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PitchBook News - Crypto industry craves clarity

VC's capital concentration; remembering LBO trailblazer Thomas H. Lee; agtech's difficult harvest; WorkLLama secures $50M
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The Daily Pitch: VC
February 27, 2023
The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data
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In today's Daily Pitch, you'll find:
 
Today's Top Stories  
Crypto industry pines for rules after FTX crash
The collapse of FTX has made the need for regulatory clarity a mainstream priority within the crypto industry. Done well, new rules could make the task of rebuilding user trust easier and accelerate crypto adoption in the long run.

That's one of the takeaways from our analyst note on the 2023 European Blockchain Convention in Barcelona, where PitchBook was invited to speak. Other takeaways from the conference include:
  • Improved cryptographic verification methods known as zero-knowledge proofs are gaining attention as privacy concerns rise. Blockchains have allowed for trust through transparency, but they also enable tracking by governments and bad actors.

  • Institutional adoption of crypto is maintaining momentum despite a sharp pullback in VC funding. One example is the rise of tokenization, which converts traditional assets such as stocks or bonds and makes them tradable on the blockchain.
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LBO trailblazer Thomas H. Lee dies at 78
(Dia Dipasupil/Getty Images)
LBO trailblazer Thomas H. Lee has died, his family announced Thursday, leaving behind a storied legacy in the private equity industry. Lee opened his buyout firm Thomas H. Lee Partners in 1974 and contributed to the growth of the now $4.4 trillion PE industry.

In 2006, Lee stepped down from the firm in accordance with a succession plan that officially began at the turn of the century and started Lee Equity Partners, a PE shop focused on business, financial and healthcare services, where he sat as chair until his death.
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A message from Citizens  
What's driving middle-market growth in 2023?
As shown in the Citizens 2023 M&A Outlook, its annual survey of decision-makers across 400 US middle-market businesses and PE firms, nearly two-thirds of companies expect M&A will be their primary growth engine this year. And while economic uncertainties are grabbing headlines, over 90% of companies say their 2023 performance will exceed or match their 2022 results.

Access the 2023 M&A Outlook to discover:
  • Which sectors enjoy the brightest outlooks
  • Where companies and PE firms' views diverge
  • Buyers' top reasons for making an acquisition in 2023
Explore the Citizens 2023 M&A Outlook
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Capital remains concentrated in the Bay Area and New York
At the start of the pandemic, many expected capital to move out of the major startup hubs of New York City and the San Francisco Bay Area. Three years later, our analyst note suggests not much has changed—and there are disadvantages for companies in smaller markets.

Capital has become increasingly concentrated within the New York City and Bay Area markets, where VCs have raised $330.8 billion in commitments since the beginning of 2019 while other funds couldn't secure even half that amount. The median distance between lead investor and target company has increased for nearly all stages due to the pandemic and remote work, but these effects could fade, causing distances to shrink and bringing back barriers for smaller markets and companies to succeed.
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Weighing agtech's Q4 harvest
Agtech had a bad harvest in Q4 2022, despite a boom over the past few years. Volatile markets and rising interest rates put a damper on the segment.

So what, if anything, can be salvaged from agtech's Q4? Our recent Emerging Tech Research report on the space explores deals, figures and developments. Key takeaways include:
  • VC funding for agtech was down 13.2% year-over-year, at $10.6 billion. Despite this, 2022 was the second-best year on record.

  • Q4 saw startups raise $1.8 billion, down 34.1% compared to the previous quarter.

  • Exit activity plummeted 93% compared to 2021, amid a difficult global market environment.
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Recommended Reads
How Thrive Capital founder Josh Kushner is building a VC empire. [The Information]

Private equity firms are snapping up data centers as cloud demand soars. [The Wall Street Journal]

One writer's thoughts on private equity returning to the UK. [Financial Times]
 
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Quick Takes  
  The Daily Benchmark  
  2018 Vintage Global Debt Funds  
  Exit & IPOs  
  AVG Group's CleanBay Renewables in SPAC talks  
  ECI preps Moneypenny sale  
  Fundraising  
  Haven Capital targets up to $50M for real estate fund  
  Corporate M&A  
  DOJ prepares to challenge Adobe's $20B Figma deal  
 
 
The Daily Benchmark  
2018 Vintage Global Debt Funds
Median IRR
10.74%
Top Quartile IRR
15.27%
1.18x
Median TVPI
Select top performers
Raith Real Estate Fund II
HCAP Partners IV
GoldenTree Distressed Fund III
*IRR: net of fees
56 Funds in Benchmark »
Check out the latest version of PitchBook Benchmarks
 
VC Deals  
German OpenAI rival Aleph Alpha is in talks with investors to raise up to $100 million, Insider reported.

