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PitchBook
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The Weekend Pitch |
April 12, 2020 
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A holiday weekend doesn't quite feel the same these days |
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The Labor Department announced this week that another 6.6 million Americans have filed for unemployment, taking the number of total claims over the past three weeks of coronavirus chaos to nearly 16.8 million. Somewhere around 5% of the US population is now out of a job—and that's only those who have formally applied for benefits.
It's a completely unprecedented spike. But then again, we live in unprecedented times. And startups, of course, haven't avoided the carnage.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. Job losses continue to mount at some of the buzziest and most well-funded startups around, which is one of 9 things you need to know from the past week: |
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The empty chairs are adding up in Silicon Valley.
(Westend61/Getty Images) |
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1. Layoff laments
The coronavirus outbreak and ensuing shutdowns have hit some industries harder than others. That's reflected in some of the most notable VC-backed companies that have parted ways with workers in recent days, either temporarily or permanently.
And there are fears in the industry that the damage could continue for quite some time.
The near-total evaporation of travel and tourism is bad news for Oyo, an Indian hotel-chain startup. The company announced this week that it will put "a significant number" of employees on furlough, or unpaid leave, with reports indicating the number is in the thousands. This comes on the heels of 5,000 job cuts in March, during the early days of COVID-19's global spread. It's believed none of Oyo's workers in India will be affected until that country's lockdown ends. But it's still a worrisome time for a startup that was reportedly valued at $10 billion just four months ago.
A lack of travel is also hammering Away, a luggage unicorn that had already experienced a bumpy few months before a pandemic arrived. This week, the company laid off 10% of its workers and furloughed a further 50%, citing sales figures that have plunged more than 90% in recent weeks.
The emptying of office buildings and the shuttering of restaurants is proving a harmful combination for ezCater, a corporate catering startup valued at $1.25 billion last year, according to PitchBook data. The company reportedly laid off 400 of its 900 employees this week. A statement to Axios on the move put it thusly: "There is not enough sugar on the planet to sugarcoat this."
Restaurant closures are also causing hard times at Toast, a creator of point-of-sale software for eateries. Less than two months ago, the business raised $400 million in VC at a $4.9 billion valuation, according to PitchBook data. This week, it either laid off or furloughed about 50% of its workforce, reportedly accounting for well over 1,000 job losses.
For at least one startup, it was the layoffs at other companies that led to layoffs of its own. Reports emerged this week that AngelList has cut jobs from its talent unit, which provides hiring help for startups. With few companies hiring, it's become a division with little to do.
That's just the damage from recent days. Look back over reports from the past few weeks, and the list grows longer. The lack of travel has caused layoffs at companies such as TripActions and Zeus Living. Social-distancing measures contributed to job cuts at names like The Wing and ClassPass. Lockdowns have led to layoffs and furloughs at scooter startups Bird and Voi. Not even well-funded unicorns like Rent the Runway and Compass have been immune.
This Tuesday, Lux Capital partner Bilal Zuberi weighed in on Twitter: "We are only starting to see startup layoffs, and many many more are to come," he wrote. "So many startups are absolutely crushed."
Hunter Walk, a partner at Homebrew, responded: "I don't think it's crazy to predict like 80% of startups will have to cut between 10-50% of employees over next 2-4 quarters."
We're still a long way from that scenario. But there's a real chance that the cascade of lost startup jobs is just getting started.
2. WeWork sues SoftBank
In some ways, it seemed inevitable that the long, unusual saga of WeWork and SoftBank would end up in the courts. Now, here we are. The special committee of WeWork's board filed suit against SoftBank this week after the Japanese conglomerate pulled out of a planned deal to buy $3 billion worth of secondary shares in WeWork, alleging breaches of contract and fiduciary duty. It's the latest twist in a roller-coaster journey for SoftBank and its massive Vision Fund.
3. Airbnb stays busy
On Monday, Airbnb announced $1 billion in new debt and equity funding from private equity firms Silver Lake and TPG Sixth Street Partners, with later reports indicating those backers will receive warrants that can be converted to shares at an $18 billion valuation—a far cry from the $31 billion figure that came with Airbnb's latest VC round. But even that 10-figure funding might not be enough for the ailing vacation rental company: On Tuesday, reports emerged that Airbnb was still considering taking on as much as $1 billion in additional debt funding.
4. Cancellations continue
More and more deals that were lined up before the coronavirus crisis are now falling by the wayside. Major aerospace suppliers Woodward and Hexcel called off a planned merger this week that would have valued Hexcel at $6.4 billion. PE firms TriArtisan Capital Partners and Sentinel Capital Partners will have to look for a new exit route from TGI Friday's after a planned $380 million sale fell apart this week. And EQT is walking away from an agreement to buy Metlifecare, an operator of retirement homes in New Zealand, for NZ$1.49 billion (about $900 million). |
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TGI Friday's will remain in PE hands for at least a while longer.
(Mike Mozart/CC BY 2.0) |
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5. Crisis mega-funds
PitchBook analysts expect fundraising to slow down in the coming months. But for now, at least, major new vehicles are still in the works. New Airbnb backer Silver Lake is seeking between $16 billion and $18 billion for its latest tech fund, according to Reuters. Index Ventures has raised $1.2 billion for a new growth fund and $800 million for early-stage deals. And China's Qiming Venture Partners closed its latest flagship fund this week on $1.1 billion.
