PitchBook News - AI startups face market realities

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The Daily Pitch: VC

September 8, 2022

The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data

In today's Daily Pitch, you'll find:

VC funding slid for AI and machine learning startups in Q2, but there are positive signs for some subsegments.

Shifting market conditions could make corporate borrowers with heavy debt loads prime targets for distressed debt investors.

Five charts exploring recent PE trends in the UK and Ireland.

Today's Top Stories

AI, machine learning startups face market realities

VC funding slid 27.8% quarter-over-quarter for AI and machine learning startups in Q2. Of the 70 product categories tracked by PitchBook, only 21 are on pace to grow in venture funding in 2022—driven by vertical applications including information security, drug discovery, and sales and marketing.

Our latest Emerging Tech Research report on AI and machine learning includes updated market size estimates and spotlights on private companies including Databricks and DataRobot.

The report also tracks major industry trends—covering AI struggles in code completion, developments in streaming data pipelines, and how synthetic data is being used for robotics and autonomous vehicle training.

read the preview

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Investors salivate for distressed debt opportunities

(Olivier Le Moal/Shutterstock)

After years of slim pickings, distressed debt investors are preparing for more abundant times.

An extended period of low interest rates, rising valuations and easy access to borrowing led many companies to amass big piles of debt. The stimulus launched during the pandemic, which could mask underlying financial stresses, only exacerbated the situation. Now those companies are grappling with a series of headwinds, including a slowing economy and falling corporate earnings.

These shifting market conditions are likely to leave those corporate borrowers in financial distress. In short, these are exactly the conditions in which distressed debt investors thrive.

Recommended Reads

PE firm employees have given more than $102 million to this year's US Congressional campaigns—closing in on a new record. [The Wall Street Journal]

The EU is drafting new cybersecurity requirements that would hit noncompliant internet-connected products with fines and the possibility of being taken off the market. [Bloomberg]

Ecommerce companies explore robots as a way to save money on workers and optimize scheduling in response to a broken supply chain. [The New York Times]

Since yesterday, the PitchBook Platform added:

30

VC valuations

3859

People

1122

Companies

34

Funds

See what our data software can do

Quick Takes

	The Daily Benchmark
	2017 Vintage Global VC Funds
	VC Deals
	Arsenal Biosciences secures $220M
	Muck Rack raises $180M Series A
	Morse Micro picks up $140M Series B
	Trukker hauls in $100M
	Carbyne nabs $56M
	Otolith Labs lands $20M
	BioBetter brings in $10M Series A
	Fundraising
	Kapor Capital collects $126M for Fund III

The Daily Benchmark

2017 Vintage Global VC Funds

Median IRR

31.94%

Top Quartile IRR

50.79%

2.33x

Median TVPI

Select top performers

Flagship Pioneering Fund VI

Oak HC/FT Partners II

SmartFin Ventures

*IRR: net of fees

65 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Arsenal Biosciences secures $220M

Arsenal Biosciences has raised $220 million in a Series B round from investors including SoftBank's Vision Fund 2, Bristol-Myers Squibb and Euclidean Capital. Based in the Bay Area, the company is a developer of cellular drug discovery tools for solid tumors.

View round

View 81 competitors »

Muck Rack raises $180M Series A

Muck Rack has raised $180 million from Susquehanna Growth Equity. Based in Miami, the company provides a public relations platform designed to help organizations collaborate with journalists and content creators to generate media coverage.

View round

View 7 competitors »

Morse Micro picks up $140M Series B

Morse Micro, a fabless semiconductor provider, has raised $140 million in a round led by MegaChips. Founded in 2016, the company's wifi capabilities allow a single access point to support more than 8,000 internet-of-things devices.

View round

View 6 competitors »

Trukker hauls in $100M

Logistics startup Trukker has raised $100 million from investors including Investcorp and Mubadala, Bloomberg reported. The company operates an online marketplace that connects transporters with consumers and businesses.

View round

View 19 competitors »

Carbyne nabs $56M

Carbyne has raised a $56 million Series C co-led by Cox Enterprises and Hanaco Ventures. Based in New York, the company offers emergency contact center technology.

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View 15 competitors »

Otolith Labs lands $20M

Otolith Labs has raised a $20 million Series A led by Morningside Ventures. The company makes wearable medical devices for the treatment of vestibular disorders such as chronic vertigo.

View round

View 2 competitors »

BioBetter brings in $10M Series A

BioBetter has raised $10 million in a round led by Jerusalem Venture Partners, with support from Israel Innovation Authority and Milk and Honey Investments. Based in Israel, the company is developing growth factors for cultivated meat operations using tobacco plants as animal-free bioreactors.

View round

View 2 competitors »

PitchBook webinar: H1 European private market update

Join PitchBook Sept. 14 for a webinar examining the progress of Europe's private capital markets for the first half of 2022. Our analysts will discuss notable deals and fundraising activity, along with what could be on the horizon for the landscape in the remainder of 2022. Key topics include:

European VC and PE dealmaking between portfolio companies and investors in H1 2022.
The exit market for PE- and VC-backed companies and investors.
The fundraising landscape for GPs and LPs.

Register now to secure your spot.

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Fundraising

Kapor Capital collects $126M for Fund III

Kapor Capital has raised $126 million for its third fund. The Oakland, Calif.-based VC firm seeks to invest in early-stage companies operating in sectors including information technology, education and energy.

View fund

View 248 investments »

Chart of the Day

"Data shows that serial and even unproven entrepreneurs command higher valuation step-ups than their novice counterparts. While unproven entrepreneurs do not have the benefit of track records of providing returns to their equity holders like serial entrepreneurs do, their commitment to bringing innovative ideas to market is encouraging and rewarded in subsequent financing rounds. This reward appears in the smaller variance between the median valuation step-ups of unproven and serial entrepreneurs in both the early and late stages."

Source: Q3 2022 Analyst Note: Serial entrepreneurs raise more capital, but at what cost?

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PitchBook News - AI startups face market realities

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UK & Ireland's tale of two markets

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