PitchBook News - VCs eye open-source models for gen AI

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The Daily Pitch: VC

October 26, 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 Q3 2023 Global M&A Report explores the signs for a possible revival next year.

Open-source large language models are a threat to OpenAI's meteoric rise

VC investment in Europe is expected to fall short of 2022's totals

Today's Top Stories

M&A recovery gets pushed out to 2024

M&A deal value nearly hit a 10-year low in the third quarter, but market conditions are pointing to a recovery next year. Our Q3 2023 Global M&A Report, sponsored by Liberty GTS, breaks down trends shaping dealmaking and explores the signs for a revival.

Trillions of dollars in dry powder for PE sponsors and cash piles kept on hand by corporations are positioned for new deals. In addition, lower valuations may spur public strategic buyers to scoop up private targets.

read the report

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VCs eye open-source large language models for generative AI's future

(Jenna O'Malley/PitchBook News)

OpenAI and the other main providers of large language models, which make up the underlying technology of generative AI, are facing their biggest threat so far—and it isn't a Big Tech incumbent.

Startups are embracing open-source versions of these models with the encouragement of their VCs investors, which are making an effort to deploy their capital is deployed more efficiently. Switching to these open-source models, VCs are betting, will drive down costs set by the big LLM providers and will lower the barriers to entry.

A bigger, more complex industry eBook

In Apex Group's latest e-book, "A bigger, more complex industry," Apex unpacks the specific trends yet to take place in the industry, including themes such as technological advancements, political changes, and economic shifts. What are some of these potential trends that could shape the private equity industry in the coming decades?

Apex is predicting … a sharp increase in global interconnectedness and integration, a stronger focus on sustainability and ESG, data transparency and technology and an uptick of alternative investments.

To find out more, download the Apex eBook on the Apex Group website here.

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People

Former Credit Suisse COO Francesca McDonagh is joining Montagu Private Equity-backed Universal Investment as the Frankfurt-based fund group's CEO.

VC Deals

CentML raised $27 million in a seed round led by Gradient Ventures for its machine learning model optimization platform.

Webcam hardware startup Opal Camera raised a $17 million Series A led by Founders Fund.

Eldercare technology company Sage raised a $15 million Series A led by Maveron.

OnsiteIQ, which offers a construction platform for commercial real estate, raised a $14 million Series B led by Vertical Venture Partners.

Enterprise AI sales tech startup Siro secured $14 million in a Series A led by CRV.

Dublin's Kota, which offers an insurance and retirement platform for companies, has secured €5 million in a round led by EQT Ventures.

PE Deals

KKR is close to acquiring a $400 million stake in OMS Group, a Malaysia-based subsea cable company, in a deal that would value OMS at nearly $1 billion, Bloomberg reported.

Macquarie Asset Management agreed to acquire a majority stake in fiber internet provider SwyftFiber, based in Tennessee, through a $275 million structured equity investment, Bloomberg reported.

Oaktree Capital Management and JHR Capital-backed Foodtastic, a Canadian restaurant franchisor, acquired British Columbia-based quick-service restaurant brand Noodlebox.

Single family office Pearl Street Equity acquired Salt Lake City-based Famous Brands International, a franchising business that owns brands Mrs. Fields and TCBY.

Portfolio Companies

EQT-backed Lithuanian online marketplace operator Vinted is considering a share sale that could be worth over €200 million, the Financial Times reported.

Fundraising

Alpine Investors closed a $3.4 billion single-asset continuation fund for Apex Service Partners, a Tampa-based residential home services company. Backers include Blackstone Strategic Partners, HarbourVest Partners and Lexington Partners.

Fintech specialist VC Flourish Ventures raised $350 million for its evergreen fund, TechCrunch reported.

Tikehau Capital launched the latest iteration of its Brienne cybersecurity fund and held a €200 million first close.

Investors

New Zealand pension fund Generate KiwiSaver Scheme has committed $25 million to Los Angeles-based PE real estate firm CIM Group.

Chart of the Day

"Nontraditional investors include sovereign wealth funds and hedge funds, among others. Since peak participation in 2021, such market players saw their private market investments become a larger part of allocations as public equity markets valuations declined. As a result, these investors looked to rebalance their portfolios, resulting in less VC deal activity in 2022. Since then, whilst participation has declined somewhat, we are witnessing more resilience than the declines seen in 2022."

Source: PitchBook's Q3 2023 European Venture Report

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