Smaller cities, superior returns | PitchBook News Summary

1. Key Themes

Theme 1: Secondary VC Hubs Are Outperforming Coastal Markets on Returns

VCs are generating superior MOIC in smaller cities, driven in part by overcrowding in Tier 1 markets that pushes investors to look elsewhere for alpha.

"DC has delivered standout returns to VCs in 2026, with an 11.7x MOIC through Aug. 3, 2026. The Bay Area's latest MOIC is 3.74x, while New York's is 3.18x."

"That's especially true considering that rounds for top New York and California unicorns have been heavily sought after, forcing investors who can't squeeze in to look elsewhere for new bets."

Theme 2: The US VC Market Is in Full Expansion Mode, Fueled by AI

Deal volume and value are both surging in 2026, with AI mega-rounds acting as a primary driver of headline figures.

"Through August 3, there were 9,366 VC deals in the US for a total deal value of $443.8 billion. The number of deals is on track to beat 2025's total, and their value has already surpassed last year's figure."

"More broadly, big-ticket rounds in AI startups have given the US VC market a big lift in 2026."

Theme 3: Private Markets Are Facing a Structural Liquidity Crisis

Across all private asset classes — PE, VC, real estate — distributions remain well below historical averages, creating a compounding problem for LP reinvestment cycles and fund formation.

"The distribution drought continues to leave LPs thirsty for cash. That's an increasingly big problem for the private markets, which require capital recycling. LPs not having money to reinvest into drawdown structures will weigh on the industry's growth."

"Since 2021, the share of PE NAV that is more than 7 years old has climbed from 28.6% to nearly 40% today."

Theme 4: Sports Franchises as Premium Alternative Assets

The Lakers transaction signals that top-tier sports teams are becoming a distinct, ultra-premium asset class for institutional and PE-adjacent capital, with valuations escalating rapidly.

"The new $12.5 billion deal marks the highest price ever paid for an American sports franchise."

"The Lakers are in a PE washing machine after less than a year of ownership by Mark Walter's holding company."

Theme 5: AI Is Expanding Beyond Software Into Healthcare, Defense, and Geopolitics

The investment thesis for AI is broadening from pure tech into healthcare delivery, national defense (drones, defense tech), and even soft power dynamics at the global level.

"Healthcare's winners will be whoever provides a patient's first interaction with AI, Lightspeed argues—whether that's an AI doctor answering questions or a body scan that builds your baseline health record."

"It turns out that AI is a tremendous source of soft power. If cheaper models spread across the developing world, they may influence how people view ideas like democracy and human rights." — Andrew Ng

2. Contrarian Perspectives

Washington, DC as the Top-Returning VC Market in America The conventional wisdom is that Silicon Valley and New York dominate VC returns. The data here inverts that narrative sharply — DC's 11.7x MOIC dwarfs the Bay Area's 3.74x and New York's 3.18x. The article suggests proximity to major hubs and less competitive deal dynamics are contributing factors.

"Some of these secondary hubs may be benefiting from their proximity to top startup cities, noted Kyle Stanford, PitchBook's director of US VC research."

Private Debt as the Least Broken Corner of Private Markets While PE, VC, and real estate all suffer from distribution droughts, private debt stands out as relatively functional — a counterintuitive positive given how much attention goes to equity-oriented strategies.

"The least dim spot is private debt, thanks to its income-oriented nature."

AI as Geopolitical Soft Power, Not Just an Economic Force The standard investor frame around AI is economic disruption and productivity gains. Andrew Ng's argument reframes cheaper AI models as ideological tools that could reshape how billions of people in the developing world think about governance and values — a risk factor and opportunity largely absent from most investment theses.

"It turns out that AI is a tremendous source of soft power. If cheaper models spread across the developing world, they may influence how people view ideas like democracy and human rights."

3. Companies Identified

Thrive Holdings | Josh Kushner's holding company | Acquires businesses and integrates AI into them; raised a $2 billion round at a $12 billion valuation from D1 Capital Partners, Altimeter Capital, and SoftBank.

"Josh Kushner's Thrive Holdings, which acquires businesses and integrates AI into them, secured a $2 billion round... at a $12 billion valuation."

