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PitchBook News - Will startups pivot from IPO to M&A?

Plus: SoftBank's executive exodus, mapping MENA's VC, PE middle-market performance, and more
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The Weekend Pitch
September 25, 2022
Presented by Masterworks
(Drew Sanders/PitchBook News)
Adobe's planned acquisition of Figma for $20 billion brought a jolt of excitement to an otherwise somber VC landscape shaken by the slump in technology stocks.

The design tool developer originally had its eyes set on going public. But in a drought year for tech IPOs, a sale to a strategic acquirer for double the $10 billion valuation Figma fetched just 15 months earlier proved too enticing to pass up.

The deal is one for the record books—the largest price for a VC-backed company at the time of the agreement, as well as reportedly the highest revenue multiple ever paid for a late-stage software firm and one of the biggest retention packages offered to a management team. Still, being bought by Adobe wasn't co-founder and CEO Dylan Field's ultimate goal.

While few startups can dream of a comparable outcome in today's environment, exiting via an acquisition could quickly become a reasonable, albeit not ideal, option for many late-stage VC-backed companies.

I'm Marina Temkin, and welcome to The Weekend Pitch. You can reach me at marina.temkin@pitchbook.com or on Twitter @mtemkin.

In many ways, this market environment is what corporate M&A groups have been waiting for.

Despite having plenty of cash on their balance sheets, public tech companies' success at scooping up late-stage startups has been relatively rare in recent years. But that's not for lack of interest.
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Quote/Unquote
(nerosu/Shutterstock)
"It's hard to find good risk/reward in tech right now, because there's been no broad-based agreement among private tech companies to re-mark assets. ... Entry prices in biotech are better."

—Chamath Palihapitiya, in an interview with Axios following news that he was winding down two technology-devoted SPACs after they failed to find merger targets.
 

Deal flow
PE dealmaking among US middle-market firms remained muted through Q2, compared to 2021's record-shattering figures, but activity is still healthy by historic standards. In H1, more than 1,600 transactions closed in the middle market, worth an aggregate $228 billion.

The current economic climate poses several challenges for dealmakers, yet analysts believe this segment of dealmaking is likely to remain robust.

Read more in our latest US PE Middle Market Report.
 

Did you know ...
(Capitano Footage/Shutterstock)
… VCs have invested $12.6 billion in the Middle East and North Africa so far this year?

The aggregate deal value is on pace to surpass last year's total, according to PitchBook data. The MENA region's VC ecosystem has been elevated in part by government support, as sovereign wealth funds bolster the local pool of capital.
 

Datapoints
(Chloe Ladwig/PitchBook News)
About half of the leaders and managing directors behind SoftBank's Vision Fund have left the firm since 2020, according to a PitchBook analysis. Its board lost 11 of its 15 directors during this same period.

Already going on for years, the executive exodus accelerated and expanded after the collapse of SoftBank-backed WeWork's IPO, and it comes at a critical juncture for CEO Masayoshi Son.

Explore our data visualization on SoftBank's executive departures.
 

Recommended reads
How JPMorgan's plan to kill credit cards split the bank. [Financial Times]

An energy crisis and geopolitics are creating a new-look Gulf that is richer, more powerful and more volatile. [The Economist]

Why one writer believes today's tech billionaires are America's false idols. [The Atlantic]

Asset managers aren't letting politics derail their strategies—for now. [Institutional Investor]

A cache of nearly 160,000 files from Russia's internet regulator provides a rare look into Putin's digital crackdown. [The New York Times]

What life is like in Ruili, the world's strictest COVID Zero city. [Bloomberg]

This edition of The Weekend Pitch was written by Marina Temkin and Ryan Prete. It was edited by James Thorne and Kate Rainey.

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