities will represent a long-term 
investment play for firms focused 
on the confluence of farming, 
food and infrastructure, with 
companies in vertical farming well-
positioned to capitalize on these 
bets by cultivating a central role 
for indoor ag in sustainable urban 
development.
17
PitchBook Private Market PlayBook 3Q 2018
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PitchBook Private Market PlayBook 3Q 2018
Looking past clichéd 
headlines and rethinking 
real estate investment 
strategies
By Garrett James Black
How has your city changed in the 
past decade?
Looking around Seattle (where 
PitchBook is headquartered), 
many neighborhoods are nigh-
unrecognizable compared to a 
decade ago. Construction cranes 
abound as apartments and 
townhomes and office complexes 
arise. 
These narratives are likely familiar—
headlines proclaiming the rise of 
mega-cities and increasingly dense 
city centers have proliferated 
for years. However, narratives 
persist long after reality changes. 
In actuality, changes have been 
afoot in many key areas, two 
in particular—urbanization and 
density. More importantly, how they 
are changing is also set to impact 
a critical source of funding for 
development: private investors.
For several years now, private real 
estate strategies in North America 
have often tried to capitalize on 
oft-discussed trends of millennials 
eschewing suburbia for city life. But 
demography is not destiny. 
There’s a case to be made that 
funds deploying capital or looking 
to target hyped investment themes 
should be wary of overexposure or 
overinvestment in said trends, as 
both macroeconomic and industry-
specific cycles in North America 
look poised to shift or even reverse 
in coming years. Suburbia may not 
be dying after all; urbanization may 
well slow down or at least even out. 
But first, some background.
The real deal
PE strategies in real 
estate can be roughly 
classified into three 
categories: core, value-
added and opportunistic. 
Core strategies focus 
on major top-tier urban 
markets and established, 
valuable properties; 
value-added strategies 
typically back projects 
that will require some 
renovation and source 
in secondary markets—
somewhat smaller 
metros; opportunistic 
strategies may go further 
afield into much smaller 
cities and even back 
distressed projects.
Post the financial crisis, real 
estate markets were depressed 
and interest rates fell to 
unprecedented lows. Many global 
institutional investors allocated 
more capital to core real estate 
strategies dedicated to exploring 
opportunities in booming real 
estate markets, primarily in mega-
metros such as New York, to 
broaden their overall portfolio 
exposures and combat the low-
yield environment.
 
In fact, the US has been a favored 
region of international investors for 
some time, given its institutional-
quality commercial real estate has 
notched attractive, risk-adjusted 
returns over the past 20 years, 
according to JLL Research in July 
2016. Allocation to private real 
estate funds has hardly slackened 
either—though it’s worth noting 
that aggregate, annual tallies of 
capital raised are still dwarfed by 
pre-crisis figures, and 2017 saw a 
notable decline from the two years 
immediately prior.
Value-added real estate pools, 
however, have stayed remarkably 
stable in terms of capital raised 
since 2014, ranging from $29 billion 
to $32 billion each year since on 
a global basis, per the PitchBook 
platform. 
Urbanization had been proceeding 
at a much more sedate pace in 
metropolises throughout the 
20th century, regardless of these 
recent capital allocations, but 
with augmented monetary fuel, 
increased densification became 
more pronounced—even in city 
centers. 
Billions of dollars have been strewn 
across quite a few locations in the 
intervening years; however, the way 
they’ve been deployed has changed 
decidedly as investors respond to 
the twin trends of densification and 
urbanization. Whether the scars 
of the recession were material or 
emotional, millennials pursuing 
apartments over single-family 
homes, growing populations, and 
faster-recovering urban centers all 
propelled greater density. 
Lagging by a customary few years, 
private investment strategists 
followed suit, helping fund luxury 
multifamily housing, high-end 
townhomes and condos, given 
costs of land and development. An 
increasing sprouting of mixed-use 
buildings that aspired to capitalize 
on preferences for walkability, 
proximity, shorter commutes and 
convenience also contributed to 
increased density. 
More and more, modern city 
centers and neighborhoods began 
to look eerily alike, characterized 
by sleek glass facades and beams 
of steel, trendy eateries sitting 
below chic apartments, crowned by 
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PitchBook Private Market PlayBook 3Q 2018
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PitchBook Private Market PlayBook 3Q 2018
rooftop open areas with grills and 
tables. But such amenities are costly 
to build, and they consequently 
lead to steep rental rates and 
exorbitant valuations.
The shift to secondary strategies
As capital flooded in, the primary 
real estate market heated up 
steadily over the past decade. 
Housing and commercial lease 
prices began to creep up, with 
skyrocketing rents in metropolitan 
areas such as New York, Vancouver, 
BC, and most notoriously San 
Francisco. (Only just recently have 
they begun to even out or decline.)
In pursuit of more reasonably priced 
markets, funds began to hunt 
further afield in what are deemed 
secondary markets, such as Seattle, 
Houston, Orlando and Atlanta. 
Moreover, they also delved into 
alternate niches. 
To take two examples, 
Blackstone recently purchased 
14 manufactured housing 
communities, and Canada Pension 
Plan Investment Board and 
Singaporean sovereign wealth fund 
GIC entered into a joint venture 
with multifamily real estate firm 
Cortland Partners to renovate 
8,000 to 10,000 Class B units 
(midscale in terms of amenities and 
size) in the US. 
In fact, that last example not 
only illustrates the extent to 
which investors have embraced 
multifamily opportunities, but it also 
hints at the next stage for private 
real estate strategies, which is 
beginning to manifest in key areas.
Diversification and innovation
Much of the multifamily cycle in 
core North American metro areas 
consisted of building luxury units, 
at least prior to 2015 or 2016. This 
phenomenon is relatively cyclical 
in nature, as rising prices and 
consumer preferences in the wake of 
the financial crisis encouraged such 
a focus—particularly as high earners 
proliferated across certain metros.
But every cycle turns, and as Class 
A properties (i.e. higher-end) grew 
pricier, Class B has become more 
popular, even in secondary markets. 
Thus, a new prong of evolution in 
strategies has emerged beyond 
the push to secondary markets: a 
growing focus on diversity in the 
class and types of properties, plus 
rethought approaches to existing 
properties, such as renovations of 
assets to core status. 
More reasonable prices and overall 
population growth, in addition to hints 
of consumers’ increased willingness 
to live outside of the hyped hotspots 
of the past decade, all contribute to a 
conducive backdrop.
On top of that diversification, the 
latest types of buildings designed 
to cater to current preferences and 
innovations in retail centers should 
also be noted. As carnage in the 
retail real estate market continues, 
exemplified best by the slow death 
of the traditional mall, builders are 
reconfiguring shopping centers 
around truly-essential-yet-still-
relatively-high-scale goods, such as 
Whole Foods.
Moreover, businesses and builders 
alike are striving to achieve a 
harmonious blend between the 
digital and the physical—think 
eyeglass retailer Warby Parker’s 
brick-and-mortar locations in city 
neighborhoods, or online mattress 
retailer Casper’s recent decision to 
open 200 stores across the US. 
Private real estate funds looking 
to deploy capital are considering 
the impact of such developing 
trends and strategizing about 
the need for or best method of 
exposure, still looking primarily at 
retail and residential as opposed 
to commercial real estate, which 
remains a tough sell. Such 
considerations tend to be fledgling, 
as the strategy is not necessarily 
proven out, and such storefronts 
typically cluster in pricey core 
markets or increasingly pricey 
secondary markets.
The case for concern
But are these strategies of pursuing 
multifamily units in secondary 
markets, Class B properties, and 
niches still sustainable for the next 
decade or more? Not necessarily. 
To reiterate, demographics aren’t 
quite destiny. The clichéd millennial 
propensity for apartments in major 
cities was certainly driven in part 
by such centers’ quicker economic 
recovery, while the plunge in home 
purchases was driven by declining 
incomes.
Consumer preferences have 
shifted somewhat to favor living 
in more urban areas, but there are 
increasing indications that younger 
demographics aren’t averse to 
buying single-family units. The 
clearest evidence was the red-hot 
pricing for housing in secondary 
markets such as Houston, Denver, 
Minneapolis and Seattle, to name 
just a few. 
Furthermore, as recently noted in 
Axios, 65% of American cities with 
at least 250,000 people either lost 
population last year or experienced 
lower rates of growth, indicating a 
reversion to suburban growth as 
opposed to urban. The building-out 
in suburbs of secondary markets 
and the continued evolution of 
workplace practices to allow 
flexible, remote schedules also 
persist as factors. In short, while 
urbanization looks set to continue 
relentlessly, density may well 
decline slightly or even out at the 
least.
Consumer preferences not having 
shifted as much as headlines 
Businesses and builders alike are striving to achieve a 
harmonious blend between the digital and the physical.
Although interest rates are rising 
at a relatively slow rate, they are 
still rising, and moreover, new 
construction costs are soaring due 
to the ballooning price of timber, 
steel and aluminum. 
would have you think isn’t the only 
macro trend to warrant concern. 
Although interest rates are rising 
at a relatively slow rate, they are 
still rising, and moreover, new 
construction costs are soaring due 
to the ballooning price of timber, 
steel and aluminum. 
Economic growth in the US remains 
at least robust, and global at least 
steady, but demand for housing—if 
not apartments—has slackened 
recently. All in all, real estate 
investors should be wary but also 
cognizant that returns may well dip 
lower in the future even despite 
the macroeconomic environment, 
given the changes in underlying 
factors such as input costs, shifting 
consumer preferences and refilled 
inventories.
From a broader strategic 
perspective, real estate PE fund 
managers should bear in mind 
that even a decade is insufficient 
to gauge the certainty of a shift in 
consumer preferences. Although 
the seismic shift in retail is probably 
permanent and adapting to 
the new face of retail—select 
locations backed by robust digital 
platforms—will be critical, residential 
markets aren’t solely about 
multifamily. Single-family units 
plus the ramping up of secondary 
markets will also be trends worthy 
of attention.
Ultimately and inevitably, however, 
urbanization will persist across 
many locations, and that will call for 
a more diversified portfolio in terms 
of class and geography.
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PitchBook Private Market PlayBook 3Q 2018
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PitchBook Private Market PlayBook 3Q 2018
Smarter cities: How private markets 
are reshaping the urban landscape
continued >
By Anthony Mirhaydari
In Plato’s “Republic,” Socrates and his interlocutors have a conversation that was apparently 
typical in ancient Greece. Is the soul immortal? Should we live a life focused on justice? 
What is the path to true happiness? Heady stuff that’s been pondered for ages.
Socrates suggests exploring those issues on a larger scale, that of an entire city, to more 
easily uncover the answers. Since a lack of self-awareness is apparently timeless, he 
concludes that the philosophers should be king.  
But the reasoning behind his method was sound: Cities, both large and small, are a window 
into the human condition. They reflect the hopes and challenges of entire civilizations. And 
they are a collective reflection of the values held by their people.
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PitchBook Private Market PlayBook 3Q 2018
22
PitchBook Private Market PlayBook 3Q 2018
Right now, the urban cityscapes 
can tell us a lot. In PitchBook’s 
headquarters of Seattle, a 
menagerie of rideshare bikes dot 
the streets. The homeless cluster 
in tents. Sandal-clad tech workers 
buzz around in Ubers. Cranes fill the 
sky. Thoroughfares are seemingly 
always jammed. And city leaders 
are struggling to address problems 
that have been decades in the 
making.
These observations are a 
microcosm of larger issues in 
play, such as densification and 
infrastructure deficits. Examples of 
how innovative technologies are 
being used to solve old problems 
with the limited resources at hand. 
A reminder of the rise of Asia and 
the languishing of the West. And 
with brands such as Lime and 
Lyft growing more ubiquitous, 
a reminder that private market 
companies and investors are 
playing pivotal roles, within their 
own particular areas, to collectively 
push cities toward a more efficient 
and sustainable future.
The stakes are high.
 
