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The Daily Pitch: VC

May 2, 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:

Our latest analyst note examines how generative AI may transform a range of sectors.

VC funding for information security stayed relatively flat in Q1, but opportunities remain, according to our latest update on the space.

Can JP Morgan retain the hands-on approach that made First Republic popular with VCs?

Today's Top Stories

How the new AI age will shape our tech

A new dawn in tech has arrived, and our latest analyst note examines how generative AI may transform a range of sectors. PitchBook analysts who cover health, ecommerce, fintech, climate tech and more weigh in on the opportunities in this emerging space.

read it now

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JP Morgan wins First Republic—will it win over VCs and the startup world?

(Spencer Platt/Getty Images)

JP Morgan has won a competitive bid to take over the majority of First Republic's assets and liabilities. The bank was on the brink of collapse after it revealed last week that customers fled with more than $100 billion in deposits.

First Republic was a relationship-focused bank with high-touch services popular with many startups and venture capital firms. If the largest bank in the US fails to retain the specialty lender's unique approach to customer care and support, it runs the risk of not holding on to the acquired customer base, VCs say.

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A message from Coupa

Profitability and resilience are top priorities for financial leaders

The past year has been extremely demanding for CFOs, from balancing cutting costs, to investing in growth, to striving for financial health while building organizational resilience.

The inaugural edition of Coupa's annual survey asked how financial leaders cope with these uncertain times. Many CFOs said they lack visibility into spend across the company—often because of legacy systems—making meeting these demands nearly impossible.

It is critical to learn how modern technology—automation especially—can help you respond to challenges and weather a recession without broad cutbacks. Download this report to learn:

Financial performance and strategies for profitability
Internal pressures and external threats, from rising wages to supply chain disruption
Plans to drive growth in the event of a recession

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Information security VC funding holds ground

Our latest Information Security Report shows how the industry has weathered the storm, as adoption and funding trends held steady in the first quarter. Among the takeaways:

VC funding in the space reached $2.5 billion in Q1, in line with the previous two quarters.

Significant acquisitions continued through a muted exit environment.

Emerging opportunities include cloud workload protection and data security posture management, which involves monitoring data flows and enforcing database policies.

read the preview

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April wrap-up: One month in global markets

Our latest Global Markets Snapshot breaks down a month of trends in the equity, debt and commodities markets, tracking returns across a range of indexes and sectors. It also features private market activity, including major deals, fundraising, IPO performance, lending volume and unicorn creation.

In this monthly digest, we provide the datasets that the PitchBook Institutional Research Group is keeping an eye on as markets remain volatile.

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Gearing up for an economic soft landing

(Steve Mann/Shutterstock)

With inflation easing, Morningstar analysts believe an economic soft landing is possible with a recession risk of just 25% in the next two years. Among their predictions:

Most sources of today's inflation—including energy, autos, and other durables—are likely to abate, and the analysts predict inflation will average only 1.9% over 2023-2027.

Analysts anticipate an 18% drop in housing starts this year, along with a 5% decline in housing prices.

The Federal Reserve is expected to cut rates aggressively around the end of this year as inflation normalizes.

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Recommended Reads

Pioneering AI researcher Geoffrey Hinton has left Google and joined the growing chorus speaking out about the risks of artificial intelligence. [The New York Times]

Science has finally figured out why some people are more likable than others on Zoom. [Business Insider]

Why some large pension funds aren't happy about the dual-class shares decision that allows PE giants like Blackstone and Ares Management to join the S&P 500. [Financial Times]

Since yesterday, the PitchBook Platform added:

5

VC valuations

687

People

296

Companies

20

Funds

See what our data software can do

The Daily Benchmark:
2016 Vintage Global VC Funds

Median IRR

26.60%

Top Quartile IRR

34.50%

0.43x

Median DPI

Select top performers

Medicxi Ventures 1

Israel IoT Innovations - i3 Equity Partners

USV 2016

*IRR: net of fees

82 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

VC firm Apple Tree Partners has established biotech startup Initial Therapeutics and infused it with a $75 million Series A.

Campus.edu, an online community college, has secured a $29 million investment from VC firms and individuals including Discord founder Jason Citron, OpenAI founder Sam Altman and Figma founder Dylan Field.

Alison.AI, an Israeli company that uses AI to create ads, has raised $5.1 million in pre-seed funding from investors including Andreessen Horowitz, according to reports.

Video game studio SuperDuperSecret Co. has raised more than $1 million in pre-seed funding from investors including Polygon Ventures, Solana Foundation and Round 13 Digital Asset Fund.

Don't miss our upcoming webinar

This webinar examines the Q1 2023 PitchBook-NVCA Venture Monitor and how ongoing market turmoil, culminating in the sudden collapse of Silicon Valley Bank, may impact the venture industry in Q2 and beyond.

In partnership with NVCA and sponsored by Dentons, J.P. Morgan, and Insperity, a panel of experts will discuss the venture environment and key findings from the recently released report. Key takeaways include:

Venture growth stage pre-money valuations have fallen to roughly 2018 levels, 64% below 2021's peak.

Crossover investors have pulled back, leaving a gap in financing needs and available equity funds.

Preliminary data shows exit value at a low of $5.8 billion, suggesting the IPO market won't thaw in the near term.

Register now to secure your spot.

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PE Deals

Apollo Global Management and BlackRock supported several of PNC Financial Services Group's failed bids for First Republic Bank, Bloomberg reported. The PE giants were poised to buy some of the bank's assets had PNC's efforts been successful.

Bain Capital is considering a competing offer to Silver Lake's $2.4 billion acquisition deal for Germany's Software AG, Bloomberg reported. Bain hopes to discuss merging the enterprise software business with portfolio company Rocket Software.

Patient Square Capital has created and committed $300 million to Elevage Medical Technologies, a new portfolio company intended to support growth in the medical device industry.

Morgan Stanley Capital Partners has acquired RowCal, a property management service provider in the Minnesota, Colorado and Texas markets.

KKR has agreed to invest $250 million in Serentica Renewables, which provides clean energy to large commercial and industrial customers.

Exit & IPOs

SoftBank-backed semiconductor giant Arm has confidentially filed for a US IPO. The company is expected to raise between $8 billion and $10 billion on the Nasdaq, Reuters reported.

Fundraising

Japanese automaker Mitsubishi is launching a $1 billion decarbonization fund for startups working in climate tech, according to reports.

Lower-middle-market PE firm Kian Capital Partners has closed Kian Growth Partners III on $400 million.

Sound Ventures has closed its AI-focused fund on nearly $240 million. The firm has investments in OpenAI, Anthropic and StabilityAI.

Corporate M&A

Japanese multinational pharmaceutical company Astellas has agreed to acquire Nasdaq-listed Iveric Bio, a pharmaceutical company that develops therapies in ophthalmology, for $5.9 billion.

Chart of the Day

Source: PitchBook's Q1 2023 European PE Breakdown

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PitchBook News - What will the generative AI dawn bring?

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Have VCs tempered tech expectations?

Private real estate's bifurcation

Who wants to buy a unicorn?

B2B fintech's Q1 boost

M&A shops the discount rack

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