PitchBook News - Swooping in on SVB's wreckage

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The Daily Pitch: VC

March 15, 2023

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

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

The middle market took private equity by storm in 2022 as add-ons captured their highest-ever share of overall US PE deals.

Nonbank lenders are hoping to fill the hole in the venture debt market.

SVB's collapse has left countless startups in Latin America without a reliable banking partner.

Today's Top Stories

Nonbank lenders pounce on venture debt market after SVB collapse

(Drew Sanders/PitchBook News)

Following the demise of Silicon Valley Bank's lending business, nonbank lenders are poised to increase their market share.

Sensing the opportunities, these dealmakers are hoping to lend to venture-backed companies at a premium.

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The sun's coming out for middle-market PE

Some firms are still shelling out billions on single buyout deals, but by several metrics, PE deals got smaller in 2022.

In Q4, middle-market deals—between $25 million and $1 billion in size—accounted for their largest quarterly share of PE deal count in five years, showing early signs of sponsors shifting down market. Add-on deals, the building block of inorganic platform growth, captured their largest-ever portion of overall PE deal activity in 2022. Even take-private deals shifted into middle-market territory as public valuations deflated.

Our 2022 US PE Middle Market Report, sponsored by Antares Capital and the American Investment Council, looks at a full year's worth of deals, exits, valuations and fundraising, outlining the ways that middle market funds are outperforming mega-funds.

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A message from PitchBook

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Fintech startups race to serve LatAm founders left behind by SVB

(Diego Grandi/Shutterstock)

Digital bank platforms have spent the last few days scrambling to capture a share of the thousands of startups fleeing SVB. In emerging markets with few international lenders, SVB's collapse has left a gaping hole.

One Brazilian seed-stage fintech, Trace Finance, has initiated deposit requests from over 400 startups totaling over $1 billion in Latin America since Thursday.

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Ripple effect: The global impact of SVB's collapse

(Aleksandra Pikalova/Shutterstock)

The collapse of Silicon Valley Bank is naturally having an outsize impact on US startups and the country's economy, but SVB's international reach means its collapse has sent shock waves around the world.

While other countries have remained relatively insulated from the initial fallout, SVB's overseas partners have also felt the pain. And the long-term ramifications are yet to materialize.

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Tough times for late-stage startups as Y Combinator shies away

Garry Tan, president and CEO of Y Combinator
(Harry Murphy/Getty Images)

Y Combinator is shelving its later-stage startup investing and laying off nearly 20% of its staff in another sign of the chillier conditions for VC fundraising for mature startups.

We spoke with PitchBook analysts to break down the implications of YC's decision.

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SVB collapse puts spotlight on loans to tech industry

(ioda/Shutterstock)

The collapse of Silicon Valley Bank has raised a number of questions about market vulnerabilities, including in the tech sector.

A frenzy of pandemic-era dealmaking involving technology companies has driven a surge in lending to software and data specialists—the largest industry in the institutional loan market, LCD data shows.

Leveraged loans to borrowers from the software sector currently total a record $170 billion, or 12% of the $1.4 trillion leveraged loan asset class, as tracked by the Morningstar LSTA US Leveraged Loan Index. And 52% of these loans are rated B-minus by S&P Global Ratings, putting them at the lower end of the credit quality distribution.

Between 2015 and 2022, only six companies from the technology sector defaulted on term loans tracked by the index, but software names have been declining in the secondary market.

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Recommended Reads

For Europe's startups, Silicon Valley Bank filled a role that no one else could—or would. [Wired]

An inside look at Northvolt, the Swedish startup charging Europe's battery ambitions. [Financial Times]

How social media is amplifying anxiety over SVB's collapse. [The Wall Street Journal]

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VC Deals

Mexico-based fintech startup Clara has secured up to $90 million in debt financing from Accial Capital. Clara's previous backers include Coatue and Iconiq Growth.

Mitiga, an incident response startup for cloud providers and SaaS companies based in New York, has closed a $45 million Series A led by ClearSky Security with backing from Samsung Next and Blackstone.

Teitur Trophics, a Danish biotech startup focusing on neurodegenerative diseases, has closed a €28 million Series A led by Sunstone Life Science Ventures and Sound Bioventures.

AlgoTx, a French developer of treatments for complex pain, has raised a €20 million Series B led by Relyens Innovation, Santé and Turenne Capital.

Singapore-based battery recycling startup Green Li-ion has closed a $20.5 million pre-Series B with backing from Trirec, Banpu Next and Equinor Ventures, according to reports.

UK-based digital therapy platform HelloSelf has secured $20 million in a round led by Octopus Ventures.

PitchBook's 2023 Pick-the-Bracket Battle

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PE Deals

Apollo Global Management has agreed to acquire NYSE-listed chemical and ingredient distributor Univar Solutions for $8.1 billion in cash. The Abu Dhabi Investment Authority will join as a minority investor.

Vista Equity Partners has agreed to sell its majority stake in hospitality and events technology provider Cvent to Blackstone for $4.6 billion. The Abu Dhabi Investment Authority has also agreed to take a minority stake in Cvent, which has traded on the Nasdaq since a SPAC listing in 2021.

A consortium led by Symphony Tech Group has acquired Nasdaq-listed Momentive Global, the market insights company that owns online survey tool SurveyMonkey, in a $1.5 billion take-private deal.

Sovereign Capital Partners-backed UK wealth manager Skerritts has acquired Mercier Allen & Associates.

Lincolnshire Management has completed its acquisition of Banker Wire, a wire mesh product manufacturer.

Portfolio Companies

Mobile bank FairMoney has acquired PayForce, a subsidiary of VC-backed CrowdForce. PayForce offers a payment collection and financial services platform for merchants in Nigeria. FairMoney is backed by investors including Tiger Global and Speedinvest.

Fundraising

Rethink Ventures has launched its debut fund with a target of €50 million. The vehicle will be used for seed to Series A investments in sectors including mobility, automotive and logistics.

Investors

Apollo Global Management, Ares Management, Blackstone, The Carlyle Group and KKR are each conducting due diligence on SVB's billions of dollars in loan assets, Bloomberg reported. Apollo has talked to VCs including General Catalyst, Andreessen Horowitz and Redpoint Ventures to determine whether to make a bid, The Information reported.

Corporate M&A

Kering Eyewear has agreed to acquire French luxury eyewear components manufacturer UNT.

UK-listed betting company Entain has acquired Canadian esports gambling company Sportsflare from Tiidal Gaming. The deal is subject to Tiidal shareholder approval.

Chart of the Day

Source: PitchBook's 2022 Annual European Venture Report

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overall US PE deals reliable banking partner The Daily Pitch venture debt market

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PitchBook News - Swooping in on SVB's wreckage

Key phrases

Older messages

Some founders sticking with SVB

SVB borrowers face a quandary

SVB rescue

Where will SVB's assets end up?

The top criticisms of ESG

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