The American Society of Civil 
Engineers (ASCE) gave the United 
States a “D+” in its most recent 
Infrastructure Report Card, warning, 
“Deteriorating infrastructure is 
impeding our ability to compete 
in the thriving global economy, 
and improvements are necessary 
to ensure our country is built for 
the future.” In a 2016 economic 
study, the ASCE estimated that the 
dilapidated state of the nation’s 
roads, bridges and other critical 
infrastructure will result in $3.9 
trillion in losses to economic output, 
$7 trillion in lost business sales and 
2.5 million lost jobs by 2025.
 
This infrastructure is concentrated 
in the urban cores, where airports, 
marine ports, public parks, wireless 
towers, petroleum pipelines, rail 
lines and power transmission assets 
are most densely distributed.
Much of that infrastructure was built 
in the middle of the 20th century 
when the nation’s population was 
smaller and more widely dispersed. 
In 1960, there were roughly 181 
million US residents, according to 
Census Bureau data, versus 309 
million in 2010. Then, around 70% of 
the population lived in urban cores. 
By 2010, almost 81% did.
 
On a global scale, the United 
Nations estimates that the world 
population will swell: from 7.6 billion 
souls last year to 8.6 billion in 2030, 
9.8 billion in 2050 and 11.2 billion in 
2100. In a separate study, the UN 
estimated that while 55% of the 
world’s population lives in urban 
areas now, that proportion will 
increase to 68% by 2050. 
 
If you think your nearest city is 
bustling now, just wait.
 
According to Bank of America 
Merrill Lynch (BofAML), the United 
States alone faces an estimated 
$3.8 trillion infrastructure gap 
acute burdens now via smarter, 
more efficient usage. Enabled by 
creative new “application layer” 
innovations like predictive policing, 
home automation systems, health 
wearables, autonomous vehicles, 
bike/scooter sharing and real-time 
public transit information.
 
Efforts in this layer have been 
mainly the focus of VC-backed 
companies and their investors.
 
As for the deeper layer of actual hard 
assets, PE-backed capital is ready to 
work to put shovels in the ground 
and widen roads, rebuild bridges and 
update dilapidated water systems. 
Because finding efficiencies will only 
get us so far, and trillions will still 
need to be spent.
 
Last year, Saudi Arabia’s Public 
Investment Fund committed $20 
billion toward Blackstone’s $40 
billion fund targeting investments 
mainly in US infrastructure, $5 
billion of which closed recently 
and is “in deployment mode.” 
Stonepeak Infrastructure Partners 
recently raised $7.2 billion 
for its latest fund. Macquarie 
Infrastructure and Real Assets, the 
world’s largest infrastructure fund 
manager with nearly $100 billion in 
AUM committed to the space, also 
recently raised $2.5 billion for its 
Super Core Infrastructure Fund.
The need to change the way 
cities look, feel and operate isn’t a 
modern innovation.
 
