KPMG Survey: Private market investment priorities
AI and emerging technologies dominate private market investment amid market uncertainty
Private company investment opportunities and challenges ahead
The report, “KPMG Private Markets Pulse,” explores the evolving landscape of private company investments, highlighting key drivers such as financial performance, technological advancements, and rigorous governance practices. Addressing investor concerns regarding overvaluation, economic volatility, and cybersecurity threats, the study provides valuable insights into securing funding and fostering growth, with a particular focus on the strategic importance of sustainability, AI, and transparency in financial reporting.
To take a pulse on the market, KPMG surveyed 301 institutional investors who invest in private companies, including private equity, venture capitalists, hedge funds, asset managers, and family offices.
Below is a high-level overview of our findings. Download the full survey report here.
Private market investors are prioritizing a combination of financial performance metrics and scalability potential when assessing investment opportunities.
Tarek Ebeid
KPMG Private Leader & Partner in Charge – Northern California Audit Practice, KPMG US
Key findings:
Investors consider several factors in assessing the disruption, market position, and competitive advantage of private company investment opportunities.
1
Financial considerations for investing in private companies
- While traditional decision-making factors continue to dominate investment strategy, non-financial metrics are becoming increasingly important. When evaluating investment opportunities, financial performance metrics (38%), ROI expectations (31%) and scalability potential (24%) are the most important factors.
- 62% evaluate investment opportunities with a balanced short-term and long-term focus on financial performance but are split on whether they place more importance on a company’s concept (38%) or a company’s founder(s) (31%).
2
Investors view technology as both an industry disruptor and crucial driver of growth.
- 45% believe that technological advances will be the primary driver of economic growth over the next 18 months.
- AI is expected to transform nearly every facet of portfolio companies within the next year, with the greatest impact in data analytics and business intelligence (52%), cybersecurity (52%) and finance and accounting functions (50%).
- Investors expect significant investment activity across key tech sectors over the next 18 months, particularly in AI, machine learning and big data (63%), 5G and advanced connectivity (36%) and blockchain/cryptocurrency (33%).
- 65% of investors assess innovation and patent records as part of their due diligence, while 64% evaluate the adoption of emerging technologies to determine competitive positioning.
3
Investors are cautious about risks that could hinder economic growth.
- Inflation (35%), interest rates (33%) and cybersecurity risk (27%) are the top risks investors monitor.
- Investors are particularly wary of the risks associated with data breaches and cyber-attacks, with 81% saying cybersecurity and data protection reporting measures have increased in importance over the past year.
- Nearly half (48%) of Private Equity investors note increased value in this area of reporting, likely due to higher levels of investment in financial services and fintech where data privacy risks are top-of-mind.
Governance, cybersecurity, and sustainability are increasingly critical in investment strategies
Private market investors are also recognizing that long-term resilience and sustainable growth are closely linked to strong governance, ethical practices and social responsibility. While financial performance, future projections and return on investment (ROI) remain the top considerations, governance and non-financial reporting are increasingly critical to driving investor confidence.
63%
Private equity investors are more focused on pricing and profitability
56%
Venture capitalists place more importance on evaluating a company’s unique value proposition
56%
Asset managers are prioritizing the evaluation of a company’s technological capabilities and innovation pipeline
Dive into our survey results:
KPMG Private Markets Pulse
Download PDFThe bottom line:
As the investment landscape for private companies continues to evolve, financial performance, technological innovation, and governance remain central to investor decision-making. While investors are eager to capitalize on high-growth opportunities, concerns about overvaluation, economic uncertainty, cybersecurity threats, and regulatory changes highlight the risks associated with private company investments.
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