6. Timely funds
Other funds closed this week seem particularly suited to our current moment. Deerfield Management raised $840 million for its new healthcare fund, the latest sign of increasing VC interest in life sciences. And Silverfern Group held a first close on $110 million for its latest opportunities fund, a type of vehicle that typically targets distressed assets and other unexpected chances for profit.
7. An IPO emerges
Keros Therapeutics navigated Wall Street's troubled waters to conduct a successful IPO, pricing its shares at the top of their range and closing its first day of trading up another 25%. It's another sign that, in certain sectors, deals are still getting done. Two other examples from this week: Podium, which raised $125 million for its online customer-messaging platform, and BigBasket, an online grocery startup from India that brought in a reported $60 million in new funding.
8. Data deals
Cohesity was another startup to secure major backing this week, hauling in $250 million at a $2.5 billion valuation to continue building out its data-storage services. The data industry could be transformed entirely if a different startup, PsiQuantum, achieves its ultimate aim of building a high-powered quantum computer; it announced $150 million in new funding this week from an investor list that includes Microsoft's M12 venture arm.
9. Astronomical acquisitions
Koch Industries completed its full takeover of enterprise software giant Infor this week, buying out Golden Gate Capital's remaining stake at an astronomical valuation that prior reports pegged at $13 billion. It was also a notable week for one of astronomy's most famous names: The VC backers of Galileo Financial Technologies agreed to sell the company to SoFi for $1.2 billion, continuing a string of huge fintech mergers in 2020 that also includes Visa's planned $5.3 billion purchase of Plaid and Intuit's anticipated $7.1 billion takeover of Credit Karma.
View the full list online |
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| It could be a long road to safety for some companies and investors. (Johannes Hulsch/EyeEm/Getty Images) |
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The canceled deals popping up with more and more frequency in recent weeks is just the beginning. The real coronavirus-inspired chill is still to come.
That's the thrust of PitchBook's Q1 2020 US PE Breakdown, our latest report dedicated to the movings and shakings of the buyout market. In just about every facet of the industry, from dealmaking to fundraising to exit activity, our analysts believe PE firms are preparing for a slowdown.
The same seems to be true for dealmakers of every stripe. As my colleague Eliza Haverstock wrote this week, the M&A market is also setting into a period of upheaval and uncertainty. |
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The skies are darkening over Silicon Valley.
(Jutta Kuss/Getty Images) |
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It's not difficult to find opinions on the coronavirus these days. But what to believe? As Priyamvada Mathur wrote this week, that's the question being tackled by startups such as NewsGuard and Graphika, which are turning their attention to debunking pandemic conspiracy theories.
Every country is responding differently to the viral threat. When it comes to the protections being offered to startups, our Andrew Woodman writes that companies in the UK wish their government would respond more like France and Germany.
Years from now, we may view Q1 2020 as the dying days of a VC golden age. James Thorne turned to PitchBook data for a look at the quarter's 25 largest venture investments. |
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Not all of KFC's marketing moves have been so successful.
(Dianne Manson/Getty Images Sport) |
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You know a marketing slogan is good when it's inspiring the name of another company nearly 70 years after its creation. And it's likely thanks to KFC's coinage of "finger-lickin' good" that the world now has Fingerlix. A seller of pre-cooked and frozen food based in India, the startup reportedly raised 140 million rupees (about $1.8 million) this week from a group of investors that includes Silicon Valley giant Accel and food-delivery unicorn Swiggy.
Considering the culture's current germaphobia, now may not be the proper time for finger-licking, no matter how tasty a meal may be. But for some startups, it's still an OK time for fundraising. |
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Recommended reads
You've probably heard the phrase "test and trace." What might such a program of virus surveillance look like in the US? [The Atlantic]
In culture as well as politics, the coronavirus outbreak is throwing into sharper relief than ever the growing divide between America's haves and have-nots. [Popula]
A longtime chronicler of disasters searches for hope in a stricken world where—for now, at least—optimism may be in short supply. [The Guardian]
Never had an audition? Never shot an acting reel? It's no problem for a new generation of TikTok stars inking representation agreements with the biggest agencies in Hollywood. [The New York Times]
A fedora-wearing rapper in his 40s who mixes rhyme schemes with mindfulness has become a polarizing presence in the world of yoga. [Outside]
Don't expect hand sanitizer to return to the shelves of your local grocery store anytime soon. [Bloomberg]
Tech billionaires like Jack Dorsey and Bill Gates are stepping up to the plate in a pandemic. It might be worth asking what their growing reach means for society at large. [Recode]
For some, quarantine is revealing just how reliant life has become on the gig economy. [Gen]
The coronavirus has been wreaking havoc on digital media upstarts such as BuzzFeed, Vice and Vox Media. [The Wall Street Journal]
Amazon's Kindle Direct Publishing arm has proved to be a haven for authors of all sorts who want to get their ideas out into the world. Including white supremacists. [ProPublica] |
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Quote of the week
"SoftBank is considered a blight on the ecosystem, not a savior. The whole industry would be happier if they had never shown up."
—Duncan Davidson, a partner at Bullpen Capital, in an interview with Forbes |
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The Weekend Pitch is produced by editor Kevin Dowd.
Were you forwarded this newsletter? Sign up at pitchbook.com/subscribe. |
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