Prestigious VCs aren't a venture debt guarantee

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The Daily Pitch: VC

March 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:

Recent deals made by VC's top firms show crypto growing in popularity again

Prestigious backers are no longer enough to guarantee a startup can secure venture debt

What steps can founders take to get their startup acquisition ready?

Investors riding out the liquidity crunch powered a rise in secondaries fundraising as others fell

Public BDCs that specialize in venture debt capitalize on sluggish investing and exits

Today's Top Stories

Early-stage startups seeking venture debt find investor prestige isn't enough

(Noah Berger/Getty Images)

A term sheet from Sequoia or Khosla Ventures opens a lot of doors for a founder. But increasingly, it's no guarantee of venture debt funding.

One year on from the Silicon Valley Bank crisis and the widespread disruption to the venture lending market, more lenders have moved upmarket.

"The dynamic has completely flipped," said Zack Ellison, co-founder of private credit firm Applied Real Intelligence, which offers venture debt to startups. "It used to be that lenders would ask founders, 'Who's backing you?' If they'd raised millions from VCs like Sequoia, Andreessen and Founders Fund, that was often good enough. It no longer is."

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The Daily Benchmark:
2015 Vintage European Debt Funds

Median IRR

7.90%

Top Quartile IRR

9.36%

0.91x

Median DPI

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ICG Europe Fund VI

Veld Credit Opportunities Fund III

Alcentra European Credit Opportunities Advantage Fund

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People

Lila Tretikov is joining NEA as a partner and head of AI strategy. Tretikov most recently served as deputy chief technology officer at Microsoft.

Chamath Palihapitiya's Social Capital has fired two partners, Jay Zaveri and Ravi Tanuku, over an AI-related investment dispute, according to reports.

VC Deals

Data security startup Cyera is in talks to raise up to $200 million at a $1.55 billion valuation, Business Insider reported.

California's Luminary Cloud, a developer of computer-aided engineering software, raised $115 million in a round led by Sutter Hill Ventures.

Healthcare technology startup Zephyr AI, which is based in Virginia, raised $111 million in a Series A backed by Eli Lilly, Revolution Growth and others.

San Francisco-based cybersecurity startup Nozomi Networks raised a $100 million Series E backed by Mitsubishi Electric and Schneider Electric.

Indian B2B fintech software startup Perfios secured $80 million from Teachers' Venture Growth, the growth and late-stage-venture unit of the Ontario Teachers' Pension Plan.

Dutch cybersecurity startup Eye Security raised a €36 million Series B led by JP Morgan Growth Equity Partners.

Swedish micromobility operator Voi raised $25 million from investors including VNV Global, Creandum and Balderton.

MMC Ventures led a €12 million Series A for Estonian cybersecurity startup BotGuard OÜ.

Austrian electric vehicle fleet management company Necture secured additional funding for its Series A, bringing the round's total to €7 million.

PE Deals

Food and beverage investor Peak Rock Capital is acquiring California Custom Fruits and Flavors, an ingredients company, in a deal valued up to $500 million.

TA Associates has made a strategic growth investment in PowerGem, which develops modeling software for the electric power industry.

I Squared Capital is acquiring the remaining 55% stake in Rubis Terminal, a liquid and gas storage firm.

Credit-focused asset manager HalseyPoint has agreed to form a partnership with French alternative asset firm Sagard, which will acquire a 40% stake in HalseyPoint.

Michigan-based digital commerce agency CQL has received a strategic investment from Superstep Capital.

Portfolio Companies

Blackstone-backed ecommerce platform company Kite has shut down, The Information reported.

WM Morrison, the UK supermarket backed by Clayton, Dubilier & Rice, has posted a £1.1 billion loss on revenue of £18 billion, for the 52 weeks ending with October 2023. CD&R bought the chain for £7 billion in 2021.

Exits & IPOs

EQT-backed skincare company Galderma Group set the price range for its IPO and could raise roughly 2.3 billion Swiss francs (about $2.6 billion) in the listing, according to reports.

TPG-backed Airtel Money, the mobile money unit of African telecom operator Airtel Africa, is considering an IPO that could value the company at over $4 billion, Bloomberg reported.

EQT agreed to sell a stake worth €1.1 billion in German prosthetics company Ottobock back to the family of Hans Georg Näder, Bloomberg reported.

Fundraising

KSL Capital Partners held the final close of its sixth fund, a travel- and leisure-focused vehicle, on roughly $2 billion.

Fulcrum Equity Partners, an Atlanta-based firm that invests in healthcare services and B2B companies, raised a $372 million Fund V.

Investors

KKR is leading a $500 million debt financing package for HarbourView Equity Partners, an investment firm with an extensive music rights catalog.

Chart of the Day

"Larger liquidation multiples and participating preferred shares haven't become significant inclusions in terms sheets, but cumulative dividends were more common in 2023 than any year since 2013, and those dividends increased in size."

Source: 2023 Annual US VC Valuations Report

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