PitchBook News - FTX collapse exposes a power imbalance

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The Weekend Pitch

December 4, 2022

Presented by Masterworks

(Jenna O'Malley/PitchBook News)

The sudden collapse of crypto exchange FTX has unleashed one of the biggest scandals in the venture world.

What exactly transpired has yet to be revealed, and may never come fully to light, but the broad strokes are that the company has a murky relationship—to say the least—with its trading firm, Alameda Research, whose heavy losses founder Sam Bankman-Fried tried to patch up with FTX client funds.

The scandal, just the latest in a long string of mishaps, bankruptcies and improprieties to hit the crypto world, has left many uncertain about the industry's future. And—in ways that some of the other shocks to hit crypto have not—the FTX implosion has forced investors to confront the question of how such a massive fraud could seemingly pass right under the noses of some of the world's most sophisticated venture capitalists.

Could the much-criticized backers of FTX have done better?

The short answer is yes. There were obvious issues with due diligence—new boss John Ray put it succinctly, saying "never in my career have I seen such a complete failure of corporate controls." (And that's from the man who oversaw Enron's bankruptcy.) Backers including Sequoia have apologized and promised to do better next time around.

But context is important.

This is The Weekend Pitch, and I'm Leah Hodgson. You can reach me at leah.hodgson@pitchbook.com or on Twitter @LeahFHodgson.

Trivia

In the first three quarters of this year, 40 European companies achieved a €1 billion-plus valuation, according to our Q3 2022 European VC Valuations Report. And the value of those unicorns continues to rise. How much has the aggregate post-money valuation of unicorns risen by the end of Q3 from the end of 2021?

A) 60.1%
B) 34.5%
C) 40.7%
D) 12.3%

Find your answer at the bottom of The Weekend Pitch!

It's not just private funds
chasing private deals

(Mark Carrel/Shutterstock)

Outside of VC and real assets funds, alternative investment firms' fundraising has decelerated in the past year. But beyond the $1.35 trillion we know was raised in the 12 months leading to the end of Q3, there's certainly trillions of dollars more capital that could be invested in private assets and companies.

We might not be able to count that money, but it's important to pay attention to it. In our Q3 Global Private Markets Fundraising Report, lead analyst Hilary Wiek spotlights the challenges of tallying dry powder.

Retail fintech, a VC darling
no more?

Well, the situation is a little bit more complicated than that, according to PitchBook analyst Rudy Yang. In our Q3 Retail Fintech Report, Yang argues that while the vertical may have gotten a shellacking this year, there are still plenty of reasons for investors to be optimistic.

Doom and gloom be gone, as Yang lays out emerging technologies that investors will be able to sink their teeth into. From new forms of so-called "autonomous finance" to advances in banking technology, retail fintech still has plenty of upside.

Navigating the denominator
effect

(Sashkin/Shutterstock)

Private market headwinds, like the denominator effect, pose challenges for allocators hoping to optimize returns. But through minor tweaks in commitment schedules and cash flow expectations using portfolio forecasting, asset owners can be better equipped to navigate these challenges.

In our latest Allocator Solutions report, we use our newly-minted Portfolio Forecasting tool to develop a simulated portfolio analysis that shows that maintaining a relatively steady course and using some straightforward forecasting can help mature portfolios navigate the denominator effect.

Stay tuned

Keep an eye out for these insights and research reports coming out this week.

ETR: Q3 2022 Supply Chain Tech Update

Insider Led Rounds

Q3 Ecommerce Report (Coverage Launch)

2022 DACH Private Capital Breakdown

Q3 2022 Web3/DeFi Report (Coverage Launch)

Mind the GAAP: Why earnings quality among capital markets information services firms matters

Quote/Unquote

"In 2020 and 2021, a lot of CFOs let their guard down and said, 'let's make sure that remote employees get access to whatever they need.' But now, CFOs are going to CIOs asking, 'why did we sign a three-year deal, and why did we buy so many seats?' "

—Eric Christopher, CEO and co-founder of Zylo, a startup that helps companies control their software spending.

Trivia

(Niphon Subsri/Shutterstock)

Answer: C)

By the end of September, aggregate unicorn post-money valuations reached €466.2 billion, up 40.7% from the end of 2021.

This edition of The Weekend Pitch was written by Leah Hodgson and Chris Noble. It was edited by Chris Noble and John Moore.

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new boss John Ray founder Sam BankmanFried sophisticated venture capitalists FTX client funds The Weekend Pitch

PitchBook News - FTX collapse exposes a power imbalance

Trivia

It's not just private funds
chasing private deals

Retail fintech, a VC darling
no more?

Navigating the denominator
effect

Stay tuned

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Trivia

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PitchBook News - FTX collapse exposes a power imbalance

Trivia

It's not just private funds chasing private deals

Retail fintech, a VC darling no more?

Navigating the denominator effect

Stay tuned

Quote/Unquote

Trivia

Key phrases

Older messages

You Might Also Like

It's not just private funds
chasing private deals

Retail fintech, a VC darling
no more?

Navigating the denominator
effect