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PitchBook News - VCs fortify defense tech

Generative AI startups get valuations leeway; lawsuit: First Citizens says ex-SVB staffers stole secrets; Axelera AI scores $50M
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The Daily Pitch: VC
May 23, 2023
The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data
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Today's Top Stories  
Uncle Sam's defense tech checkbook
With rising geopolitical tensions and government acquisition reforms, investment in defense tech is on track to surge to nearly $185 billion by 2027. Our 2023 Defense Tech vertical snapshot dives into the industry drivers and the startups poised for liftoff.
  • Renewable energy and biotech ranked as the top defense tech segments by deal flow in 2022.

  • 71% of exit activity in the space since 2016 has involved strategic acquisitions.

  • Despite a projected CAGR of nearly 16%, there are challenges—including the "valley of death" funding gap, government bureaucracy and specialized talent shortages.
read the preview
 
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In the world of startup valuations, there's generative AI—and everything else
Rewind founder Dan Siroker (Sportsfile/Getty Images)
Startup valuations of early-stage companies are plummeting—unless you're a generative AI company.

Revenue multiples assigned to non-AI companies have fallen to mid-single digits, according to investors. Meanwhile, AI startups have been raising funds with minimal sales.

What are investors seeking in these other startups in a tight capital environment?
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Download DealCloud's e-book to explore more on the topic of commercial real estate relationship management—what it is, why it's more important in 2023 than ever before, and how to empower your teams to build and maintain more profitable relationships.

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First Citizens accuses ex-SVB staffers of scheme to 'plunder' secrets in lawsuit
(AaronP/Bauer-Griffin/Getty Images)
HSBC and a group of executives newly hired from Silicon Valley Bank stole trade secrets and proprietary information from First Citizens-owned SVB as part of a scheme to gain market advantage in innovation tech and life science banking, according to a lawsuit filed yesterday in US District Court in Northern California.

First Citizens' lawsuit, which seeks at least $1 billion in damages, claims that ex-SVB employees took data on SVB's clients, loan book and employee salaries over to HSBC.

Since March, at least 28 high-level staffers have joined HSBC from Silicon Valley Bank, including David Sabow, SVB's former head of technology and healthcare banking, who First Citizens alleges was the chief architect behind the scheme.

"[We] need to make a splash with 30, 40, 50 people out the gate," Sabow allegedly said.
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LPs gain bargaining power as fundraising tightens
(supawat bursuk/Shutterstock)
Investors in US private equity funds have started to gain the upper hand in negotiations over fund terms in recent months. Several fund lawyers have highlighted a notable shift in bargaining power—from fund managers to their limited partners—in a tight fundraising environment.

For instance, more GPs have agreed to the so-called no-fault divorce clause in the past six months, which would allow LPs to break up with their GPs more easily, the attorneys said.
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As PE healthcare deals slow, cardiology attracts buzz
PE dealmaking in healthcare services slowed for a fifth quarter as firms dealt with lower valuation multiples, harder-to-access leverage and rising debt services costs. But the 200 deals struck in Q1 still marked a 20% increase on the average quarter in 2018 and 2019.

Cardiology is gaining attention from PE investors, who see potential returns in migrating some practices into an outpatient setting and billing insurance under value-based care schemes. Our Q1 2023 Healthcare Services Report lays out how deals are getting closed—more seller earnouts, for example—and how still-looming recession risk could influence activity this year.
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Recommended Reads
Startup CEOs have taken a pay cut to preserve working capital. [The Wall Street Journal]

The US is entering an array of agreements to secure the critical minerals for electric cars, but everyone else wants them, too. [The New York Times]

What is at stake for Europe's biggest neobank if the startup's UK banking license isn't granted? [Sifted]
 
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Since yesterday, the PitchBook Platform added:
18
VC valuations
2017
People
609
Companies
22
Funds
See what our data software can do
 
The Daily Benchmark:
2014 Vintage US PE Funds
Median IRR
19.29%
Top Quartile IRR
26.72%
1.16x
Median DPI
Select top performers
Consonance Private Equity Fund
Nautic Partners VII
Spectrum Equity VII
*IRR: net of fees
68 Funds in Benchmark »
Check out the latest version of PitchBook Benchmarks
 
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VC Deals  
Berlin's Patient21 has raised a €100 million Series C from investors including Pitango, Target Global and Piton Capital. The startup has developed healthcare management software for use in its outpatient clinics.