British urban planner Ebenezer 
Howard’s “Garden Cities of To-
morrow,” published in 1898, was an 
effort to head off urban dystopia. 
The book inspired Walt Disney 
in the 1960s, who envisioned 
what is today’s Epcot Center 
theme park to instead be a living, 
breathing “Experimental Prototype 
Community of Tomorrow” that 
would be an example to others and 
end the scourge of crowded, dirty 
and crime-filled cities.
Sidewalk Labs, an affiliate of Google 
parent Alphabet, is experimenting 
with urban innovation in Toronto and 
is looking to build a new American 
city “from the internet up” in the 
hope of lowering the cost of living by 
14% for an average family.
 
In a recent analysis, a global team 
of analysts at McKinsey found 
that adding digital intelligence 
to existing urban systems could 
improve key quality-of-life 
indicators by 10% to 30%. Examples 
include shortening emergency 
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Urban population
Rural population
World urbanization 
Source: UN Department of Economic and Social Affairs
Globally, the infrastructure gap is 
estimated to total $18 trillion on 
total investment of $79 trillion.
by 2040. They estimate that the 
current public infrastructure market 
is worth between $3 trillion and $4 
trillion today and could double to 
$8 trillion by 2030. Globally, the 
infrastructure gap is estimated to 
total $18 trillion on total investment 
of $79 trillion.
With those types of sums in play, 
capital is being increasingly drawn 
to an area where financing was 
typically borne by taxpayers via 
elected officials and not private 
enterprise. But that could be set to 
change.
 
Private investment in infrastructure 
assets totaled just $337 billion 
last year, per BofAML, but 90% 
of institutional investors plan to 
increase their future allocation 
to the asset class. It’s easy to see 
why: Amid a “reach for yield” 
dynamic, infrastructure assets offer 
attractive returns, stable cash flows, 
inflation protection, low default 
rates and diversification benefits 
via low correlations to other assets, 
according to the CAIA Association.
 
The playbook looks something 
like this: Leverage fundamental 
technologies developed over the 
last two economic cycles—smaller, 
more powerful computers with 
ubiquitous connectivity and cloud-
based storage/processing—to ease 
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PitchBook Private Market PlayBook 3Q 2018
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PitchBook Private Market PlayBook 3Q 2018
Capital invested  
since 2010
$36.4B
Completed deals  
since 2010 
2,187
Capital invested  
since 2010 
$21.5B
Completed deals  
since 2010  
1,684
Mobility
Companies developing solutions  
designed to provide more accessible, 
environmentally friendly, efficient and low- 
cost transportation options.
Select companies: 
  Lyft
  Lime
  Bird
  Cruise Automation
 
Most active investors:
  Didi Chuxing (16)
  Tiger Global (13)
  Accel (12)
Food/ 
restaurant  
 
Companies developing technology  
intended to improve consumer experiences 
around food selection, aid purchasing and 
consumption, and help restaurants run more 
streamlined operations.
Real estate 
Companies developing and leveraging 
technology intended to help facilitate the 
purchase of, management of, maintenance 
of and investment into both residential and 
commercial real estate.
Select companies: 
  Instacart
  Impossible Foods
  Toast
  Upserve
Most active investors: 
  500 Startups (48)
  Accel (28)
  First Round  
Capital (28)
  Kima Ventures (28)
Select companies: 
  Opendoor
  Compass
  LendingHome
  Bowery Valuation
Most active investors: 
  500 Startups (41)
  Thrive Capital (20)
Capital invested
Capital invested
2014
2018
2018
Capital invested 
up each year 
since 2012
Capital invested  
since 2010 
$70.5B
Completed deals  
since 2010 
 470
2014
$2.9B
$6.6B
$18.6B
$12.1B
tech
tech
$26.4B
$8.9B
$3.8B
$3.2B
$5.6B
$1.7B
Capital invested 
since 2010
$4.4B
Completed deals
 since 2010 
366
Capital invested since 2010
$6.4B
Completed deals since 2010 
113
Shared 
spaces
Companies designing, managing 
and operating co-working and  
co-living spaces to deliver 
temporary and low-cost tenant 
options, as well as provide 
community-centric environments 
that foster collaboration and 
connected living.
Select companies: 
  WeWork
  Ucommune
  Common
  Starcity
Most active investors:
  Slow Ventures (5)
  T. Rowe Price (4)
  SOSV (4)
  Benchmark (4)
  Real Ventures (4)
  JPMorgan Chase  
& Company (4)
Construction
Companies building hardware and software 
solutions intended to increase the efficiency 
and productivity of operations related to 
construction, building and infrastructure. 
Smart
Companies leveraging innovative  
technology to create or enable improved 
facilities like roads, buildings and electric  
grids, as well as more sustainable and  
efficient systems to better manage traffic, 
pollution, crime and more. 
Select companies: 
  Katerra
  3DR
  PlanGrid
  BuildingConnected
Most active investors: 
  Brick & Mortar 
Ventures (14)
  Borealis  
Ventures (11)
Select companies: 
  Mark43
  Blueprint Power
  Rubicon Global
Most active investors: 
  Plug and Play  
Tech Center (14)
  Kleiner Perkins (11)
  New Enterprise 
Associates (9)
  High-Tech 
Gründerfonds (9)
Record $3.5B 
invested in 2017
Capital invested
2014
2018
Capital invested  
since 2010
$10.5B
Completed deals  
since 2010 
1,025
$2.1B invested so far in 2018, on 
pace to beat 2017's record $2.5B
$989M
$633M
tech
infrastructure
$342M
$353M
$484M
Data as of August 15, 2018 and includes venture capital and private equity transactions
27
PitchBook Private Market PlayBook 3Q 2018
26
PitchBook Private Market PlayBook 3Q 2018
response times, cutting commute 
times, lowering disease burdens and 
reducing greenhouse gas emissions.
 
A wide swath of research 
extolls the economic benefits 
of infrastructure investments, 
making it a rare issue on which 
Republicans and Democrats agree 
(and subsequently raising the 
specter of increased public funding, 
such as President Donald Trump’s 
proposed $1.5 trillion infrastructure 
plan). For example, according to 
the International Monetary Fund, 
GI Hub and Oxford Economics, an 
increase of 1% of GDP in investment 
spending raises the level of output 
by about 0.4% in the same year 
and by 1.5% four years after the 
increase.
To better understand this theme, 
we’ve taxonomized the deployment 
of new digital solutions into six 
categories that we’ve dubbed the 
“Urban Technology Ecosystem.” 
Mirroring Socrates’ strategy, after 
zooming out to examine the 
problem writ large, it’s time to focus 
in on how individual companies and 
investors are affecting the larger 
problem in their targeted areas—
similar to his examination of the 
constituent parts and functional 
classes of the well-ordered city.
 
Mobility
Survey data cited by BofAML 
shows that, when people are asked 
about infrastructure, roads and 
highways are top of mind. They 
are also the site of the largest 
single component of the global 
infrastructure gap, at $8 trillion of 
the $18 trillion gap estimated by 
2040. It’s also top of mind when 
you think of private markets’ 
most visible, current impacts on 
city centers, capturing everything 
from dockless bikes and shareable 
scooters to ridesharing services 
and ongoing efforts to deploy 
autonomous vehicles.
 
