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PitchBook News - China's investment malaise

Plus: The end of the overcapitalization era, public BDCs suit up to catch lending wave, medtech's fair prognosis & more
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The Weekend Pitch
August 20, 2023
Presented by the U.S. National Science Foundation
(Jenna Pluimer/PitchBook News)
Once a focal point for Asia's fastest-growing private markets industry, China has become a riskier bet for the region's investors, with the latest US trade restrictions making it even more challenging to invest in the country.

President Joe Biden's executive order to ban investment in semiconductors, quantum computing and specific AI systems is of particular concern to tech-focused venture capitalists. But the new policy also has consequences for private equity.

There are still opportunities to be found in China, but its appeal among investors in Asian private equity is, at the very least, diminished. At the same time, those who continue to invest in the country will likely have to find new ways to navigate regulations as they contend with greater state oversight.

This is the Weekend Pitch, and I'm Andrew Woodman. You can reach me at andrew.woodman@pitchbook.com or @adwoodman.
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A message from the U.S. National Science Foundation  
Invention to impact
Kintsugi develops voice biomarker software to measure, predict, and scale access to mental healthcare with more effective screening and triage. Just 20 seconds of free-form speech can identify signs of depression and anxiety. Kintsugi (NSF-2036213) 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 research & development. By investing more than $200 million in startups annually, NSF helps teams navigate the earliest stages of technology translation. In the past five years, these companies go 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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Trivia
The agtech vertical exists at the intersection of technology, cultivation, climate and agriculture. After a steady decline, deal activity appears to be plateauing, according to PitchBook data. During Q2 2023 we tracked 210 deals within the space worth how much?

A) $432 million
B) $3.5 billion
C) $1.8 billion
D) $902 million

Find your answer at the bottom of The Weekend Pitch!
 

VC's looming deficit cliff

(Daniel Milchev/Getty Images)
Startups are having to stretch themselves even more in-between rounds in a sign that the era of free flowing capital—the era of overcapitalization—is over for now. Our recent analyst note lays out the changes to PitchBook's model and how to account for these mechanics in this new investment environment.
 

Public BDCs suit up to ride venture debt recovery

The slowdown in VC deals is turning more companies into borrowers, but the venture debt market lost its stride after the March collapse of Silicon Valley Bank.

The five public business-development companies dealing in venture debt, which already are reporting strong earnings, are selling shares and positioning themselves to be ready as the market stabilizes, according to our recent analyst note.
 

Medtech emerges from convalescence

(David Sacks/Getty Images)
VC funding in medtech is still below 2022's levels, but there are signs of recovery. Deal value and count in the sector have increased since Q1 2023, and VCs have demonstrated intrigue in new technologies related to precision medicine, sleep disorder treatment, and mixed reality surgical navigation.

Improved hospital margins and robust patient interest in elective surgeries also contribute to medtech's fair prognosis.
 

Quote/Unquote
"A lot of buyers have been priced out. If you don't have access to the bank of mom and dad to get that down payment, it's very challenging."

——The National Association of Home Builders' chief economist, Robert Dietz, made this statement to NPR regarding mortgage rates hitting a 20-year high of 7.09%.
 

Recommended Reads
Fake meat is bleeding, but it's not dead yet. [Wired ]

Inside Otter University: How Travis Kalanick's sales boot camp for young techies went off the rails. [Business Insider]

Can affluence and affordable housing coexist in Colorado's Rockies? [The New York Times]
 

Stay tuned
Keep an eye out for these insights and research reports coming out this week:
  • Q2 2023 Crypto Report
  • Q2 2023 Global Private Market Fundraising Report
  • Q2 2023 Retail Fintech Report
 

Trivia
(Vithun Khamsong/Getty Images)
Answer: C)

In Q2 2023, PitchBook tracked 210 deals worth $1.8 billion, a slight decrease from the previous quarter. Learn more about the vertical in our latest Agtech Report.

This edition of The Weekend Pitch was written by Andrew Woodman, Jacob Robbins, Claire Simpson and Laural Hobbes. It was edited by James Thorne and Laural Hobbes.

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