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Plus: SoftBank Vision Fund II's $10B piggy bank, crypto and fintech court consumers, valuations' downward spiral & more
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The Weekend Pitch
May 14, 2023
Presented by the U.S. National Science Foundation
Acquisitions of VC-backed companies may have hit a decade low in Q1, but the number of conversations between potential buyers and sellers is far from that nadir.

"There is a lot of window shopping," said Sheila Patel, vice chair and general partner at VC firm B Capital Group.

For now, startups don't feel an immediate pressure to sell, and buyers—whether larger startups, publicly traded companies or private equity investors—are holding out for lower prices. But dealmakers and investors agree that by the end of this year or early next year, M&A activity will increase significantly.

They say that the timing comes down to simple math. The runways of many early and mid-stage startups are expected to expire in the next six to nine months.

"If companies can't raise money, where are they going to go?" said Navin Chaddha, a managing director at Mayfield. "I see a lot of consolidation."

I asked several dealmakers why what seems to be widespread flirting is leading to few marriages. Here's what they said.

This is the Weekend Pitch, and I'm Marina Temkin. You can reach me at marina.temkin@pitchbook.com or on Twitter @MTemkin.
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A message from the U.S. National Science Foundation  
Virginia-based Babylon Micro-Farms is on a mission to make micro-farming easy and accessible for educators, businesses, and healthcare organizations. Their sustainable vertical-farming wall appliance called Galleri is designed for indoor, year-round growing of over 40 plants. Babylon Micro-Farms (NSF-2035792) is one of hundreds of deep tech startups funded annually by the U.S. National Science Foundation (NSF), a government agency that plays a central role in accelerating discoveries into the marketplace.

Each startup can receive up to $2 million to support translational R&D. By investing roughly $200 million in startups annually, NSF helps teams navigate the earliest stages of technology translation. In the past five years, these companies have gone on to raise billions in follow-on capital, and the portfolio has had 300+ exits.

Learn more about NSF funding at seedfund.nsf.gov
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Generative AI wave catches SoftBank on its back foot

(YUICHI YAMAZAKI/Getty Images)
SoftBank Board Director Yoshimitsu Goto declared Thursday that the firm "must not miss investment opportunities" in generative AI.

But the Japanese conglomerate, which has long positioned itself as an AI visionary, doesn't have the seemingly endless resources it used to. Moreover, SoftBank largely missed the initial wave of generative AI startups—and its investment pace has slowed to a trickle.

Even if the firm is able to free up capital and go on the offensive once more, it'll be doing so in a very crowded field.
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Trivia
Crypto has had a bumpy ride over the past few months, but deal activity has largely stabilized. During the first quarter, startups raised $2.6 billion, but across how many deals?

A) 67 deals
B) 247 deals
C) 353 deals
D) 189 deals

Find the answer at the bottom of The Weekend Pitch!
 

Crypto and fintech's consumer play

Amid high-profile scandals, bank failures and recession fears, the crypto and fintech verticals have weathered difficult times and faced stagnating growth. But the two share an opportunity for growth: consumers.

Our latest Crypto Report breaks down how the vertical's underlying technology could be applied to the consumer security and privacy segments, while the newest Retail Fintech Report dives into opportunities for B2C fintech startups despite enterprise providers' domination in the space.
 

Valuations continue their descent

Venture capital valuations continued their downward spiral in Q1. The dearth of IPO exits, a pullback from nontraditional investors, and ongoing economic headwinds have all contributed to lower valuations and smaller round sizes for all stages except seed.

The most dramatic declines were observed among the most mature companies. Median valuations for venture-growth stage fell to $90 million, a nearly 75% drop from the prices these deals fetched in 2021. Find out more in our latest US VC Valuations Report.
 

Healthcare PE investors are loving cardiology
(UnderhilStudio/Shutterstock)
Practice valuations are high, and the path to delivering value-based care schemes is long and winding. But that’s not stopping healthcare-focused PE firms from investing in the buzzy speciality, which investors think is prime for expanding into more outpatient services.

Our quarterly Healthcare Services Report gives an exclusive look inside the tight-knit world, highlighting the biggest deals from Q1 across the industry and how recession risk could impact dealflow.
 

Quote/Unquote
"Every industry eventually goes through consolidation. … [The] alternatives industry is in the midst of this today."

—Bruce Flatt, CEO of Brookfield Asset Management, during the firm's Q1 earnings call Wednesday.
 

Recommended Reads
Google Docs transformed the field of word processors, but it never mustered the will to truly dominate. [Wired]

Seven months after Washington unveiled trade barriers, Chinese companies are doubling down on homegrown supply chains to remake its chip business. [The New York Times]

Inside the attempt to steal trade secrets related to formulations for BPA-free coatings for the inside of Coca-Cola cans. [Bloomberg]
 

Stay tuned
Keep an eye out for these fresh insights and research reports coming out this week.
  • Q1 2023 Carbon & Emissions Tech Report
  • Q1 2023 European VC Valuations Report
  • Analyst Note: Analyzing Public BDC Venture Lender Q1 2023 Earnings
  • Q1 2023 Supply Chain Tech Report
 

Trivia
Answer: C)

In Q1 2023, crypto startups generated $2.6 billion across 353 deals. To learn more about the quarter and those deals, check out our Q1 2023 Crypto Report.

This edition of The Weekend Pitch was written by Marina Temkin, Jacob Robbins, Emily Burleson and Samantha Steele. It was edited by James Thorne and Laural Hobbes.

Were you forwarded The Weekend Pitch? Sign up at pitchbook.com/subscribe.
 
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US National Science Foundation SoftBank Vision Fund II fintech court consumers early next year The Weekend Pitch Private equity investors

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VC valuations feel the squeeze

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