Private equity activity peaked in 2021, surpassing $1tn in total deal value and an average deal size over $1bn. Many high-profile companies subsequently lost large portions of their value, with Klarna falling from $45.6bn to $6.7bn and Stripe dropping from $95bn to $50bn. Increasing numbers of tech firms have since folded, including Builder.ai, Frank and Stenn. Investors continue to fund risky ventures, notably in AI, exemplified by a $2bn seed round for Thinking Machine Labs without a proven product. Generalist investors prioritise personalities and promises over product-market fit while $1.2tn of buyout dry powder intensifies dealmaking pressure.
Private equity deals hit an all-time high in 2021, peaking at a total value of more than $1tn , with an average deal size exceeding $1bn for the first time. Founders were media darlings, valuations soared, and investors raced to get a piece of the action. By 2023, many of those same companies - such as Klarna and Stripe - had lost billions in value. Klarna's valuation plummeted by 85% from its 2021 peak of $45.6bn to $6.7bn in 2022.
Yet investors are still ploughing fortunes into risky ventures - particularly in AI. Case in point: the Thinking Machine Labs raised an eye-watering $2bn seed round without a single proven product. In a race to invest in the latest, most eye-catching tech, generalist investors with money to spend are focusing on personalities and promises, failing to scrutinise product value, market fit, and opportunity.
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