Cognition | AI coding startup | Reportedly in talks to raise over $1 billion at a $40 billion valuation — a massive step-up signaling extreme investor conviction in agentic coding.

"Cognition, an AI coding startup, is in talks to raise over $1 billion in a new round at a $40 billion valuation."

Lovable | Swedish vibe coding startup | Raised $400 million Series C at a $13.3 billion valuation, co-led by Menlo Ventures and EQT's Scaleup Europe Fund.

"Swedish vibe coding startup Lovable secured a $400 million Series C at a $13.3 billion valuation."

Form Energy | Energy storage (iron-air battery systems) | Raised $750 million Series G led by T. Rowe Price, signaling mainstream institutional conviction in long-duration energy storage.

"Energy storage company Form Energy, which develops iron-air battery systems, raised a $750 million Series G led by T. Rowe Price."

Heaviside Industries | Precision-strike drone manufacturer | Raised $60 million Series B led by Felicis; partnered with Norway's Nammo to supply warheads — notable for the VC-defense nexus.

"Heaviside Industries, which manufactures small, precision-strike drones, raised a $60 million Series B led by Felicis and partnered with Norway-based Nammo to supply warheads."

CodeRabbit | AI code review tool | Raised $143 million Series C at $1.5 billion valuation led by Atomico and Smash Capital.

"CodeRabbit, the developer of an AI code review tool, received a $143 million Series C... at a $1.5 billion valuation."

Accel | Global VC firm | Raised $800 million for European and Israeli early-stage bets as part of a $3.5 billion global raise, with AI and defense as primary focus areas.

"Accel notched $800 million for European and Israeli early-stage bets as part of a $3.5 billion global raise, with AI and defense in the crosshairs."

Lightspeed | VC firm | Raising a ~$600 million continuation fund to extend positions in OpenAI, Verkada, Rippling, and invest new capital in Anthropic.

"Lightspeed is looking to raise a roughly $600 million continuation fund to extend its hold on a portfolio of companies—including OpenAI, Verkada and Rippling—and to invest new capital into Anthropic."

Zetwerk | India-based contract manufacturer, Accel-backed | Preparing IPO targeting ~$400 million raise.

"India-based contract manufacturer Zetwerk, which is backed by Accel, is preparing its IPO and is looking to raise around $400 million."

Skan AI | Enterprise AI observability platform | Raised $63 million led by Cathay Innovation and Dell Technologies Capital.

"Skan AI, the developer of an observability platform for enterprise AI, raised a $63 million round led by Cathay Innovation and Dell Technologies Capital."

Remepy | Combines pharmaceuticals with personalized AI treatment apps | Raised $36 million Series A led by OG Venture Partners and M Ventures — an early signal of the pharma-AI convergence.

"Remepy, a company developing a program that combines traditional pharmaceuticals with personalized AI treatment apps, raised a $36 million Series A."

Trian Fund Management | Activist PE firm | Considering a take-private bid for Wendy's at ~$3.9 billion enterprise value.

"Trian Fund Management is considering a take-private bid for Nasdaq-listed fast-food restaurant chain Wendy's, which has a current enterprise value of around $3.9 billion."

Blackstone | Global alternative asset manager | Led a C$2.5 billion investment for a 25% stake in Aeroplan, Air Canada's loyalty program — continuing the trend of PE buying into loyalty/data assets.

"Blackstone and La Caisse led a C$2.5 billion ($1.8 billion) investment for a 25% stake in Aeroplan, a travel loyalty program owned by Air Canada."

Quartr | Stockholm-based AI infrastructure for company research | Raised $18 million led by Altos Ventures — notable as a research/financial data infrastructure play.

"Quartr, a Stockholm-based startup building the AI infrastructure for company research, raised $18 million in a round led by Altos Ventures."

4. People Identified

Kyle Stanford | PitchBook's Director of US VC Research | Cited as the source for the geographic proximity thesis explaining secondary market outperformance.

"Some of these secondary hubs may be benefiting from their proximity to top startup cities, noted Kyle Stanford, PitchBook's director of US VC research."

