Why Alts, Why Now

Without question, the past year has been a challenging market environment for many investors. Amidst the turmoil, there have been positive tailwinds for taking positions in more illiquid alternative assets, such as Venture, Growth Equity and non-traditional debt.
Read

Without question, the past year has been a challenging market environment for many investors. Amidst the turmoil, there have been positive tailwinds for taking positions in more illiquid alternative assets, such as Venture, Growth Equity and non-traditional debt.

Over the past 30 years, alternative investments have significantly grown in prominence and returns. Market trends have been a major contributing factor to this growth. Since 1990, the number of publicly traded companies have been cut in half; and the number of private companies with over 500 employees have grown 50%. With the support of Venture and Growth Equity capital, the financial benefits of being a private company have become increasingly more attractive than seeking public funding.

Alternatives are further enhanced by global investment in technology allowing innovation at a rapid pace. This opens the door for the formation of new businesses and disruptive tech which fortifies the marketplace, expanding revenue potential. Profitable and well capitalized companies (or companies defining markets) are weathering the storm. Add the strength of current secular growth drivers, and the Venture and Growth Equity sectors will continue to outperform other asset classes.

Era of Transformation

Public Markets

Solely investing in the traditional market is becoming outdated. Only relying on public markets is shown to be more volatile and result in smaller returns:

Source: Bloomberg, Morgan Stanley Wealth Management GIC, Private Equity Index Data: The Cambridge Associates

As we all know, this past year has been a challenging one for global financial markets. It is rare for both global equity and bond markets decline in unison, as well as many other asset classes globally:

Venture Capital

While macroeconomic conditions are in a flurry, certain alternative asset categories have performed reasonably well this year, including Seed, Early to Mid stage Venture Capital, and Growth Equity.

Starting with Seed investments, deal counts and values are showing resilience and strength during macroeconomic volatility in 2022:

Source: PitchBook - NVCA Venture Monitor *As of September 30, 2022

Early stage is continuing to outperform pre-pandemic figures. Although the robust VC environment of 2021 has slowed down, Early Stage investments in 2022 are performing well, showing that the uptick in deal counts and values are indicators of strong long-term growth.

Source: PitchBook - NVCA Venture Monitor *As of Sentiment 30, 2022

Beyond deal counts and values, pre-money valuations in early to mid-stage Venture Capital are proving to be extremely resilient in poor market conditions. This strong trend is supported by the asset light and non-capital intensive characteristics of early to mid-stage companies, allowing them to weather storms much more efficiently.

Pre-Money Valuation Rounds by Stage. Source: PitchBook

Growth Equity

Over the last ten years, Growth Equity has fueled technological innovation. Companies like SpaceX, Uber, Shein, and AirBnB, were all propelled by Growth Equity to scale at unprecedented pace. With Cloud Computing, Artificial Intelligence, Virtual Reality, Autonomy, and Web3 at the forefront of innovation, we are at another inflection point in technological advancement. At the same time, private markets are primed to support the next generation of leaders in the market. This is because the greater availability of private capital gives Growth Equity the wheels to drive unique business formations and combinations, scaling companies at an accelerated rate. As PE deals and exits slow down, Growth Equity’s proven success will be a pioneer in this new generation of technology.

Secondaries Market

The Secondaries market in Early stage and Growth Equity is equally ripe. Because macroeconomic volatility has led to a decline in late-stage valuations, buyers are able to purchase secondaries at a discount. Therefore, the volume of transactions is growing rapidly due to this attractive discounted access and blind pool risk mitigants (buying into existing investments to mitigate uncertainty and extensive due diligence).

Source: Jefferies, July 2022

An era of transformation is upon us and it is clear that we are in the early innings of a golden age for Venture and Growth Equity. Market forces continue to drive down returns on traditional investments, causing investors to look for areas that mitigate volatility. Alternative assets check that box. They provide uncorrelated returns that put money to work; however, limited access and understanding has hindered the growth of this space.

Join Everest

We at Everest aim to fix the problem. We’ve created the marketplace for Alternatives, complete with education and access for non-institutional investors.

This is empowered by our commitment to fostering, developing, and growing companies and fund managers in the alternative space, accelerating future growth opportunities for entrepreneurs and investors. Our Everest Basecamp Marketplace is a new breed of seamless investments in alternatives, combining technology, early stage and growth companies, and unique investment opportunities to non-institutional investors.

Whether you’re an entrepreneur building a category-defining company, or an investor searching for the builders of tomorrow, we would love to hear from you. Welcome to Everest.

View Recent Press:
NEWSWIRE

Isometric Technologies Raises $15 Million to Improve Freight Transportation Performance in the Supply Chain

WV GOvernor's office

Pure Watercraft Reveals Plan to Assemble Zero-Emission, All-Electric Watercraft in West Virginia

DIGNIFIHEALTH

DignifiHealth Wins HFMA Start-Up Cup

View More Press