Indian digital payments company PhonePe has raised an additional $100 million from General Atlantic, bringing its ongoing fundraise to $550 million.

Kiwi, a Puerto Rico-based fintech startup, has secured a $75 million credit facility and raised $4.5 million in a pre-Series A led by Advent-Morro Equity Partners, Altio Capital and Independent Capital.

Axelera AI, a Dutch AI startup building hardware and software for AI developers, has raised a $50 million Series A from investors including CDP Venture Capital and Verve Ventures.

India-based Chalo has raised $45 million in equity and $12 million in debt from investors including Avataar Venture Partners. The startup's app offers bus tracking and contactless payment options.

FlowX.AI has secured a $35 million Series A led by Dawn Capital. The company's platform helps banks modernize applications systems and infrastructure.

Infinite Uptime, an Indian internet-of-things startup, has raised $18.85 million as part of a Series B3 led by Tiger Global, TechCrunch reported.

Drug discovery startup PharmEnable has secured $7.5 million in a round led by MP Healthcare Venture Management.

Adara Ventures has led a €4 million Series A for Madrid-based Jotelulu. The startup's platform is designed to help IT companies deliver cloud services to small and medium-sized businesses.
 
PE Deals  
TVM Capital has invested €10 million in Amsterdam-based medical devices company DEBx Medical.

Blackstone has acquired International Gemological Institute from Shanghai Yuyuan Tourist Mart. The Netherlands-based company certifies diamonds and other rare gems.

Bessemer Venture Partners' PE growth fund, BVP Forge, has invested in Medisolv, a healthcare data software provider founded in 1999.
 
Fundraising  
NGP Energy Capital Management has raised $700 million for an energy transition fund called NGP ETP IV and closed a separate fund, known as NGP Royalty Partners II, on $527 million, The Wall Street Journal reported.

Qiming Venture Partners has closed its seventh fund, Qiming Venture Partners RMB Fund VII, on 6.5 billion yuan (approximately $942 million), DealStreet Asia reported.

IDG Capital and Towngas have jointly raised 5 billion yuan (approximately $713 million) for their Zero-Carbon Fund, which has a target of 10 billion yuan, DealStreet Asia reported.
 
Investors  
Mubadala and Fortress Investment Group have agreed to buy SoftBank's 90% stake in Fortress. The deal allows Fortress to regain a 30% stake and a majority of the board seats, while Mubadala will build on its existing shares to own 70% of Fortress.
 
Chart of the Day  
Source: 2022 Global Fund Performance Report (as of Q3 2022 with preliminary Q4 2022 data)
 
Who's in the newsletter today?
Investors
Adara Ventures
Advent-Morro Equity Partners
Altio Capital
Avataar Venture Partners
Bessemer Venture Partners
Blackstone
CDP Venture Capital
Dawn Capital
Fortress Investment Group
General Atlantic
IDG Capital
Independent Capital
MP Healthcare Venture Management
Mubadala
NGP Energy Capital Management
Pitango
Piton Capital
Qiming Venture Partners
Shanghai Yuyuan Tourist Mart
SoftBank
TVM Capital
Target Global
Tiger Global
Towngas
Verve Ventures
Companies
Axelera AI
Chalo
DEBx Medical
FlowX.AI
Infinite Uptime
International Gemological Institute
Jotelulu
Kiwi
Medisolv
Patient21
PharmEnable
PhonePe
 
 
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