The overarching goal is to use 
technology to reduce congestion 
and foster faster, cheaper and 
more environmentally friendly 
ways to get around. Private market 
investment activity in the space has 
been red-hot, with $18.6 billion in 
capital invested through August, 
per the PitchBook platform, on 
track to nearly match the $26.4 
billion posted in 2016.
 
Companies active in the space 
include ridesharing provider Lyft, 
bikeshare-to-scooter-share icon 
Lime, and GM’s autonomous driving 
division Cruise Automation, which 
the automaker purchased in 2016 
for $1 billion. Key investors include 
Chinese rideshare giant Didi Chuxing, 
as well as Tiger Global and Accel.
 
Overall, BofAML estimates the 
global transportation market—a $7 
trillion industry—faces the threat 
of significant disruption from 
companies in this area amid crazy 
inefficiencies. 95% of cars are parked 
at any given time, cars cost up to 
$8,500 a year to own and operate, 1.2 
million people die per year in vehicles, 
and automobiles generate 23% of 
total CO2 emissions.
 
BofAML believes “the convergent 
and mutually reinforcing trends of 
electrification, autonomous driving, 
the Internet of Cars (IoC) and 
the sharing economy will drive a 
fundamental shift from today’s car-
centric travel to a platform-centric 
model whereby transport becomes 
a utility.” Resulting in savings of 
$3.8 trillion on everything from 
less emissions to fewer accidents, 
resulting in the creation of a new $1.5 
trillion market in future mobility.
 
What does this future look like? 
Consider Lime, which is reportedly 
working on small electrical vehicles 
dubbed “transit pods” to slot between 
bikes and scooters and cars in urban 
cores. Maybe encouraging a few to 
leave their big SUVs at home.
 
Food and restaurant technology
We define food and restaurant 
technology as companies 
developing solutions to improve 
experiences around food selection 
and consumption. Everything from 
burger-making machines to vertical 
farming to restaurant reservation 
apps. Overall, capital invested in 
the space totaled $8.6 billion last 
year, up from $7 billion in 2016 and 
$5.1 billion in 2015, per PitchBook 
data. The most active investors in 
the space include 500 Startups 
and Kima Ventures. Key companies 
include Instacart and Upserve.
This category is best represented by 
efforts to automate the stereotypical 
job of the sleepy-eyed teenager: 
the fast-food burger-flipper. And 
VC-backed Creator’s restaurant-sized 
burger-making robot is among those 
bringing that dream into reality.
 
Formerly known as Momentum 
Machines, the startup created a 
machine that can take the constituent 
components—raw beef, buns, whole 
tomatoes and onions that it slices 
itself—and pump out a $6 burger 
that the company’s proponents claim 
would cost between $12 and $18 at 
an upscale restaurant.
Another is Toast, developer 
of a cloud-based restaurant 
management platform that facilitates 
quick tableside ordering, menu 
modifications and labor management 
to streamline operations and bolster 
revenues. The company raised a $115 
million Series D in July led by T. Rowe 
Price, lifting its post-valuation to $1.4 
billion.
Shared spaces
By definition, space is limited in 
urban cores. Which is why as soon 
as the development of structural 
steel enabled buildings to reach 
to the heavens, skyscrapers have 
been inexorably increasing their 
floor counts. It started with the 
10 floors of the Home Insurance 
Building in Chicago in 1885. Now, 
the Burj Khalifa in Dubai boasts 
163 above-ground floors for a total 
architectural height of 2,717 feet.
 
But impressive, new, super-tall 
buildings are expensive and take 
time—and lots of capital—to raise. 
Which brings us to the shared 
spaces vertical, where companies 
are designing and operating co-
working and co-living spaces to 
create environments that foster 
collaboration and connected living 
along with lower costs.
 
WeWork is a perfect example of 
a company innovating in this area, 
leasing space in major metropolitan 
areas, building out unique offices 
from Ho Chi Minh City to Lima 
to Portland, and then subleasing 
to gig economy and remote 
work warriors. The company 
completed its eighth capital raise 
last August in a $3 billion deal led 
by SoftBank’s Vision Fund, pushing 
its post-valuation to just over $21 
billion. Other companies in the 
space include Chinese co-working 
provider Ucommune and co-living 
provider Common, which rents out 
furnished and shared apartments to 
a members-only community.
 
Overall, $3.5 billion was invested in 
shared spaces last year in 31 deals, 
up dramatically from the $1.1 billion 
invested across 23 deals in 2016. 
Smart infrastructure
 
When it comes to the nuts and 
bolts that make cities run, such 
as subway cars and bridges, 
companies operating in the smart 
infrastructure space are using 
the latest digital technology to 
ensure maximum efficiency can be 
extracted from current resources—
flawed and insufficient as they are.
 
Consider that in New York City 
over 1,000 miles of water mains are 
The overarching goal is to use technology to reduce 
congestion and foster faster, cheaper and more 
environmentally friendly ways to get around.
Companies operating in the smart 
infrastructure space are using 
the latest digital technology to 
ensure maximum efficiency can be 
extracted from current resources—
flawed and insufficient as they are.
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PitchBook Private Market PlayBook 3Q 2018
28
PitchBook Private Market PlayBook 3Q 2018
more than 100 years old. Or that 
more than 200 of the city’s public 
school buildings were built before 
1920, according to the Center for an 
Urban Future.
 
Examples include sensors that 
detect the speed and number of 
vehicles on freeways, detecting 
traffic jams automatically and 
alerting drivers to take alternative 
routes. Or roads that have 
embedded temperature gauges 
to warn of ice. Or magnetic field 
sensors to determine whether a 
streetside parking spot is open 
or free. Or the deployment 
of responsive appliances that 
communicate with a smart electric 
grid to do their washing and drying 
during off-peak usage. 
Another example of the 
technologies in this area are smart 
streetlamps that dynamically 
adjust brightness when movement 
is detected and change color 
when an ambulance or fire truck 
is approaching. Silver Springs 
Networks, which was purchased by 
Itron for $830 million in January, 
develops software that allows 
utilities to create networks of 
intelligent streetlamps.
Investment in the space totaled 
$2.5 billion last year and has already 
nearly exceeded that amount so far in 
2018—a dramatic increase from the $1.1 
billion in deal value seen in 2016. Active 
investors in the space include Plug and 
Play Tech Center and Kleiner Perkins.
 
Companies to watch include 
Mark43, a developer of public 
safety software that enables law 
enforcement officers to complete 
their paperwork quicker and more 
accurately. The company raised $38 
million in a Series C round in March 
in a deal led by General Catalyst 
Partners and Breyer Capital for a 
post-valuation of $190 million.
 
Construction technology
 
There’s simply no getting around the 
fact that there aren’t enough homes.
According to McKinsey, by 2025 
a third of urban dwellers—1.6 
billion people—could struggle to 
secure decent housing, forcing 
many to decide between living in 
substandard dwellings or becoming 
financially stretched and cutting 
back on other essentials, such 
as healthcare. Replacing today’s 
substandard buildings and creating 
the new units needed by 2025 
would require $9 trillion to $11 
trillion in construction spending. 
With land included, the total cost 
could be $16 trillion.
But there is room for innovation. 
By reducing construction costs, 
housing affordability could improve 
up to 16%. Examples include savings 
associated with value engineering 
(specifically, standardizing 
architectural designs) and using 
modular and prefabricated 
techniques. By unlocking additional 
land supply, through approaches 
like allowing higher density, costs 
could fall up to another 23%.
 
