The PitchBook Economy

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Innovation in financial markets has been one of the notable trends of the past year – a generally amusing and ultimately dangerous phenomenon. We have seen an explosion of activity in the options market, unconventional financial structures such as SPACs (Special Purpose Acquisition Companies) have become traditional weapons of acquisition and the crypto currency/coin market has blossomed partly behind influential technology platforms such as FTX.

Two more points are worth noting. One is that as always, innovation and speculation go hand in hand – the price of Tesla and bitcoin follows the same parabolic upward path (they only go up). And the animal spirits are all connected by the umbilical cord. Second, promisingly for the broader economy, waves of innovation often begin in financial markets and spread to other sectors.

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democratization of risk

Much of this financial innovation has been cast as the ‘democratisation of finance’, giving people access to low-cost trading platforms and a wide variety of assets (and leverage). When all is said and done it will be remembered as ‘the democratization of risk’ – the distribution of risk from large institutions and hedge funds to retail investors. The selling of the last few days speaks volumes about this.

While most of the financial media fixate on the ‘democratisation of finance’ and the meme stock that defines it, another, almost opposite trend is occurring at the other end of the markets – the deepening of private capital investment.

It is defined by a search for investments by high-end asset managers, large family offices, well-connected financial investors in non-cited (eg venture capital, pre-IPO stakes) companies that are at the heart of technology-driven sectors. To some extent, at least in its sociology and anthropology, the contrast between the pursuit of private investment and the rush of retail trade reflects a growing social divide.

Businesshala to Pitchbook

This can also be exemplified by the difference in the tools of trade. The growth of equity markets to a large extent over the past twenty years, and all the wealth built around them, is exemplified by Businesshala Terminals.

The tools of choice in the world of private capital are ‘Rolodex’ in the modern sense, which private capital operators rely largely on trusted networks, and PitchBook – an information service that provides otherwise hard to obtain details on private companies. (eg funding round, identity of shareholders, financial profile).

The ‘pitchbook’ economy has emerged from a number of factors. One is an explosion in entrepreneurship that arguably began in Israel and the US and spread to Europe. For example, the enterprise and startup culture in France is very healthy, fueled by a growing number of business schools, incubator platforms such as Station F, supporting state bodies such as the BPI.


The second change is the role that technology has played in allowing companies to grow faster (and must say, fail faster too). I was struck by a line in Azeem Azar’s excellent ‘The Exponential Age’, where he remarked that TikTok was of little use when he started writing the book, and when he finished about twenty months later So it was the most downloaded app.

In the pitchbook economy, capital moves very rapidly to companies that are deemed capable of winning in the sense of gaining a foothold in the market. In line with this, competition among venture capital firms, banks and new investors (Tiger Global is being talked about) is heating up. Against this background, investors speak of the growing number of Unicorns (startups worth $1 billion) and Decacorns (startups worth $10 billion, of which 30 are globally – roughly the same as the total for the past three years).

The rise of this relatively early stage of what I call the pitchbook economy has many implications for the private investment sector. One is the change in the way people work and in relation to employment. It seems to me that any young person is willing to try the Entrepreneurship/Development company route rather than being swayed by the security of large corporations. There is a cachet now associated with entrepreneurship, and at the moment there is a feeling that payoff may be significant. Labor and pension structures have not yet been adjusted.


The second is that the digitization and ‘greening’ of our economy will accelerate – it is hard not to think of private development companies in Europe that are somewhat involved in either trend.

We will also see the potential for faster consolidation across sectors. The Neobank market in Europe is becoming overcrowded in my view and some operators simply won’t make any money (N26 has sensibly pulled out of the US market) and BOLT is now becoming a major player in the mobility sector.

As a final comment, one factor that unites private capital and public markets is financial liquidity. The bloated value of stock market valuations corresponds to highly sought-after valuations of private companies. In that respect, the ‘pitchbook’ economy will prove to be only when we go through a monetary crunch cycle, and we get a sense of who is left.


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