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| The Daily Pitch |
| PE, VC and M&A |
| Your edge on global private capital markets |
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| What high-valuation seed rounds mean for eventual outcomes |
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By Susan Hu, Quantitative Research Analyst
Paying top dollar to invest in a hot startup at a high valuation has historically been worth it, but the advantages are fading.
The past few years of muted exit activity and scarce liquidity have compressed deal-level return multiples, particularly for deals occurring near the market peak, according to our latest analyst note.
Higher entry prices still buy access, but increasingly at the cost of ownership and time. As startups raise additional rounds, dilution builds and distributions are delayed, limiting upside potential for early investors—especially smaller managers without the capital to defend their stakes.
Historically, these so-called consensus deals have paid off. Startups in these top-tier rounds fail less often and are twice as likely to produce 10x-plus outcomes. Concentrated portfolios have had a higher probability of catching the outlier wins that drive venture returns, and fewer sub-1x outcomes. |
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But with fewer signals of quality at the seed stage, stronger early traction often draws investors toward the same startups. We've seen this with almost every hype cycle—AI being the latest example—as competition for access pushes select rounds to record valuations.
Today, top-decile seed rounds are priced at around $40 million pre-money, roughly three times the market median and further raising the hurdle for sustaining historical returns. And as exit timelines stretch, longer holding periods are eroding the payoff that has made consensus rounds worth the premium.
For portfolios concentrated in these high-valuation seed rounds, the shift is evident: Simulated outcomes show 75th percentile return multiples falling from 7.7x to 3.8x for the more recent entry-year cohort.
With consensus rounds commanding record pricing, the question is whether investors are still paying for quality or simply paying into the AI-driven hype. |
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| A message from Apogem Capital, a New York Life Investments company |
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| Time-Tested Private Credit: Lessons from 25 Years of Direct Lending |
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Apogem Capital is among the longest-tenured direct lenders in the United States, with experience spanning the early 2000s, the global financial crisis, and today’s evolving private credit landscape. Across 4,000 transactions and 25 years of investing, Apogem has developed a disciplined approach rooted in rigorous underwriting, deep sector specialization, and proactive risk management.
In this installment of Apogem’s Private Markets Insights series, investment leaders share practical lessons for institutional investors navigating today’s market conditions, from maintaining portfolio resilience through changing cycles to how sector-focused expertise helps identify opportunities and mitigate risks in the middle and lower middle market.
Explore the full insights.
For institutional use only. Not intended for the public. |
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• Jeff Bezos is reportedly a co-founder again. The New York Times said his latest venture, a physical AI startup called Project Prometheus, has raised $6.2 billion, which would make it one of the most well-funded early-stage AI startups. Read more
• Startups focusing on animals and robots are bucking an overall slowdown in VC funding for the agtech sector, according to our latest Emerging Tech Research. See what else our analysts discovered
• Clayton, Dubilier & Rice has agreed to a $10.3 billion take-private of packaging company Sealed Air, underscoring PE's renewed appetite for large take-privates as credit conditions improve. Find out more
• The launch of the Morgan Stanley Private Markets ELTIF marks the latest move by a major asset manager to tap retail demand for private market exposure under new EU rules. Read more |
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| East Rock seeds small-cap secondaries shop Mirror |
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| (Jenna O'Malley/PitchBook News) |
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By Rod James, Private Equity Senior Editor
East Rock Capital, which manages over $4 billion in assets on behalf of wealthy families, has thrown its weight behind an emerging investment firm focused on small-cap secondary deals, a part of the market where there are lots of sellers but few buyers.
The New York-based multifamily office has made a seed investment in Mirror Partners, which acquires fund positions with a total value of less than $10 million, according to a statement from Connecticut-based Mirror.
"The small secondary market remains one of the most overlooked and fragmented areas of private equity," said Thomas Melly, founder and managing partner of Mirror, adding that the firm aims to take advantage of the "structural inefficiency" caused by so many secondary buyers outgrowing this part of the market.
Mirror has already agreed to 24 deals out of a pipeline of more than 950 opportunities, giving an indication as to the supply-demand imbalance in the trade of smaller fund positions.
Mirror will primarily look to acquire stakes in North American buyout funds, with a smaller allocation to European buyout, private credit and VC vehicles.
The secondary market has grown rapidly over the past five years, in line with the increasing liquidity constraints faced by private market investors. More LPs are selling fund stakes to free up cash for reinvestment elsewhere in their portfolios, including an influx of first-time sellers.
This desire for liquidity is becoming more pressing due to a still underwhelming market for company exits. There were 5,306 private market exits through early November this year, compared to 6,896 in all of 2024, according to PitchBook data.
A record $162 billion of secondary deals closed in 2024, and numbers for the first half of 2025 suggest another record year is likely. There were $103 billion of secondary deals in the first half of 2025—$56 billion of which were LP-led secondary deals, where institutional investors sell individual or multiple fund stakes.
The GP-led market, which entails fund managers running processes through which all investors in a fund or asset can tap liquidity at once, is also seeing record activity. |
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Smart reads that caught our eye.
• Job scams online and over text message have cost Americans $300 million this year. FTC data shows reports of such scams have spiked over the last five years, and that scammers have taken advantage of a weak labor market in 2025. [ | | | | | | | |