Companies in this vertical are 
building hardware and software 
solutions that increase the 
efficiency of operations related to 
construction and infrastructure. 
Dealmaking has been accelerating, 
with the 2018 year-to-date total 
of $989 million nearly matching 
2011’s $1.1 billion full-year result 
and marked acceleration from the 
$633 million posted in 2017. Active 
investors include Brick & Mortar 
Ventures and Borealis Ventures.
 
Companies in the space include 
Katerra, developer of a construction 
technology platform that eases 
material ordering and manufacturing, 
among other tasks, allowing builders 
to optimize building development, 
design and construction. Another 
is Method Homes, which makes 
modern prefabricated and 
preengineered homes that result in 
significant cost savings to traditional 
site-build structures.
Real estate technology
 
The process of buying and selling a 
home has become much easier with 
the advent of tools such as Redfin 
and Zillow. Both companies were 
VC-backed, borne in the midst of the 
housing bubble and have gone public 
during the current expansion. Redfin 
went public in 2017, and Zillow went 
public back in 2011 followed by 
several PIPE deals, including a 2014 
investment by Tiger Global.
 
A number of startups share the aim 
of leveraging technology to help 
facilitate the purchase, management, 
maintenance and investment into 
both residential and commercial real 
estate. Capital invested in the sector 
totaled $6.6 billion last year across 
343 deals, with 500 Startups and 
Thrive Capital being the most active 
investors.
 
Other companies active in the space 
include Compass, which adds hands-
on curation by real estate agents to 
online listings as well as additional 
information on the characteristics 
of the neighborhoods homes are 
sitting within. The company raised a 
$550 million Series E in December 
led by SoftBank, for a post-valuation 
of $2.2 billion.
 
The role of private capital
BofAML believes that with public 
finances stretched across much of 
the developed world—including 
the United States, which is running 
a budget deficit of $781 billion that 
is adding to a $21.3 trillion national 
debt—public-private partnerships 
(PPPs) are likely to play a growing 
role in solving the infrastructure 
investment gap. These structures 
allow PE and other sources of non-
taxpayer funding to contribute to 
what they estimate will be a total 
spend of $80 trillion on global 
infrastructure through 2040.
PPPs are defined as “long-term 
[contracts] between a private 
party and a government entity, for 
providing a public asset or service,” 
according to the World Bank. 
Examples of this strategy include 
China’s “One Belt, One Road” 
plan, President Trump’s proposed 
$1.5 trillion Infrastructure Plan and 
Europe’s ¤500 billion (about $569 
billion) Juncker Plan. 
It’s a mutually beneficial relationship. 
Politicians are attracted to the 
pools of capital. And investors are 
attracted to the strong risk-adjusted 
returns, reduced downside risks and 
enhanced diversification benefit it 
offers in relation to other asset classes. 
Put more simply: PPPs lessen the 
financial burden on governments to 
provide funding for infrastructure in 
exchange, oftentimes, for allowing 
private enterprise to collect toll and 
usage revenues. The use of PPPs 
has increased in recent years, per 
World Bank data.
The latest dynamic is the rise of 
mega-funds, such as Blackstone’s 
Infrastructure I fund, which is 
targeting $40 billion, including the 
aforementioned $20 billion anchor 
commitment from Saudi Arabia’s PIF 
(the largest single contribution of any 
investor to an infrastructure fund).
From the city to the soul
Returning to Plato’s “Republic,” 
no doubt Socrates and his friends 
would be excited about the 
prospects for increased happiness 
and health as urban landscapes 
are modernized and made more 
efficient and sustainable. After all, 
the motivation for their philosophical 
exploration was a desire to improve 
quality of life. Both internally, for 
the soul, and externally, in our 
interactions with others.
McKinsey believes smart cities, 
benefiting from the deployment 
of data and technology, can 
make things better across several 
domains: social connectedness, 
environment, health, time, safety, 
jobs and cost of living. For a city of 
5 million, they estimate between 30 
and 300 lives could be saved each 
year.
 
The task won’t be easy. Socrates 
admits, “beautiful things are indeed 
difficult to attain.” But it surely 
will be profitable for the private 
market entities playing a growing 
role in the ongoing saga of humans 
working toward greater harmony 
between themselves and the 
environment around them.
For a city of 5 million, McKinsey 
estimates between 30 to 300 lives 
could be saved each year.
By reducing construction costs, housing affordability 
could improve up to 16%.
31
PitchBook Private Market PlayBook 3Q 2018
30
PitchBook Private Market PlayBook 3Q 2018
Navigating the competitive  
middle-market lending landscape
Garrett Ryan 
Head of Capital Markets 
Twin Brook Capital Partners
A Q&A with Twin Brook Capital Partners
Garrett Ryan is the head of capital markets for Twin Brook’s middle-market direct lending loan business. 
Ryan has extensive knowledge of mid-market leveraged finance, institutional and high yield debt, and 
asset based lending. Prior to joining Angelo Gordon in 2017, he spent eight years at Fifth Third Bank as the 
head of healthcare debt capital markets. Prior to that, Ryan was with the finance company, CapitalSource, 
and LaSalle Bank. He has 18 years of experience in capital markets and earned his finance degree from 
University College Dublin and got his  MBA from the Kellogg School of Management.
What do you consider the primary 
challenge for a middle-market 
lender in this competitive market?
The primary challenge that any 
lending firm has in a “hot” credit 
environment is that there are far 
more sub-optimal transactions that 
come to market. When (i) leverage 
markets are awash with money, (ii) 
PE firms are eager to deploy capital, 
and (iii) purchase price multiples 
are at an all-time high, these weaker 
borrowers stand a much better 
chance of trading and/or getting 
financed. The outcome of this is 
that we need to say “no” more 
often to our sponsors or possibly 
deploy resources triaging deals on 
which we would not normally spend 
time. The flood of weaker deals 
can put pressure on resources and 
underwriting bandwidth.
How do you think deal structures 
have changed in the context of a 
competitive market? 
The answer somewhat depends on 
what part of the lending market you 
target, but the obvious changes are 
around pricing and leverage, which 
clearly have moved in issuers’ favor. 
In some cases, lender protections, 
such as financial covenants and 
various negative covenants, have 
The emergence 
of cov-wide 
transactions in the 
last 12-18 months is 
also alarming.
Execution, structure 
flexibility and long-
term relationships 
are the key 
decisionmaking 
factors for 
borrowers.
Unitranches have 
become a popular 
alternative to 
more traditional 
two-party debt 
structures.
also been weakened in recent 
years. The absolute acceptance of 
cov-lite transactions in the broadly 
syndicated market (greater than 
$40 million of EBITDA) as being 
the norm is a distinct difference 
between today and 2007-2008. 
The emergence of cov-wide 
transactions (greater than $25 
million of EBITDA) in the last 12-18 
months is also alarming. The lower 
middle market (less than $25 million 
of EBITDA) is somewhat immune 
from these structures, but there is 
always some level of pressure for 
sponsors to push larger precedent 
deal terms throughout the middle 
market. 
What kinds of US companies—in 
terms of sector, size and needs—
are most attractive to private debt 
lenders right now?
Given where we are in the cycle right 
now, we believe it’s the companies 
that showed strong resilience 
through the great recession or 
generally exhibit strong counter-
cyclical attributes. Having the right 
financial sponsor associated with 
these borrowers is also important, 
not just for their expertise, but 
their willingness to support the 
company with follow-on capital, if 
necessary. The size of the company 
is less clear in its importance 
because larger borrowers come 
with very loose credit protections 
(little or no financial covenants) 
versus smaller companies which 
have more traditional protections 
in place but lack the scale of their 
larger competitors. Software/tech, 
healthcare or financial services, 
are industry verticals that come to 
mind that provide lenders comfort, 
particularly in light of where we are 
from a cycle perspective.
 
