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The Daily Pitch: VC

February 14, 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:

Startups, trends and opportunities to watch in the gaming sector

Arm's performance makes a splash in our IPO index of formerly PE-backed companies

TPG reported a year-over-year drop in its distributable earnings

PE healthcare services deals declined but still reached their third-highest number yet

LPs raise the bar for which VC funds they're willing to back

Today's Top Stories

What LPs look for in a VC fund

VC fundraising has become a brutal slog. Indeed, LPs' bar for backing a venture vehicle has risen significantly. Allocators are prioritizing funds whose predecessors converted returns into cash, remained disciplined during the 2021 market frenzy, and had a thoughtful strategy around fund size increases.

Emerging managers with unique networks and relevant industry experience can stand out from the pack. Our recent analyst note outlines expectations for smaller fund sizes, fewer new products and a shakeout of mediocre managers who struggle to adapt.

read it now

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Gaming continues leveling up

Despite a relatively subdued year, the gaming VC ecosystem ticked upward in Q4, according to our latest Emerging Tech Research. Across 126 deals gaming startups brought in $1 billion from VCs, snapping back to the more realistic level of investment seen pre-pandemic.

As gaming continues to grow even bigger, content moderation and back-end service startups are emerging opportunities in the sector. Our Q4 2023 Gaming Report highlights the startups, trends and opportunities worth paying attention to.

read the preview

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PE IPO Index gets strong-Armed

Our IPO index of formerly PE-backed companies is up 15.9% this year, thanks largely to the performance of UK-based chip designer Arm.

The SoftBank-backed company's stock soared 77% after the AI craze drove sales sharply higher in its latest earnings. Arm comprises 27.4% of PitchBook's capitalization-weighted index, owing both to its large size and the dearth of PE-backed IPOs in recent years.

Our VC-backed index has risen 9.5% in 2024, and the DeSPAC index is down 2.5%.

explore the indexes

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PE braces healthcare services deals as add-ons fall

(Peter Dazeley/Getty Images)

PE dominated the healthcare services space by announcing or closing an estimated 788 deals last year, a year-over-year decline that still surpassed pre-pandemic levels to mark the third-strongest year ever.

But, under the pressure of high interest rates and a labor shortage spurred by the mass workforce exodus in the wake of the pandemic, deal size and structure have changed fundamentally.

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Funds

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Top Quartile IRR

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TrueBridge Capital Fund IV

TrueBridge-Kauffman Fellows Endowment Fund IV

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People

CVC Capital Partners co-founder Donald Mackenzie is stepping back ahead of the firm's much-anticipated public listing, the Financial Times reported.

European private credit specialist Investec Alternative Investment Management has picked Alicia Forry as its new head of ESG for alternatives.

VC Deals

California-based BioAge, a biotech startup developing therapies for obesity and metabolic diseases, raised a $170 million Series D led by Sofinnova Investments.

Sudo Biosciences, an Indiana-based biopharmaceutical startup, raised a $147 million Series B led by Enavate Sciences and TPG.

ProfoundBio, a Seattle-based cancer therapy specialist, raised a $112 million Series B led by Ally Bridge Group.

Antithesis, a software testing and debugging startup based in Virginia, raised $47 million in a seed round from Amplify Partners, Tamarack Global and First In Ventures.

Intel Capital, Atlantic Bridge and Supernova led a more than $40 million round for semiconductor startup Cambridge Mechatronics.

Helsinki's Bob W raised €40 million in Series B led by Evli Growth for its short-stay apartment rental marketplace.

Satellite connectivity specialist Skylo secured $37 million led by Intel Capital and Innovation Endeavors.

Don't miss our upcoming webinar

Despite poor public stock performance last year, our analysts say the economy performed better than anticipated, and we can anticipate a steadier trickle of IPOs in 2024 if interest rates begin to decrease. Still, intensifying hurdles like dwindling cash runways and access to capital are driving startups and investors to approach 2024 with even greater caution.

In partnership with the National Venture Capital Association (NVCA) and sponsored by J.P. Morgan, Dentons, and Deloitte, this webinar will highlight key findings from the Q4 2023 PitchBook-NVCA Venture Monitor and what investors should be aware of in 2024. Key topics include:

Later-stage companies, many of which should have exited by now, have been impacted the most by the significant slowing of deal activity YoY across all stages.

Despite some high-profile IPOs, we are far from an IPO comeback, leaving many companies at the mercy of an investor-friendly fundraising market.

Nontraditional investors have continued to reduce their VC appetite. Given the current interest rate environment, we don't expect many of them to return for quite some time.

Register now to secure your spot.

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PE Deals

NYSE-listed Expro has agreed to acquire Buckthorn Partners-backed Coretrax, a wellbore cleanup and oil drilling company, for approximately $210 million.

Australian banking giant Macquarie is nearing a deal to purchase a significant stake in the wholesale arm of British broadband provider TalkTalk Telecom, Sky News reported.

Salesloft has acquired Vista Equity Partners-backed Drift, an ecommerce conversational AI company.

Blackstone is planning to merge industrial property landlords St. Modwen and Industrials REIT, Bloomberg reported.

Clayton Dubilier & Rice has completed its acquisition of Shearer's Foods, a contract manufacturer and private label supplier serving the North American snack industry, from the Ontario Teachers' Pension Plan.

Nordic Capital has agreed to acquire SaaS financial services company Zafin.

PE-backed Zendesk has acquired Klaus, which offers an AI-powered management platform.

LPL Financial has agreed to acquire New York-based Atria Wealth Solutions, a wealth management company.

Portfolio Companies

Fintech startup Bolt has cut its valuation by 97% in a share buyback transaction, The Information reported. Valued at $11 billion in 2021, the Tribe Capital buyback values the company at $300 million, according to the report.

Fundraising

KSL Partners has raised a $3 billion continuation fund for ski resort operator Alterra Mountain Company.

Epiris has closed its third namesake fund on £1.044 billion.

Investors

Houston-based CAZ Investments committed $1 billion to Blue Owl Capital's GP Stakes Fund VI.

The Carlyle Group has launched a new semi-liquid European private credit strategy offering individual private wealth investors access to its global credit platform.

Swiss VC firm Wingman Ventures rebranded as Founderful. It also raised $85 million for its latest Swiss AI- and tech-focused vehicle, which is targeting $120 million.

Paris-based GP stakes investor Armen bought up to 32% of deep-tech investor Jolt Capital.

Struggling UK logistics company Yodel has been acquired by YDLGP, a newly formed company backed by a consortium of investors including investment bank Solano Partners and executives from rival PE-backed company Shift.

Chart of the Day

Source: Vertical Opportunities in a Reopened IPO Window

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PitchBook News - What LPs look for in a VC fund

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Early-stage VCs step up grab for cash

Fintech on the auction block

Renewed optimism for private markets

New key for PE: Adding value

Founders edge into VC LP bases

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