PitchBook News - The impact of down rounds in VC

The new places to be for female founders; AI startups face market realities; Crypto exchange FTX eyes $1B round; Theorycraft Games scores $50M
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The Daily Pitch: VC
September 23, 2022
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In today's Daily Pitch, you'll find:
  • Our latest analyst note takes a look at what's in store for companies taking down rounds in the current market.

  • PE firms have been ramping up their investments in European asset managers, with deal value breaking last year's mark before the end of Q3.

  • St. Louis, Phoenix and Austin top the list of US cities seeing explosive growth in capital raised by female-founded startups.
 
Today's Top Stories  
What do down rounds really mean for companies?
The swift decline of the public markets has left many private startups with extended valuations and no exit opportunities in sight. In such an inhospitable market, many companies will be coming face-to-face with down rounds. But what do down rounds really mean for founders and investors in the long run?

Our latest analyst note dives into the data on post-down round exits, difficult IPO markets and investment returns to determine what's in store for companies taking down rounds in the current market. Key takeaways include:
  • Just 13% of companies raising a down round from 2008 to 2014 were unable to raise a new round or exit immediately after the down-valuation investment.

  • The majority of down rounds occur at the late stage, where there is ample room to adjust valuations that have grown enormously over the past decade.
read it now
 
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Check out where female founder fundraising is growing fastest in the US
Austin (Peter Tsai Photography/Getty Images)
While San Francisco and New York City are major hubs for female-founded startups, other cities have seen more significant growth in the amount of capital raised by female founding teams since 2020.

The Southwest, led by Austin, Dallas-Fort Worth and Phoenix, has seen explosive growth in capital raised by female-founded startups since 2020, while Washington, DC, and Denver have also seen a surge.
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PE appetite surges for European asset managers
(Giulio Benzin/Shutterstock)
PE firms have been ramping up their investments in European asset managers in recent years, with acquisition targets ranging from retail-focused companies to large fund administration groups.

This year, the total deal value has already surpassed the figure for all of 2021—before the start of Q4.
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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 recent 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.
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Recommended Reads
With market conditions worsening, it's hard for PE firms to achieve successful outcomes if they focus on nothing but chasing new deals. [Institutional Investor]

The luxury home market has finally faltered thanks to inflation, recession fears and rising interest rates. [The Wall Street Journal]

As the US raises interest rates, the rest of the world bears the pain. [The Economist]
 
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Quick Takes  
  The Daily Benchmark  
  2020 Vintage Global Funds-of-Funds  
  VC Deals  
  Crypto exchange FTX eyes $1B round  
  Rivus Pharmaceuticals raises $132M  
  AccessFintech banks $60M Series C  
  Theorycraft Games nabs $50M  
  Somewear Labs picks up $13M+  
 
 
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VC Deals  
Crypto exchange FTX eyes $1B round
FTX is planning to raise up to $1 billion in new funding that would maintain the company's roughly $32 billion valuation, CNBC reported. The crypto exchange operator raised a $400 million Series C in January.
View round
 
View 6 competitors »
 
Rivus Pharmaceuticals raises $132M
Rivus Pharmaceuticals has raised $132 million in a round led by RA Capital Management. The company develops therapeutics for cardio-metabolic diseases.
View round
 
View similar company »
 
AccessFintech banks $60M Series C
AccessFintech has raised $60 million in a round led by WestCap. The company offers data sharing and workflow collaboration tools for financial institutions.
View round
 
View 33 competitors »
 
Theorycraft Games nabs $50M
Game development studio Theorycraft has raised a $50 million Series B led by Makers Fund, with support from NEA and Andreessen Horowitz.
View round
 
View similar company »
 
Somewear Labs picks up $13M+
Somewear Labs has raised a $13.7 million Series A from investors including Bling Capital and the Webb Investment Network. Based in the Bay area, the company offers a critical communications platform for a wide range of users, including wildland firefighters and other rescue mission operators.
View round
 
View similar company »
 
 
Chart of the Day  
Source: Q3 2022 Analyst Note: Serial entrepreneurs raise more capital, but at what cost?
 
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