Does the amount of dry powder 
in the market concern you? How 
can the industry best mitigate the 
impact of it?
I think it concerns everyone in the 
market as it creates structuring 
pressure on lenders, but we believe 
execution, structure flexibility and 
long-term relationships are the 
key decision-making factors for 
borrowers. The winners and losers 
in private credit will be determined 
by the depth of the lending team’s 
experience, the strength of a 
lender’s origination function and the 
role the lender plays in a transaction. 
If you have a well-established direct 
originations function, rather than 
relying on buying other lenders’ 
deals, we believe that bodes well 
for long-term success. If your role 
in these transactions is to act as 
administrative agent, that should 
also be helpful in the long term 
for your strategy because you are 
able to (i) deepen the relationship 
with a sponsor, (ii) build a larger 
and diverse portfolio of credits, (iii) 
have more control over the credit 
agreement, and (iv) generate more 
capital market income than your 
competitors. 
Does the competitiveness of the 
deal market dictate one preferred 
financing structure over another?
In a market that demands 
speed from buyers who need 
to minimize lender processes 
on their side, unitranches have 
become a popular alternative to 
more traditional two-party debt 
structures. However, sponsors will 
often opt for senior-subordinated 
debt structures because they have 
good relationships across both 
senior and junior debt providers 
and are comfortable coordinating 
multiple tranches in the debt 
structure. These days, sponsors 
will typically ask lenders for term 
sheets highlighting both options. 
Ultimately, it comes down to 
certainty, speed, flexibility and 
price.
What role do the banks play in 
the current debt market? Are US 
private debt lenders more likely 
to see them as competition or as 
partners?
In the middle market, commercial 
banks are struggling to maintain 
relevance in the sponsor-lending 
world. The regulations are a 
significant time drag on their ability 
to screen, underwrite and process 
a transaction. Despite the new 
33
PitchBook Private Market PlayBook 3Q 2018
32
PitchBook Private Market PlayBook 3Q 2018
About Twin Brook Capital Partners
Twin Brook Capital Partners is a finance company focused on providing cash 
flow-based financing solutions for the middle market private equity community. 
The firm is managed by highly experienced, dedicated professionals who have 
successfully worked together throughout their careers at leading middle market lending institutions. Twin Brook’s 
flexible product suite allows for tailored financing solutions for leveraged buyouts, recapitalizations, add-on 
acquisitions, growth capital and other situations. 
Twin Brook focuses on loans to private equity-owned companies with EBITDA between $3 million and $50 million, 
with an emphasis on companies with $25 million of EBITDA and below. Since inception in the fourth quarter of 
2014, Twin Brook has acted as Lead/Co-Lead Arranger on 90% of deals funded (2015-2018), acquired $6.5 billion 
of committed capital, and closed 220 transactions. 
For more information, visit twincp.com
The bright spot 
is that there are 
no indicators that 
we are near a 
recession.
administration, the relaxation of 
Dodd-Frank and the overall tone of 
less regulatory oversight, banks still 
maintain that getting transactions 
done is fraught with restrictions. 
Separately from the regulations, 
the banks are having a difficult 
time competing on hold sizes, lack 
of product offering (unitranches), 
amortization terms, etc. Moreover, 
it’s the overall lack of conviction 
that most banks have around the 
space. Finance companies are set 
up with the sponsor at the center 
of their reason to exist. For banks, 
middle-market sponsor finance 
is not what gets them excited. 
Their focus is selling treasury 
management, foreign exchange 
and other non-interest-bearing 
products. Credit is important to 
them, of course, but their risk 
tolerance is really geared toward 
larger double-B or investment-
grade-rated companies to which 
they can sell their traditional 
banking products. 
 
How do you think private debt 
lenders can best prepare for a turn 
in the credit cycle? 
Without a doubt, we believe it comes 
down to the size and experience of 
the professional staff that a lender 
employs. When the cycle hits, it’s 
all about bandwidth. If an account 
manager has 15-20 names for 
which he or she is responsible and 
just one of them goes sideways, 
that’s an increased time constraint 
on that individual. During a cycle, 
that portfolio may have two-thirds 
of those 20 names in triage for an 
individual account manager. That 
is not sustainable. However, for 
lenders that have invested heavily 
in personnel to manage through 
the downturn, those lenders should 
come out with better outcomes. 
Twin Brook has a professional staff 
of over 45 people and plans to add 
another seven by year end. Our 
preferred ratio of account managers 
to borrowers is 1:6. 
 
