A Pepperdine first: PE multiples up, VC down

BVWireIssue #268-2
January 15, 2025

cost of capital
cost of capital, pepperdine private capital markets study, risk analysis, industry analysis

“There’s something this year that I’ve never seen before” about private equity and venture capital multiples, remarked Dr. Craig Everett, project director of the Pepperdine Private Capital Markets Project. Deal multiples for PE investments have increased, while deal multiples for VC investments have decreased, according to the results of the project’s 2024 survey.

This divergence in trends was particularly striking, as he had never observed this phenomenon before. He speculated that this shift could reflect a “flight to quality,” where investors are showing a preference for the relative stability and lower risk of mature, profitable companies typically targeted by private equity, compared to the inherently riskier and more volatile investments in newer ventures pursued by venture capitalists.​

The survey results are in the 144-page “2024 Private Capital Markets Report,” which is available if you click here. The report is developed from an annual survey of expected rates of return with respect to private companies. Respondents include senior lenders, asset-based lenders, mezzanine funds, private equity groups, venture capital firms, angel investors, privately held businesses, investment bankers, business brokers, limited partners, and business appraisers. Many valuation experts use the report as a sanity check on their cost of capital estimates.

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