Forbes - RIP good times…part two?

The market should expect more such cases this year. 

Martin Pichinson’s work winding down companies over the decades, particularly after the dot-com bubble burst, has earned him monikers like the Terminator of Silicon Valley and Dr. Death. These days, he says he has already noticed a change in outreach to his advisory firm, Sherwood Partners, which helps companies sell IP, liquidate and otherwise avoid bankruptcy. “Up until last week, we had average growth,” he told me last week. “Last week, we started to see some bubbling in requests for our services and board meetings. This past week, the floodgates opened.”

Pichinson says the writing for this was on the walls even before equity funding started to slow, and pandemic assistance from 2020 only delayed the inevitable for many companies that wouldn’t have made it otherwise. 

But the current slowing of the IPO market plays a factor too, he says. Many VCs have formal language in fund documents that prevent them from investing in the same company from multiple funds. If a late-stage company is looking to stay private longer than it had originally planned due to the public markets’ current volatility, it may not be able to tap all its investors for more financing in the meantime. 

Usually, most categories can accommodate only two to three winning startups, but the market’s fever these past few years has let more startups tackling similar goals raise funding, Pichinson adds. Now, he says, “a cleansing” is in store. “People will say to me that these companies were bad, and it aggravates the hell out of me. VCs are very smart, and these entrepreneurs see ahead of our time. A ‘B’ player can beat an ‘A’ player if they get to market faster.”

While Fast has been the first high-profile startup to close so far this year, the market is showing signs of weakness. Mortgage startup Better.com has had multiple rounds of layoffs, and stock trading app Robinhood announced last week that it was letting go of 9% of its workforce as users and revenue drop. 

Some investors want to chalk this latest market softening up to just a blip. Pichinson isn’t so sure. “History tells you every seven years you have a correction. It's been 12 years,” he says. “We think this will be a huge dip in the market."

Which company will fall next? —B.S.

Cannon-Brookes believes that keeping AGL together will allow it to transition away from coal more quickly and easily, which he thinks is necessary on both a financial and moral level. It’s a high-profile example of the idea that ESG investing isn’t just about being a responsible steward of the planet—it can also be a path to higher returns. —K.D.

— Ares Management and Apollo Global Management are among the private equity firms still talking with Elon Musk about helping finance the billionaire’s $44 billion takeover of Twitter, according to Reuters. Musk is still trying to raise additional financing to reduce his own equity contribution to the proposed mega-deal, the report said.

— January Ventures raised $21 million for its second fund to back women-founded startups that didn’t have strong networks in Silicon Valley. The fund has invested in more than 50 startups thus far, 90% of which have a woman founder. The fund’s LP base contains multiple other VCs, including Marc Andreessen, Chris Dixon and Arlan Hamilton. 

— Video game conglomerate Embracer signed on to buy three game studios from Japanese publisher Square-Enix for $300 million, as the latter company pulls back from the Western market. The deal includes the rights to Tomb Raider, Deus Ex, Marvel’s Avengers and other well-known games and franchises. 

— Divergent Technologies raised a $130 million Series C round at a $1 billion valuation for its technology that can 3D-print car parts. The round was financed by Tom Steyer and former Goldman Sachs co-president John L. Thornton. The company was founded by Kevin Czinger, who also founded Czinger Vehicles, which builds a 3D-printed hypercar. 

— Advent International agreed to invest in Imperial Dade, which sells food-service packaging and janitorial supplies to customers in hospitality, healthcare, facilities maintenance and other markets. Bain Capital has backed Imperial Dade since 2019 and will share ownership with Advent, with the two assuming joint board governance. 

— Yuga Labs, the company behind the Bored Ape Yacht Club NFT collection, collected $320 million over the weekend in the largest NFT mint yet. The company sold NFTs representing virtual plots of land in a future metaverse Yuga Labs hopes to launch. The volume of the sale greatly disrupted the Ethereum blockchain and sent its per-transaction gas fees soaring.  

— European private equity firm Astorg is closing in on an agreement to acquire contract drug developer CordenPharma for more than €2.5 billion ($2.62 billion), according to Bloomberg. CordenPharma might be best known for supplying certain lipids used in Moderna’s vaccine for Covid-19.

— JackBe raised a $3.5 million seed round for its approach to the growing on-demand grocery sector, one that offers groceries that customers pick up at its outposts. The Oklahoma-based startup is backed by RCC Ventures and Purpose Equity. 

— Private equity firm GI Partners agreed to buy GTY Technology in a take-private buyout worth around $370 million, with the price of $6.30 per share representing a 123% premium to GTY’s share price the day before the deal was announced. Based in Boston, GTY makes cloud-based software for governments, with sub-brands focused on permitting, budgeting, grant management and other areas.

— Former NBA player Omri Casspi has launched an early-stage venture fund called Sheva, with $30 million raised so far toward a $50 million target. Casspi, who was the first Israeli to play in the NBA, is teaming up with David Citron, previously a partner at Global Founders Capital.

— Ag-tech startup Solinftec raised a $60 million growth round led by Lightsmith Group with participation from Unbox Capital and Circularis Partners. The company has been building real-time AI and software-as-a-service farm-management solutions.

Last quarter, out of 3723 total venture deals, 131 included a crossover investor—down only seven deals from the fourth quarter of  2021, which saw 4098 total deals, 138 of them with a crossover investor. That actually amounts to a slight growth in the (still miniscule) share of deals that involved crossover investors—from 3% of all deals to 4%.

Although the share of deals involving a crossover investor rose by a percentage point from Q4 to Q1, the size of the deals they participated in was substantially smaller, suggesting they may have been at an earlier stage. The deals that crossover investors participated in were valued at $11.1 billion in Q1, representing 15.7% of overall dollars invested then—down from $19.8 billion in Q4, which accounted for 20% of funding in that quarter.

As the pandemic boom in demand for Instacart’s services fades—and after a mega-merger failed to materialize—the grocery delivery company once again faces an uncertain future. (New York Times)

Our colleague Abe Brown takes a look at Elon Musk’s deal to buy Twitter and how the current share price—trending below the billionaire’s offer—reflects analysts' uncertainty about the transaction. (Forbes) 

Dividing startup ownership equally among founders may be the best way to keep everyone happy. But new research indicates it might not be the best way to build a successful business. (Wall Street Journal)

Mental health startup Cerebral has been sued by a former executive who says he was wrongfully fired after raising concerns that the company was over-prescribing ADHD medication. The company was already under scrutiny for its prescribing, billing and advertising practices. (Forbes) 

During the pandemic, Edible Arrangements, known for its perishable fruit bouquets, turned around its previously declining business—at the expense of its franchises. (Slate)

Startups focused on deepening the connections people have with their faith have been growing rapidly over the last few years. Now, churches are holding services in the metaverse. (Fortune)

With his new London restaurant where scraps are the stars, chef Douglas McMaster is waging a war against waste. (Bloomberg)