What is your biggest source of 
optimism in the US private debt 
market right now? 
Despite the fact that the market 
is somewhat frothy today with 
price and structure clearly in favor 
of borrowers, the bright spot for 
lenders is that we believe there are 
no indicators that we are near a 
recession. In the event that a cycle 
occurs, the US economy is likely 
more insulated from the severity of 
the shocks that occurred in 2008-
2009. Also, deal flow continues 
to be strong. The first half of 2018 
showed a significant increase in 
M&A volume over previous periods  
and the number of opportunities 
in all segments of the market 
continues to be robust. Despite 
the amount of liquidity in the 
market, we believe there are ample 
opportunities for experienced 
lenders to deploy capital.
See how the PitchBook Platform can 
help VCs invest smarter. 
demo@pitchbook.com
We do 
pre-money valuations,
cap tables,
series terms,
custom search,
growth metrics.
You invest  
in the next big thing.
35
PitchBook Private Market PlayBook 3Q 2018
34
PitchBook Private Market PlayBook 3Q 2018
Drawn from our flagship industry reports covering private equity, 
venture capital and M&A, this section of the PlayBook contains 
analysis and datasets summarizing the primary trends shaping 
each market.
US venture capital 
36-39
US private equity 
40-43
European venture capital 
44-47
European private equity 
48-51
Global M&A 
52-55
Market Trends
37
PitchBook Private Market PlayBook 3Q 2018
36
PitchBook Private Market PlayBook 3Q 2018
US venture capital
Overview
$37.1$27.0$31.3$44.4$41.7$47.4$71.9$82.2$75.6$81.9$57.54,716
4,470
5,388
6,738
7,865
9,244
10,509
10,606
8,939
8,815
3,997
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Deal value ($B)
# of deals closed
2018 deal value has surpassed six of past 10 years 
US VC deal activity
PitchBook-NVCA Venture Monitor 
*As of June 30, 2018
For an industry that has been 
characterized by capital availability 
over recent years, the first half 
of 2018 has only exacerbated 
feelings of excess with more capital 
invested in a six-month timeframe 
than any time in recent memory. 
Through 2Q, $57.5 billion has 
been invested in US VC-backed 
companies, exceeding the full-
year total for six of the past 10 
years. Beyond basic measures 
of VC investment, 1H has also 
seen 94 financings completed of 
at least $100 million, 42 unicorn 
financings—including seeing Bird 
reach unicorn status in just 12 
months—and the first close of the 
largest US VC fund ever. To say 
capital availability is high would be 
putting the true state of the US VC 
industry lightly.
US VC deals have continued to 
grow in size, and not only at the 
top end of the market. Angel & 
seed deals this year have come 
in at a median size of $825,000 
and $2.1 million, respectively, each 
a new decade-high figure for the 
time being. And while mega-deals 
continue to add an increasing bulk 
to overall figures, smaller deal size 
buckets are also gaining steam. 
For example, early-stage deals 
between $10 million and $25 million 
are on pace to surpass $10 billion 
in aggregate deal value this year, 
which is the first time we have seen 
that happen.
Nontraditional investors continue to 
move into the market as well, with 
2018 currently pacing to be the fifth 
consecutive year that more than 
1,500 deals were completed with 
participation from these investors—
PE firms alone have been involved 
in 368 VC deals already. These 
deals have combined for over $36 
billion of invested capital, roughly 
63% of the total capital invested 
in 1H. Nontraditional investors are 
both a partial cause—VC funds 
themselves have had more dry 
powder with which to work over 
the past few years than ever 
before—and a result of companies 
staying private longer. The 
likelihood is high that these firms 
continue to stay active within VC, 
given that companies continue 
to stay private longer while also 
needing capital infusions to 
continue growth. The average time 
to exit in 2018 is 6.1 years from the 
first VC financing the company has 
raised. This figure has risen nearly 
each year over the past decade, 
and, coupled with the high capital 
Unicorns set for record year 
US unicorn activity
availability from VCs, is a reason for 
the high increase in unicorns and 
other high valuations.
Unicorns themselves have had an 
active year in both dealmaking 
and exits. 42 companies have 
closed deals with a valuation of 
at least $1 billion, pacing the year 
to reach the previous high from 
2015. As the number of unicorns 
continues to grow, so do the paper 
gains and the unrealized value still 
illiquid from investors and LPs. For 
unicorn rounds raised in 2018, the 
average time between the new 
funding and the company’s first VC 
round has stayed above six years, 
nearly as long as the average time 
to exit. Though six US unicorns 
have completed an exit this year, 
and several others are waiting in 
IPO registration, the extended risk 
profiles will likely claim several 
victims. This is something that 
we have expected to happen, 
especially as unicorns have 
continued to raise further rounds 
and grow in the private market. 
Though exits overall have stayed 
low relative to the 2014 and 2015 
highs, more exits have been 
completed this year than had been 
at the same time period last year. 
The median exit size has reached 
$105 million, and the average 
has surpassed $225 million, each 
representing the highest exit 
value figure we have tracked. The 
average post-valuation of 2018 
exits sits at $581 million after 1H, 
more than double the value seen 
in full-year 2016, and more than 
$150 million higher than even 
2017’s average value. Despite a 
lower number of completed exits 
than has been seen in the past, it’s 
undeniable that capital is being 
returned to investors, even if it may 
be taking longer.
The fundraising environment, 
which has stayed hot, may indicate 
that exit timelines will continue 
to lengthen and companies will 
continue growth in the private 
market. Eight funds have been 
closed on at least $500 million, 
including two larger than $1.3 
billion. Though larger funds don’t 
necessarily need a longer lifecycle, 
the flexibility that is available 
because of the extra capital allows 
these investors to stay with private 
companies and invest further into 
the lifecycle of winners. With the 
year pacing to see 320 new US 
VC funds entering the market this 
year, we don’t believe that current 
trends will subside in the near term. 
This year will likely become the fifth 
straight year to record more than 
$30 billion in new commitments, 
adding dry powder to a market 
already awash with capital.
Angel & seed
Series A
Series B
Series C
Series D+
3.1
3.9 
5.2
6.8 
8.2 
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Companies aren't entering VC purview until later 
Median US VC age (years) of companies by series
PitchBook-NVCA Venture Monitor 
*As of June 30, 2018
$6.3$2.4$2.6$13.6$16.9$18.5$17.4$11.86
7
9
27
24
23
71
80
55
72
42
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Deal value ($B)
# of deals closed
PitchBook-NVCA Venture Monitor 
*As of June 30, 2018
39
PitchBook Private Market PlayBook 3Q 2018
38
PitchBook Private Market PlayBook 3Q 2018
$28.7B
total exit value  
closed through first  
six months of 2018
2018 PACED TO  
TOP $50 BILLION
Exits
US venture capital
$16.2$16.3$30.6$33.8$46.0$36.8$79.8$50.4$59.2$54.0$28.7484 482
697
738
869 893
1,073
1,012
879 853
419
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Deal value ($B)
# of exits closed
As hold times and valuations 
continue to extend across the 
board, the health of the exit market 
grows in importance. So far in 2018, 
we’ve seen some encouraging signs 
with a strong first half of exit value 
and steady valuation step-ups at 
exit. With $28.7 billion of exit value 
closed through the first six months, 
2018 is pacing to top $50 billion for 
the fifth straight year.
IPOs have been a bright spot in the 
exit market, with activity primed 
to closely match last year’s levels 
on both a count and value basis. 
This quarter was headlined by eight 
companies debuting at a valuation 
over $1 billion, with DocuSign 
and Pluralsight topping that list. 
At least one highly anticipated 
IPO was scrapped, with Adaptive 
Insights purchased by Workday 
for $1.6 billion—more than double 
the $627 million at which they 
were planning to price the IPO. 
This complemented some of the 
high-profile IPOs that capped off 
an exceptionally strong quarter for 
enterprise software exits, which we 
expect to, in turn, drive increased 
deal activity in the space as that 
capital is re-allocated.
While pharma & biotech IPO 
activity usually makes up a majority 
of the IPO count, the industry had 
an especially robust June with 15 
