PitchBook News - Startups' precarious 2023

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The Daily Pitch: VC

July 17, 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 Sustainable Investment Survey charts the ESG strategies of more than 400 private market players

Data points to more trouble ahead for the US VC market

A tech stock resurgence is buoying billion-dollar valuations

Today's Top Stories

5 big trends shaping VC investing today

(cosma/Shutterstock)

US startups have progressed precariously through 2023, and several signs point to more trouble ahead if dealmaking and fundraising conditions continue to tighten and exit markets remain closed, according to the recently released Q2 2023 PitchBook-NVCA Venture Monitor.

While sharp declines in both deal value and count have stabilized somewhat in recent quarters, factors including the loss of crossover investors and dismal fund performance are reminders that investors and LPs may continue to look elsewhere for returns.

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What GPs, LPs really think about impact and ESG

Opinions on impact investing and ESG frameworks in the private markets are often described as politically polarized, and there's no sign that characterization will fade anytime soon. But between the sustainable investing diehards and the anti-ESG stalwarts, there's a much bigger set of investors with nuanced views on how to balance investing for profit and investing for purpose, and why they need not be mutually exclusive.

Hundreds of private market players responded to our Sustainable Investment Survey this year, and our 2023 report provides a window into their overlapping and sometimes conflicting views on impact and ESG.

read the report

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A message from Affinity

The AI investment era: A discussion with OpenAI and Fifty Years on July 25

Artificial intelligence is rapidly transforming venture. VCs are using AI to automate tasks, improve decision-making, identify new investment opportunities—and more. Hear from Peregrine Badger, Instigator at Fifty Years, Adam Perelman, Engineering Manager of ChatGPT at OpenAI, and Ray Zhou, CEO at Affinity as they discuss three key ways AI impacts VC:

How AI can augment the investor
Challenges and corresponding solutions associated with AI
How to maximize opportunities—from internal improvements to identifying the most promising AI deals

Tune in on July 25 to learn how tools like ChatGPT are changing the private markets and the opportunities VCs can seize as the use of AI becomes commonplace.

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Unicorns, tech stocks meet in the middle

Valuations of billion-dollar VC-backed companies continued to converge with public markets in the first half of the year, the Morningstar PitchBook Unicorn Indexes show.

The Global Unicorn index has risen 13.3% in 2023 as tech stocks roared back and large startups continued to adapt to tighter dealmaking conditions.

Asian unicorns were the top-performing regional index, climbing 16.3% this year compared with 12.5% in the US and 8.2% in Europe.

Down rounds continue to rise and new unicorn formation is at a multiyear low, but an AI craze and a stock market recovery have lent much-needed support to billion-dollar valuations.

explore the indexes

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How drugmaking tools can lock in revenue for manufacturers

(Pavel Chagochkin/Shutterstock)

Life science tools such as equipment, reagents and materials are often grandfathered into the manufacturing of a new drug and used throughout its production lifetime. Drugmakers tend to refrain from switching these tools to maintain batch consistency—not to mention avoiding costly, time-consuming approvals by regulators to update their manufacturing processes.

According to Morningstar analysts, as long as the resulting drug stays in demand, the companies that make these tools can have a decadeslong revenue stream. And once drug patents expire, these life science companies often gain generic and biosimilar manufacturers as new customers, making them an attractive investment.

read the report

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European PE carveouts stymied by poor valuations

(voloshin311/Shutterstock)

The anticipated uptick in European carveouts as a share of overall European PE deal activity has yet to materialize, and potential sellers are now reluctant to shed divisions at lower valuations.

At the same time, PE buyers dealing with rising capital costs seem unwilling to engage in the lengthy and complex deal negotiations needed to secure a good deal.

Recommended Reads

Why Meta finally went for Twitter's throat. [The Information]

China controls the supply of crucial war minerals. [The Economist]

Two writers' thoughts on why it matters whether crypto coins like Ripple's are considered securities. [Bloomberg]

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VC Deals

Defense-tech company HawkEye 360 has raised a $58 million Series D1 led by BlackRock.

CurvaFix, a medical device company developing solutions for fractured bones, has raised a $39 million Series C led by MVM Partners.

Private school payments management startup Mattilda, headquartered in Mexico City, has raised a $19 million Series A led by GSV, FTC and Dila Capital.

EG 427, a French developer of gene therapies for chronic diseases, has closed an €18 million Series A.

Affect Therapeutics, which offers digital addiction treatment programs, has raised a $16 million Series A led by Artis Ventures.

Spline, which offers 3D design software, has raised $15 million in a seed round led by Gradient Ventures, TechCrunch reported.

Trunk Tools, a fintech startup focused on the construction industry, has raised a $9.9 million seed round led by Innovation Endeavors.

Crypto analytics company LunarCrush has raised a $5 million Series A led by Draper Round Table and INCE Capital Partners.

Delta g, a UK-based startup using quantum technology to map underground locations, has raised £1.5 million in a round led by Science Creates Ventures.

PE Deals

Goldman Sachs Assets Management has agreed to acquire Norwegian edtech company Kahoot for about $1.7 billion in a take-private deal alongside the company's existing backers, which include General Atlantic and LEGO Group's Kirkbi Invest.

Apollo Global Management has agreed to invest $500 million in European airline operator Air France-KLM via hybrid debt and equity financing.

TPG is looking to acquire South Korean cosmetic packaging supplier Samhwa, which supplies brands such as L'Oréal, Estée Lauder and Chanel, The Korean Economic Daily reported.

Kohlberg & Company has acquired Riveron from HIG Capital, which retained a minority stake in the US business advisory and consulting firm.

Exit & IPOs

Andreessen Horowitz-backed creator economy startup Fanhouse has been acquired by peer Passes, a company launched by Lucy Guo, co-founder of Scale AI.

HIG has sold global consultancy firm Riveron to KKR; although, it retains a minority stake in the company.

French billionaire Francois-Henri Pinault is in talks to buy TPG-backed global talent agent Creative Artists Agency in a deal that could be worth up to $7 billion, Bloomberg reported.

Medicxi-backed Versanis Bio, a biopharmaceutical company developing an obesity drug, has been acquired by Eli Lilly.

Portfolio Companies

Cyrus Hodes, co-founder of Stability AI, has sued the generative AI startup, alleging that co-founder Emad Mostaque tricked him into selling his stake for $100 shortly before the company reached a $1 billion valuation.

Investors

Willis Towers Watson is considering offering its wealth management clients a long-term asset fund so they can access private equity, Citywire reported.

Chart of the Day

Source: Q2 2023 PitchBook-NVCA Venture Monitor

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PitchBook News - Startups' precarious 2023

Older messages

US PE's big bounce in exits

Venture capital builds in the dark

A glimpse into fund performance

VC's long road to recovery

Healthcare crisis puts PE to the test

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