Daily Update: Venture Capital’s Cruel Summer
Today is?Wednesday, August 17, 2022, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global. Subscribe?to be notified of each new?Daily?Update.?
With due respect to F. Scott Fitzgerald, it seems there are second acts in American lives. Adam Neumann, who went from famous to infamous with the high-profile rise and higher-profile implosion of coworking space provider WeWork, is back. On Aug. 15, top-tier venture capital firm Andreessen Horowitz announced its intention to back Flow, Neumann’s new residential real estate company, with $350 million. The decision is notable because the loose funding environment that powered WeWork to a $47 billion valuation is now a thing of the past.
According to S&P Global Market Intelligence, the value of global venture capital-backed funding rounds?fell 65.6% year over year ?in July to $21.78 billion, while the number of rounds decreased 32.1%. The amount raised by venture capital firms is the lowest since April 2020, when the initial pandemic lockdowns created an environment of uncertainty. This drop in investment continues a?steady decline ?that began in April 2022.
The technology, media and telecommunications sector continues to command the lion’s share of venture capital funding with 39.8% of the total. Real estate claimed a more modest 2.7% of funding. Even positive news for Klarna — the Swedish online financial services provider that saw the largest funding round in July, attracting $800 million at a $6.7 billion valuation — hides?a grimmer reality . During its funding round in June 2021, Klarna had a post-money valuation of $45.6 billion.?
In more grim news for venture capital firms and the companies they fund, exits via initial public offerings?fell off precipitously ?in the first half of 2022, and exits via secondaries, in which individual shareholders sell to a third party, dropped 45% year over year. Since a venture fund’s limited partners, or investors, get their money from successful exits, the?cooling market for technology startups ?promises delayed gratification at best.?
"Sellers want the price from six months ago when everything was great. Buyers want the price from today. It just takes time to sort that out," Pete Witte, global private equity lead analyst for EY, said in a recent S&P Global Market Intelligence article.
With central banks in the U.S. and Europe responding to inflation with higher interest rates and an end to quantitative easing, the time of cheap, plentiful funding may be?over for now . Analysis from S&P Global Ratings shows that a?global slowdown ?has already begun. The question for Neumann and his backers is whether founders and venture capitalists who thrived in better times are prepared for the current market climate.
Today is?Wednesday, August 17, 2022, and here is today’s essential intelligence.
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Written by Nathan Hunt.
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Economy
The Ascent Of APAC In The Global Economy
The economic weight of the APAC region is forecast to rise by 2040, underpinned by the economic expansion of mainland China, India, and the 10 Southeast Asian countries comprising the Association of Southeast Asian Nations. The total GDP of the APAC region has risen from USD9 trillion in 2000 to USD35 trillion by 2021, with APAC now accounting for around 37% of world GDP. By 2040, it will rise to around 42% of world GDP. Much of that contribution has come from mainland China, whose weight in world GDP rose from 3.6% in 2000 to 18.6% by 2021, measured in nominal USD terms.
—Read the article from?S&P Global Market Intelligence
Capital Markets
Croatia's Banks Face Short-Term Pain, Long-Term Gain With Euro Adoption
Croatian banks face losing roughly 20% of their annual profit once the nation's looming switch to the euro hammers lucrative currency operations. The long-term benefits from the change may make that a price worth paying. Ditching the kuna will cost the industry some 1.4 billion kuna per year, mainly from lost foreign-exchange profits, reduced fees, and lower interest income, according to the Croatian National Bank.
—Read the article from?S&P Global Market Intelligence
Global Trade
U.S. Coal Exports Rise In Q2'22 Amid Global Energy Crisis
领英推荐
U.S. coal exports rose in the second quarter as demand and prices remained elevated amid a global energy crisis. Shipment volumes increased 14.8% quarter over quarter to 21.6 million tonnes and climbed 4.6% year over year, according to S&P Global Market Intelligence data. The global coal market has become tight as several countries shunned supplies from Russia following its Feb. 24 invasion of Ukraine. High natural gas prices and the lack of new project investments have also pushed up coal prices.
—Read the article from?S&P Global Market Intelligence
ESG
More Real Estate Firms Are Embracing Climate Targets
The real estate industry has a critical role to play within the transition toward a net zero world. According to the Global Alliance for Buildings and Construction’s 2021 Global Status Report for Buildings and Construction, the built environment—real estate developers and managers, operators, and construction companies—was responsible for almost 40% of global CO2 emissions in 2020, with almost three-quarters of those emissions coming directly from building operations.
—Read the article from?S&P Global Sustainable1
Energy & Commodities
Listen: U.S. Power Markets Are Hot, Hot, Hot, But Summer Peak Season Is Far From Over
A heat wave hit the central U.S. in mid-July, leading to multiple alerts and records across two grid footprints, and a late July heat wave brought triple-digit temperatures to the Pacific Northwest, shrinking power exports to neighboring regions in the West. But the summer demand season is far from over, as forecasts for summer-like temperatures now extend into September, which means there's likely much more on the way before things cool off. U.S. power news editor Kassia Micek, power pricing analyst Karen Rivera, senior power and gas editor Mark Watson, and North American power analytics manager Morris Greenberg discuss what's happened this season to date, and how things look down the curve.
—Listen and subscribe to Commodities Focus, a podcast from?S&P Global Commodity Insights
Technology & Media
Falling Demand And Semiconductor Shortages Hit Struggling Tech And Autos Firms
The supply-related constraints which have troubled global electronics producers since early last year were compounded as demand conditions in key industries deteriorated in July. New orders received by electronics producers fell at the fastest rate since mid-2020 amid reports of a blanket drop-off in demand from both large developed markets such as Europe and the U.S., to key manufacturing hubs in Asia such as China and Taiwan. Falling sales in key industries to electronics firms such as tech and autos add further woe to an already-beleaguered sector.
—Read the article from?S&P Global Market Intelligence