companies pricing, including a 
record of 6 on a single day. Recent 
strength in the public markets and 
investor familiarity with the biotech 
business model has pushed the IPO 
window wide open, and VC-backed 
companies are taking advantage of 
the opportunity. In turn, this could 
spur more activity by corporate 
acquirers as they might look to pull 
the trigger and acquire a company 
before they have a chance for a 
public listing to avoid paying a 
premium on their public shares. 
Corporate acquirers also have 
tailwinds from the recent passage 
of tax reform legislation, which we 
expect to lead to an uptick in M&A 
transactions in the short-term.
Alternative exits, particularly direct 
secondary transactions and special 
purpose acquisition companies 
(SPACs), are areas we expected 
to see have increased activity 
throughout 2018 and beyond. In 
June, we saw TPG announce its 
new Tech Adjacencies Fund, which 
is seeking $1.5 billion to target direct 
secondary opportunities, expanding 
its growth stage strategy into new 
areas. This trend is predicated on 
the fact that companies are raising 
a larger number of VC financings 
and delaying exits, as VC capital 
availability allows rounds at virtually 
any amount. While there have been 
some encouraging signs from the 
IPO market, the costs of operating 
as a public company still loom as 
deterrents for many large VC-
backed companies. The second 
quarter contained both Spotify’s 
unorthodox public listing as well as 
a few more SPAC debuts, providing 
further evidence that alternatives 
are likely here to stay and even 
more likely to evolve over the 
coming years as the current market 
cycle plays out.
PitchBook-NVCA Venture Monitor 
*As of June 30, 2018
Exit value strong as activity stabilizes 
US VC exit activity
Fundraising
After a slow start to fundraising in 
2018, 2Q saw an uptick in activity. 
VCs closed 72 funds with a total 
of $10.8 billion raised during the 
quarter. This brings both fund count 
and capital raised in 2018 on pace 
to surpass 2017 totals. The number 
of micro-funds (funds sized $50 
million or smaller) has declined 
slightly in 2018, but we expect this 
category to rebound in the second 
half of the year as a number of open 
funds approach their target sizes. In 
the $100 million-$500 million range, 
capital raised has increased at a 
faster pace than other segments. 
Successful closings of funds in this 
bucket have increased from 40% 
of total capital raised in 2014 to 
56% in 2018. This trend likely ties 
to elevated valuations of seed-
stage startups, driving VCs to raise 
larger funds. According to recent 
PitchBook analysis, larger funds 
have proven to provide greater 
returns. These market factors, in 
addition to outsized returns, are 
providing sufficient incentive for 
LPs to continue to support VCs as 
they raise ever larger funds.
The seed-stage ecosystem 
has gone through significant 
transformations over the past 
several years. Whereas seed 
investments were initially made 
into startups at the earliest lifecycle 
stages, the “seed” label has evolved 
to include companies that have 
achieved impressive levels of 
traction and product development. 
The potential for high returns has 
attracted numerous new investors, 
including angels, CVCs and VC 
funds. With rising deal sizes and 
valuations, some seed-stage VCs 
have been faced with a dilemma: 
Do they raise larger funds to stay 
competitive, or do they exit the 
seed market entirely? LVRHealth, 
after raising four sub-$20 million 
funds, decided to raise a fifth fund 
at $100 million. Arena Ventures 
has chosen the latter option, 
pausing seed investing activities 
“until the seed market corrects.” 
We expect inflated valuations and 
larger seed funds to continue as 
greater amounts of capital continue 
to be directed into early-stage 
companies.
Another significant trend is the 
decrease in mega-funds ($1 billion+) 
raised. Total mega-fund funding 
has declined from $11.4 billion in 
2014 to $6.8 billion in 2017. Thus 
far, 2018 appears to be in line with 
previous years; however, seven 
open mega-funds could reverse 
this trend. Serpent Venture Capital 
is raising the largest fund, with a 
minimum fund size of $7 billion. If 
all seven vehicles close this year, 
it would bring total mega-fund 
capital closed in 2018 to a new 
high of $23.28 billion. The rise in 
mega-funds is providing a much-
needed destination for the plentiful 
LP capital available in the market. 
Elevated aggregate distributions 
to LPs and positive aggregate 
net cash flows are driving larger 
investments. The capacity to write 
large checks will exacerbate the 
trend of unicorns retaining private 
status for longer. Lastly, we believe 
many of these funds are taking 
an approach similar to SoftBank’s 
Vision Fund, adopting a meta-
view and attempting to capitalize 
on mega-trends affecting entire 
industries.
$31.7$12.1$19.8$25.7$24.4$21.1$36.2$36.8$41.1$34.6$20.2193
124
156
155
208
227
297 295
322
283
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Capital raised ($B)
# of funds closed
157
PitchBook-NVCA Venture Monitor 
*As of June 30, 2018
Fundraising shows no sign of slowing 
US VC fundraising activity
41
PitchBook Private Market PlayBook 3Q 2018
40
PitchBook Private Market PlayBook 3Q 2018
Overview
US private equity
$327.1$141.7$292.4$339.4$367.6$439.2$518.8$548.0$599.3$593.9$263.92,247
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Deal value ($B)
Estimated deal value ($B)
# of deals closed
# of estimated deals closed
2,781
1,920
2,806
3,167
3,550 3,463
4,266
4,422
4,386
4,421
Deal flow on pace for another strong year 
US PE deal activity
Source: PitchBook 
*As of June 30, 2018
The first half of 2018 proved to be a 
hotbed for PE activity; 2,247 deals 
were completed totaling $263.9 
billion in value—representing a 
2% increase in volume and a 6% 
decrease in value compared to the 
first half of 2017. Activity continues 
to be driven by easy access to 
credit and sustained strength in 
fundraising that has resulted in a 
buildup of dry powder. Notable 
deals that were announced or 
closed this quarter include Silver 
Lake’s $3.5 billion take-private of 
Blackhawk Network Holdings and 
KKR’s $8.3 billion secondary buyout 
(SBO) of BMC Software from Bain 
and Golden Gate Capital, both 
of which represent PE’s growing 
interest in IT. We expect deal flow 
to be continually strong in the 
second half of 2018, due primarily 
to the aforementioned dry powder 
and easy access to debt financing. 
Typically viewed as a hybrid 
approach between buyouts and 
VC, growth equity is an often-
overlooked portion of the PE 
market. Through the first half of the 
year, growth equity transactions 
accounted for 23% of all PE 
deals, on pace with its 10-year 
trailing average of 22%. Non-
tech companies in the expansion 
phase are often those that need 
growth capital most. For example, 
emergent consumer brands MOD 
Pizza and Chobani raised growth 
equity rounds in 1H 2018.
As the rate of PE deals has 
increased in recent years, the 
deal sizes have also tended to 
be much larger. The median deal 
size increased to $197.1 million 
in 1H 2018, representing a 31% 
increase over 2017’s full-year 
figure. However, we expect the 
most recent figure to be revised 
downward since small deal values 
generally take longer to collect; 
nonetheless, the trend is clear. 
Higher purchase-price multiples are 
one factor driving deal sizes above 
historic norms. Another catalyst is 
the sizable step-up in fund sizes, 
which have required managers 
to pursue larger deals to deploy 
capital efficiently. As a result, deals 
under $25 million accounted for just 
40% of deal flow in the first half of 
2018—the lowest figure since 2007.
As deal sizes have been shifting, so 
has the composition of PE target 
companies. The proportion of PE 
targets that were publicly traded 
at the time of acquisition has been 
cut in half, from a recent high of 
2.9% in 2011 to just 1.4% through 
the first half of 2018. Concurrently, 
PE firms are now more likely to 
source deals from companies with 
VC backing (3.7% of deals in 1H 
2018), coinciding with PE’s growing 
interest in software businesses.
$38.8$21.7$33.4$34.5$34.6$42.9$61.4$47.4$49.6$68.4$25.0549
469
612
666 693
832
963 988 981
991
457
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Deal value ($B)
# of deals closed
$150.0
$197.1
$515.1
$488.1
$0
$100
$200
$300
$400
$500
$600
$700
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Median ($M)
Average ($M)
Growth equity has risen substantially in the last 
decade 
US PE growth equity activity
Source: PitchBook 
*As of June 30, 2018
Buyout sizes continue to balloon 
Median and average buyout size by year
Source: PitchBook 
*As of June 30, 2018
$263.9B
total over 2,247 deals  
in 2Q 2018