Summary

  • While H1 2022 leadership hiring kept pace with a historic 2021, last quarter (Q2) saw a significant dip (-23% QoQ)
  • Late-stage VC-backed companies are taking the brunt of the impact from recent market turmoil compared to early-stage VC.  Leadership hiring was down 53% QoQ for late-stage VC and up 10% QoQ for early-stage VC in Q2 2022
  • PE leadership hiring in Q2 was down by 37% QoQ, and still up 2% YoY. In fact, the PE searches for the first half of 2022 are up 29% compared to the first half of 2021 — mainly due to Q1 2021 performance

Download Thrive’s Mid-Year Executive Search Q2 2022 Report

Across the executive talent community, caution signs are being noticed and there is a strong sense of refocus given the current macroeconomic landscape. The last 2 ½ years have been volatile, with everyone from economists to consumers left uncertain about what’s around the corner and how to plan accordingly. Especially coming out of a record-breaking year in 2021, everyone is left wondering what’s ahead and how big the impact has been on H1 ‘22. 

In our latest Mid-year Exec Search Report that focuses on Q2 ‘22, we analyzed more than 25,000 executive search records and set out to provide executive recruiters and talent leaders with data-backed insights to help them both gain a better understanding of the industry, market, and environment they operate in and make more informed decisions.

Key Finding #1

Private Market Deal Flow Impacts Leadership Hiring

By looking at US PE and VC deal flow over the first half of 2022, it wouldn’t be obvious that that has been talk about an economic downturn. Signals indicate that PE and VC deal values are tracking close to last year’s exceptional pace.

However, a closer look shows that there was a significant dip in Q2 PE and VC deal flow. It appears that the first quarter, which buoyed H1 2022 performance, benefited from the common delay between when deals are negotiated and discussed and when they’re completed. This indicates that much of Q1 deal flow is the result of activities from late 2021, prior to the macro trends mentioned in the previous section.

We see a similar trend in Thrive’s leadership hiring data. While new executive searches in H1 2022 were up 8% YoY, they were down 23% QoQ in Q2 2022.

Q2 performance was still well above pre-COVID historical averages, despite a significant quarter-over-quarter di,. As for what’s ahead for H2 2022, industry insiders are divided. Respondents of our mid-year pulse survey were asked to predict how leadership recruiting will trend in the second half of the year, and 43% said it would decrease, 31% said it would stay the same, and 26% said it would increase.

One thing that seems to be clear is that there are nuances related to industry-focus, company stage, ownership type, growth rate, and efficiency. For example, it appears that later-stage companies ready to exit–particularly via IPO–and those with high growth and equally high burn rates have felt the valuation crunch more.

Key Finding #2

Late-Stage VC has been impacted more than others

Generally, VC-backed companies burn through a lot of capital to chase aggressive growth targets compared to PE-backed companies that are typically more focused on EBIDTA. As a result, most VC-backed companies depend on rounds of funding to sustain growth and exits to liquidate, both of which have been affected by the market downturn.

But not all VC has been affected equally. Many late-stage companies are either on a path to IPO or rely heavily on public market valuations to help price their financing rounds. These companies have been impacted more than early-stage VC as IPO activity has been in a slump so far this year. Pitchbook reported that during the first half of 2022 only 22 VC- backed businesses exited relative to 183 in 2021.

Many late-stage VC-backed companies raised big rounds on bloated valuations in 2021. While those companies may have enough runway the first part of this year, we might see more flat and down rounds as startups return to private markets if a true public liquidity gap continues into the rest of 2022.

Deal activity seems pretty consistent between early and late-stage VC— H1 2022 deal count was down 8% YoY for early-stage VC and -4% YoY for late-stage VC. The noticeable difference can be seen in valuations. The median valuation for early-stage VC-backed companies is up 22% YoY through the first half of 2022, while late-stage is only up 5%.

IPO activity has been in a slump so far this year. Pitchbook reported that during the first half of 2022 only 22 VC-backed businesses exited relative to 183 in 2021.

Key Finding #3

The Impact on PE is Somewhere Between Early and Late-Stage VC

Private equity has also been significantly impacted by the rising cost of debt and public market performance–particularly the steep cuts to valuation multiples. These dynamics make pricing difficult, which hurts deal flow. It’s worth noting that take-privates present an opportunity for deals given that public marks have fallen much more quickly. With so many public companies off 50% or more from their 52-week highs, numerous sponsors are spotting attractive deployment prospects.

Q2 2022 PE deal value was down 21% compared to the previous quarter. That said, PE deal value for the first half of 2022 is still tracking slightly ahead (+7%) of H1 2021 according to pitchbook estimates. Yet, many experts expect a tough second half of the year.

Q2 2022 PE deal value was down 21% compared to the previous quarter.

That said, PE deal value for the first half of 2022 is still tracking slightly ahead (+7%) of H1 2021 according to pitchbook estimates.

Yet, many experts expect a tough second half of the year.

Looking at leadership hiring volume, PE-backed companies are falling somewhere between early- and late-stage VC. It’s also tracking closely with PE deal value.

PE leadership hiring in Q2 was down 37% QoQ, and still up 2% YoY. In fact, the PE searches for the first half of 2022 are up 29% compared to the first half of 2021–mainly due to Q1 2022 performance.

In our latest report, the Mid-Year Exec Search Report Q2 2022, we analyzed these market trends and provide up-to-date numbers on:

  • Search volume by asset class, in addition to search velocity metrics
  • Up-to-date executive compensation benchmarks by role, asset class, and company size
  • Predictions on industry trends, top obstacles, and shifting priorities from the talent leadership community

Get access to all of our benchmark data and the full overview of Q2 2022 by downloading our free report.