Breakthrough Innovation Sectors in 2024

Innovation remained a key driver for high-growth companies throughout 2024. These organizations not only launched groundbreaking technologies but also expanded their market presence. A rebound in mergers and acquisitions (M&A) activity across several sectors suggests further growth potential. According to PrivCo data, valuations across a variety of sectors, such as Artificial Intelligence, Education Technology, Health Technology, and Pet Care, have increased - factors that are positive for both buyers and sellers.

Private companies' significant investment in research and development (R&D) over recent years has bolstered both revenues and valuations. According to the National Center for Science and Engineering Statistics, private sector R&D funding reached $602 billion in 2021, representing 75% of total U.S. R&D spending ($806 billion), with companies self-funding the majority ($527 billion). By 2022, the most recent year with available data, total R&D spending increased by $84.1 billion to $885.6 billion. The bulk of that activity was spread across four sectors - pharmaceuticals and medicines, computer and electronic products, information technology (software and non-software), and computer systems design and related services.

Our report captures these investment trends and how they are reflected in the valuations and revenue growth of private companies.

Artificial Intelligence

AI has been a major driver of investment and equity market performance. Private market investment in this area surged in 2024, setting many new fund raising records.

In late December, Databricks, a company that helps users refine and create AI models, announced that it was seeking Series J funding of $10 billion. According to PrivCo data, the company has raised $8.6 billion to date, with financial information from its Series J offering indicating a valuation of $62 billion. The round will be led by Thrive Capital and so far includes Andreessen Horowitz, DST Global, GIC, Insight Partners and WCM Investment Management. Other significant participants include existing investor Ontario Teachers' Pension Plan and new investors ICONIQ Growth, MGX, Sands Capital and Wellington Management.

Anthropic, a leader in AI systems design, is building on its strong funding momentum. After reaching an $18 billion valuation in its Menlo Ventures-led round last year and securing a $4 billion Amazon investment in Q4 2023 (according to PrivCo data), the company is now seeking an additional $2 billion in a round led by Lightspeed Venture Partners.

PrivCo data shows that Anthropic has an annualized revenue of $875 million.

EdTech

The EdTech sector has captured investors' attention as it stands ready for AI transformation. With its expansive global market and schools' tendency toward long-term contracts, these companies offer stable growth potential. Many are developing innovative technologies to help educational institutions modernize and adapt to evolving needs, particularly in remote learning. PrivCo data shows that valuations and revenue in this sector have been stable. Many of these companies also have consistent free cash flow which makes them more attractive to investors.

Bain Capital has made a strategic move in the education technology sector, acquiring PowerSchool for $5.6 billion in a deal that underscores the growing value of K-12 administrative software. The cloud-based platform has caught the attention of major investors, with Vista Equity Partners and Onex Partners maintaining significant minority stakes. PowerSchool's impressive financial trajectory tells a story of consistent growth, with revenues climbing from $558 million to $630 million, and then to $697 million over the past three years – a testament to the increasing digital transformation of school administration.

In November, the acquisition of Instructure, a provider of learning management services, also made news. KKR and Dragoneer took the company private in a $4.8 billion all cash deal. The company plans to use this new investment to expand operations and is targeting $1 billion in revenue. Instructure shows similar stability to PowerSchool, with annual revenues progressing from $405M to $475M to $530M over the past three years according to PrivCo data.

HealthTech

After enduring a challenging period in 2023, the HealthTech sector rebounded dramatically in 2024. From 2022, through 2023, healthcare was marked by a significant slowdown in dealflow, a modest correction in company valuations, workforce reductions and postponed initial public offerings. With revenues rebounding and valuations showing renewed promise, investors are once again showing strong interest in the HealthTech space.

The sector's recovery is substantiated by impressive funding metrics. According to the annual Digital Health Funding Report by Mercom Capital Group, HealthTech companies attracted $32.5 billion in venture capital across 1,450 deals in 2024 – a substantial 22% increase from the previous year.

In a notable strategic move, revenue cycle management firm R1 RCM announced plans to go private in October, with private equity firms TowerBrook and CD&R leading the transaction. PrivCo data underscores the company's robust financial performance, with revenues growing from $1.47 billion to $1.81 billion, and then to $2.25 billion over the past three years – a trajectory that likely attracted significant investor attention.

Pet Care

It might seem counterintuitive to include Pet Care companies on a list of high-growth, high-innovation sectors, but investors are increasingly flocking to these companies as many leverage new technologies to support growth. The sector offers a range of services, from training and veterinary care to comprehensive animal support services. With relatively stable revenues and valuations, Pet Care companies are demonstrating consistent market potential.

In November, Shore Capital Partners Shore Capital Partners entered into negotiations with Silver Lake to merge portfolio companies Southern Veterinary Partners and Mission Veterinary Partners and recapitalize the combined entity in an $8.6 billion dollar deal. The combined entity would create one of the largest networks of animal hospitals in the country. PrivCo data shows dramatic growth with revenues increasing from $194M to $352M over the past two years.

Blackstone acquired Rover Group in 2024 for $2.3 billion, taking the pet care services platform private through an all-cash transaction. The deal encompasses Rover's comprehensive services, including pet sitting, walking, and home visits. Rover Group says it plans to use the investment to expand operations and innovate through its digital market for pet services.

PrivCo data suggests that 2025 could be another solid year of high profile deals in these innovative parts of the global economy. Overall cost of capital is decreasing and many investors are looking for solid, high growing companies to invest in. Companies that have a track record of innovation and resilient valuations are likely to be at the top of their list.

PrivCo's approach to market intelligence goes beyond simple data collection. Our analysts have meticulously gathered billions of data points on private companies, uncovering nuanced market trends through a sophisticated, multi-layered verification process. By leveraging advanced Artificial Intelligence and the expertise of highly skilled data scientists, we transform complex information into easy-to-read, curated company profiles that provide financials, funding rounds, growth signals, and actionable insights. This report offers a high-level analysis that demonstrates the depth and precision of our approach.

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