Capital Provider Sentiment Survey Results
Here's to the next 12 months!
I’d like to thank the 61 folks who participated in our recent capital provider market sentiment survey. I feel your input has provided a meaningful enough sampling from which to convey some valuable insights to our ecosystem.
I’ve outlined some of the takeaways below. You can find the whole shebang with a bevy of (not as tiny) charts and quotes along with some comparisons to this time last year in this deck.
Feel free to share the link, which is open for anyone to view.
Survey Participants Breakdown
In this year’s survey, 61 capital providers shared their market perspectives and sentiment.
We broke down respondents by ‘type’ and ‘investments stage’ which is highlighted below:
A few noteworthy trends:
All respondents were B2B focused
The respondent breakdown was 67% equity / 33% debt
Equity providers skew 60% Seed/Series A
Debt respondent’s investment stage was 95% Series A and beyond
78% of equity investors had <$250M in AUM
60% of lenders had >$250 AUM
Top Takeaways
Sentiment
Recession concerns have abated dramatically from this time last year and both equity and debt investors have shifted to a more positive skew in terms of their ability to deploy capital in the way they’re looking to.
That said, there’s still a lot of neutrality as we all continue to wait for better days and investors still expect a lot of pain for a lot companies that have been overfunded and overvalued over the past few years.
Activity
Non-bank lenders have had the highest uptick in activity year-to-date and have the highest expectations for activity over the next 12 months (by a thin margin over Seed/A and A/B/Growth equity).
A/B/Growth equity and banks have shown the most moderation in activity with ~50% reporting being less active YoY.
~80% of respondents expect <25% of portfolio companies will require bridge financing in the next 12 months,and they expect existing equity investors to be the bridge capital.
Strategy
15 months into the “reset”, it seems any strategy shifts have already been made.
Investors conveyed the same themes they did 12 months ago:
1) Raising of the bar for investability
2) More thoughtful deployment with more discipline
3) Focus on fundamentals and health,
4) Getting in at good valuations
Growth is still important but has been prioritized.
Investors are looking for more traction, more scale and more liquidity along with less burn.
Investor Sentiment- Qualitative
Our question to all participants:
Please provide a short statement about your thoughts on the current market.
Sharing a few responses broken down by investment stage.
Seed/A Equity Investors
I do think that there is some pent-up capital on the sidelines that will need to be deployed for funds to meet their "investment period" and portfolio construction goals, and expect there to be some more deals done after the summer
Will likely see more companies go out of business as they still cannot raise the money they need to survive, grow and the buyers' pursestrings continue to tighten into the recession
Series A/B Growth Equity Investors
The # of Seed Stage companies is at a historic high, which should balance out the capital supply dynamics that drove up valuations in 2021 and create a boon of opportunities for Series A investors in the next 6-18 months. IMO Markets will revert to some shade of normal within the next 12 months.
EBITDA positive companies create their own destiny.
Non-bank Lenders
Recession on the horizon albeit a light one. Jobs market slow down and inflation being managed. M&A will pick up greatly, Bank lending tightening, Series A/B venture tough to get, Seed will remain solid.
As a debt provider, I've also seen a lot of companies that are overleveraged and looking to refinance to delay amortization, finding a cold reception among lenders.
Bank Lenders
Capital intensive businesses are a non starter. CEO's are finding out they should have conducted layoffs sooner and are realizing they can achieve the same results with a lean team.
Thanks again to all contributors and readers! If you enjoy what you read, I’d appreciate you sharing with your network!
If you’d like to discuss, collaborate or just catch up, reach out bparks@bigfootcap.com.
About Bigfoot Capital
Bigfoot Capital offers growth-oriented loans for B2B software companies with $2M- $20M in revenue. We pride ourselves on partnering with companies and their stakeholders to provide a capital partnership that comes with stability and support.
If you operate or support a B2B software business and want to learn more about alternative capital options that preserve equity, get in touch with our team today.