Recruitment platform WorkLLama has secured $50 million from undisclosed investors.

Olatec Therapeutics has raised a $40 million Series A led by Sanders Morris Harris.

Here Not There Labs, the creator of chat app Towns, has raised a $25.5 million Series A led by Andreessen Horowitz.

Helsinki-based Nosto has raised $16 million from Mandatum Asset Management. The startup helps ecommerce brands build and launch personalized shopping experiences.

Voicemod, which offers voice changing technology, has raised $14.5 million in a round led by Kfund, TechCrunch reported.

Vertical farming startup Futura Gaïa has secured €11 million from investors including UI Investissement, Colam Impact and Sofilaro.

Green Check Verified, a banking solution for cannabis providers, has raised a $6 million Series A led by Mendon Venture Partners.

Canadian smart video platform IrisCX has secured a $4.6 million seed round led by Arthur Ventures.
 
Don't miss our upcoming webinar
A panel of speakers will discuss how women founders in the VC and startup ecosystem fared during ongoing market volatility—and provide forecasts for 2023. Key takeaways include:
  • Trends in aggregate funding received by female-founded companies compared to all-female and all-male founding teams.

  • Gender breakdown for decision-makers at VC firms and how this impacts deal activity for founders.

  • Angel investment through unicorn status: how investment evolves throughout the company lifecycle.
Register now to secure your spot.
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PE Deals  
PAI Partners-backed European Camping Group has completed its acquisition of French holiday company Vacanceselect Group. The deal, announced in July, values the business at €1 billion.

KKR is among several investors looking to buy a stake in Indian carmaker Tata Motors' EV business, The Economic Times reported. The stake is said to be worth up to $1 billion.

L Catterton is close to acquiring Guatemala-based Ilegal Mezcal, Bloomberg reported. The deal is expected to value the spirit maker at under $200 million.

DCP Capital has agreed to purchase a 33% stake in the Chinese operations of Jamieson Wellness a Toronto-based natural health brands owner, for $35 million. DCP also agreed to buy $75 million in shares of the publicly traded company.

Mintec, backed by Five Arrows Principal Investments, has acquired AgriBriefing, a UK company that provides data on agri-food supply chains.

SDC Capital Partners has acquired a majority stake in Orange County-based Cityside Networks, a fiber-optic internet provider serving Southern California.
 
Exit & IPOs  
AVG Group's CleanBay Renewables in SPAC talks
CleanBay Renewables, a renewable energy company with growth equity backing from AVG Group, has been in talks to merge with blank-check company BurTech Acquisition Corp. in a deal that could value CleanBay at $660 million, Bloomberg reported.
View details
 
View similar company »
 
ECI preps Moneypenny sale
ECI Partners is prepping the sale of UK customer support services company Moneypenny, Unquote reported. The firm picked investment bank Houlihan Lokey to advise on the exit, which is expected later this year.
View details
 
View 36 competitors »
 
 
Fundraising  
Haven Capital targets up to $50M for real estate fund
Haven Capital Ventures is seeking $20 million to $50 million in capital commitments for Haven Fund II, a real estate vehicle designed to invest in manufactured home communities.
View details
 
View investment »
 
 
Corporate M&A  
DOJ prepares to challenge Adobe's $20B Figma deal
The Department of Justice has been preparing an antitrust lawsuit that would complicate Adobe's planned $20 billion acquisition of VC-backed Figma, Bloomberg reported. The UK and European Union are also reviewing the deal for potential antitrust concerns.
View details
 
View 40 competitors »
 
 
Chart of the Day  
Source: Q4 2022 Launch Report: Gaming
 
Who's in the newsletter today?
Investors
AVG Group
Adobe
Andreessen Horowitz
Arthur Ventures
BurTech Acquisition Corp.
Colam Impact
DCP Capital
ECI Partners
European Camping Group
Five Arrows Principal Investments
KKR
Kfund
L Catterton
Mandatum Asset Management
Mendon Venture Partners
PAI Partners
SDC Capital Partners
Sanders Morris Harris
Sofilaro
Tata Motors' EV business
UI Investissement
Companies
AgriBriefing
Aleph Alpha
Cityside Networks
CleanBay Renewables
Figma
Futura Gaïa
Green Check Verified
Here Not There Labs
Ilegal Mezcal
IrisCX
Jamieson Wellness
Moneypenny
Nosto
Olatec Therapeutics
OpenAI
Vacanceselect Group
Voicemod
WorkLLama
Service Providers
Houlihan Lokey
 
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