Andrew Ng | AI researcher, entrepreneur, and investor | Argued that AI models are emerging as a form of geopolitical soft power that could shape political values globally.

"It turns out that AI is a tremendous source of soft power. If cheaper models spread across the developing world, they may influence how people view ideas like democracy and human rights."

Mark Walter | Owner, holding company that purchased the LA Lakers | His holding company completed a $12.5 billion transaction — the highest price ever paid for an American sports franchise — within less than a year of initial ownership.

"The Lakers are in a PE washing machine after less than a year of ownership by Mark Walter's holding company."

Josh Kushner | Founder, Thrive Holdings | Leading the AI-integrated business acquisition model with a $12 billion valuation and backing from SoftBank and Altimeter.

"Josh Kushner's Thrive Holdings, which acquires businesses and integrates AI into them, secured a $2 billion round."

Nathan Schwartz, CFA | Senior Quantitative Research Analyst, PitchBook | Authored the private markets liquidity analysis, including the PE NAV aging data.

"Since 2021, the share of PE NAV that is more than 7 years old has climbed from 28.6% to nearly 40% today." — from his Quantitative Perspectives report.

Jon Coller | Founder, Kivuko Capital; son of Coller Capital founder Jeremy Coller | Launched a new London-based PE firm, signaling generational transition and continued institutional interest in private equity secondaries.

"Jon Coller, son of Coller Capital founder Jeremy Coller, launched London-based PE firm Kivuko Capital."

Alex Cooper | Founder, Unwell (media company) | Silver Lake-backed WTSL invested in Unwell at a $500 million valuation, underscoring continued PE appetite for creator-led media businesses.

"Silver Lake-backed firm WTSL invested in Unwell, a media company founded by Alex Cooper, at a $500 million valuation."

5. Operating Insights

1. Geographic Arbitrage Is a Viable VC Strategy Right Now With top-tier coastal deals oversubscribed and valuations elevated, VCs who deploy capital in secondary cities — particularly those adjacent to major hubs like Philadelphia near New York — are generating meaningfully higher multiples. The data is striking: DC's 11.7x MOIC vs. the Bay Area's 3.74x. For fund managers, this argues for intentional geographic diversification rather than defaulting to coastal deal flow.

"Backing startups in smaller hubs, such as Washington, DC; Miami and even Phoenix, has been more lucrative this year for VCs on a MOIC basis."

2. When Acquiring Asset Managers, Talent Retention Is the Central Operating Problem The newsletter flags the challenge of retaining "rainmakers" — top performers — when folding an acquired asset manager into a larger corporate structure. This is a structural operating risk that PE acquirers of financial services firms must solve at deal close, not after integration.

"You've bought an asset manager. How do you get their people to stick around once their firm is folded into a larger corporate structure?"

3. Continuation Funds Are Becoming a Standard Liquidity Tool for Top VCs Rather than waiting for IPOs or M&A exits, elite VCs like Lightspeed are raising continuation funds to hold concentrated positions in breakout companies longer while returning some capital to LPs. This is both an LP relations tactic and a signal of conviction in specific holdings.

"Lightspeed is looking to raise a roughly $600 million continuation fund to extend its hold on a portfolio of companies—including OpenAI, Verkada and Rippling—and to invest new capital into Anthropic."

6. Overlooked Insights

1. The VC MOIC Recovery Is Broad-Based, Not Just a DC Story Buried in the geographic returns discussion is an important macro signal: median MOIC across all metro areas is recovering meaningfully. This suggests the overall VC return environment is improving, not just in select geographies.

"Median MOIC returns across all metro areas are bouncing back from the 2022 lows. The median MOIC now stands at 4.1x, up from 3.6x in 2025 and 2.6x in 2024."

2. Philadelphia Is Quietly Becoming a Top-5 US VC Market by Deal Value Philadelphia's emergence as a high-volume, high-value VC market — surpassing Miami in total 2026 deal value — is mentioned only in passing but represents a meaningful geographic shift worth tracking.

"New York-adjacent Philadelphia has recorded 543 VC deals so far this year, with a cumulative deal value of $5.21 billion, and is on pace to top its 2025 figures. And so far this year, it's also besting Miami's total VC deal value of $3.04 billion."