The Pepperdine Private Capital Martkets Project. 2013 Capital Markets Report

The Pepperdine private cost of capital survey (PCOC) is the first comprehensive and simultaneous investigation of the major private capital market segments. The survey deployed in September 2012, specifically examined the behavior of 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. The Pepperdine PCOC survey investigated, for each private capital market segment, the important benchmarks that must be met in order to qualify for capital, how much capital is typically accessible, what the required returns are for extending capital in today’s economic environment, and outlooks on demand for various capital types, interest rates, and the economy in general.

Findings indicate that the cost of capital for privately‐held businesses varies significantly by capital type, size, and risk assumed. This relationship is depicted in the Pepperdine Private Capital Market Line, which appears below.

VENTURE CAPITAL SURVEY INFORMATION
Of the 71 participants who responded to the venture capital survey, approximately 28% of respondents expect a shrinking of the venture capital industry. The majority (55%) of respondents plan to make five investments or more over the next 12 months.

Other key findings include:

  • The types of businesses respondents plan to invest in the next 12 months are very diverse with over 33% targeting information technology and another 23% planning to invest in health care or biotech. Approximately 44% of  respondents plan to make new investments outside of the U.S.
  • Respondents’ exit strategies include selling to a public company (40%) followed by selling to a private company (25%).
  • Respondents believe access to capital is the most important issue facing privately‐held businesses today.Domestic economic uncertainty is indicated as the most important emerging issue.

2013PPCMPcapital-markets-report

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