PitchBook News - VC goes vertical on AI

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The Daily Pitch: VC

January 30, 2024

The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data

In today's Daily Pitch, you'll find:

Do funds dedicated to high-net-worth clients leave LPs vulnerable to less profitable deals?

VCs shift interest to sector-specific vertical AI deals

Edtech Byju's is looking to raise $200 million at a 99% valuation discount

M&A deal value is low, but other metrics signal improvement

Today's Top Stories

VCs go vertical in backing sector-specific AI projects

(Andriy Onufriyenko/Getty Images)

Last year saw a massive rise in VC investments in foundational generative AI models.

But now, VCs are turning more attention to vertical AI startups that focus on specific industries as they try to capitalize more quickly on the AI boom.

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Amid private wealth push, investors raise concerns about cherry-picking

(Spencer Platt/Getty Images)

Private equity wants to attract a new kind of LP: the high-net-worth investor.

As the industry deepens its foothold in products for traditional wealth management clients, participants have flagged potential byproducts of the trend, including the risk of cherry-picking.

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Byju’s equity wipeout could further sour VCs on edtech

(chanakon laorob/Getty Images)

Byju's, one of the world's most well-funded edtech companies, is attempting to raise $200 million from existing investors at a 99% valuation discount to its $22 billion valuation from 2022, according to reports.

Byju's has raised more than $7 billion in equity and debt from investors including SoftBank, UBS Group, General Atlantic and Silver Lake, according to PitchBook data. The latest share sale, known as a rights issue, gives current backers the option to buy additional stock, but they are not required to do so.

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Exploring signs of revival for M&A dealmaking

Worldwide M&A deal value reached $3 trillion in 2023, marking it the second-weakest year in a decade. However, other metrics imply the worst may be behind us, according to our 2023 Annual Global M&A Report, sponsored by Liberty GTS.

The total estimated M&A deal count was 37,300—the third highest on record. Additionally, the Federal Reserve's pivot to interest-rate cuts raises optimism for an upcoming recovery in the deal market. Lastly, public multiples have sprinted ahead of private multiples, setting the stage for a catch-up move.

read the report

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LCD's new default rate analysis: Sponsors drive distressed exchanges

(Alengo/Getty Images)

More borrowers of riskier debt have turned to distressed exchanges, seeking to avoid bankruptcy. That's one reason the leveraged loan default rate has remained low as the cost of debt has skyrocketed.

PitchBook LCD's new Dual-Track Default Analysis zeros in on distressed exchanges, giving a fuller view of the default picture. When these exchanges are included, the default rate nearly doubles.

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VC eyes future in carbon nanotubes

Investors are looking for new opportunities in carbon nanotubes, according to our recent Emerging Space Brief. These small sheets of graphene rolled into a tube are used in a variety of fields, including medicine and batteries, due to their semiconducting properties. Our analysts offer an overview of the tiny tech and cover key deals and trends in the space.

read it now

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Since yesterday, the PitchBook Platform added:

19

VC valuations

2041

People

774

Companies

41

Funds

See what our data software can do

The Daily Benchmark:
2019 Vintage European Debt Funds

Median IRR

10.38%

Top Quartile IRR

11.86%

0.23x

Median DPI

Select top performers

Inveready Venture Finance III

Blantyre Special Situations Fund I

MCP Private Capital Fund IV

*IRR: net of fees

16 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

Beijing-based Xreal has raised a $60 million Series C+ round led by Alibaba, VentureBeat reported.

Switzerland-based ResponsAbility Investments plans to invest up to $25 million in Indian EV ridehailing and charging company BluSmart.

Switzerland's Transmutex, a startup developing energy from nuclear waste, has secured a $23.2 million investment from Union Square Ventures and Steel Atlas.

CarbonPool, a Swiss insurance startup for carbon markets, has raised $12 million co-led by Heartcore Capital and Vorwerk Ventures.

Compa, a Newport Beach-based market intelligence startup, has raised a $10 million Series A led by Storm Ventures.

Hatch Africa, a poultry distributor targeting underserved rural households in Eastern Africa, has secured $9.5 million from investors including AgDevCo and IDH Farmfit Fund.

Berlin-based Akirolabs has raised $5 million in a seed round that included High-Tech Gründerfonds, OTB Ventures and D11Z.Ventures for its SaaS platform aimed at procurement teams.

Wondercraft, a London-based startup building a platform for AI-generated audio content, has raised $3 million from investors including Y Combinator and Steven Bartlett.

Chipmetrics, a Finnish startup developing testing tools for advanced materials and electronics, has raised €2.4 million led by High-Tech Gründerfonds and Occident.

PE Deals

Blackstone has approached lenders for $250 million in private debt to help finance its $2.3 billion acquisition of Rover Group, Bloomberg reported.

European middle-market firm Three Hills invested in Hispatec, a Spanish software and technology company focused on the specialty crops segment.

UK firm Exponent is the front-runner to acquire Irish pharmaceutical company Chanelle Pharma in a deal worth more than €300 million, The Sunday Times reported. HIG and Duke Street Capital are said to be among rival bidders.

Don't miss our upcoming webinar

Given the strong public equities rebound back to 2021 highs, investors are wondering when PE will demonstrate similar results. Returns were uncharacteristically low in 2023, and deal activity ran at half speed.

In this webinar, our analysts will examine recent trends and look ahead to explore if this is the end of an era or a pause that will eventually revive the market. Key topics include:

How PE can kickstart the exit engine and return money to investors.

The effects of "higher for longer" interest rates.

How technology and healthcare are set up for PE outperformance.

Register now to secure your spot.

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Exits & IPOs

The Carlyle Group is considering a sale of Amsterdam-based HSO, a Microsoft cloud solutions integrator, for about $1 billion, Bloomberg reported.

Healthcare services company BrightSpring ended its second day on the Nasdaq below its offering price of $13 a share, closing at around $10.50.

Fundraising

Travel and leisure investor KSL Capital Partners has closed a $3 billion-plus continuation vehicle for Alterra, a mountain destination and adventure travel company.

Ambienta has held a first close on its Ambienta Sustainable Credit Opportunities fund, reaching around half of its initial target of €500 million.

SoftBank Ventures Asia has closed on 200 billion Korean won (about $150 million) for its 2023 Alpha Korea Fund, exceeding a 100 billion won target. The close coincides with the firm rebranding as SBVA following its acquisition by The Edgeof in 2023.

Chart of the Day

Source: 2023 Annual Global M&A Report

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PitchBook News - VC goes vertical on AI

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