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The Daily Pitch: VC

April 24, 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:

Sluggish PE dealmaking is slowing a stronger recovery, according to our Global M&A Report

At the largest VC firms, rising turnover suggests unchecked growth among investment teams may be over

Mega-rounds make a comeback, grabbing over half of European VC deal value in Q1

Today's Top Stories

A rebuilding year for global M&A

Global M&A dealmaking is slowly on the mend after two consecutive years of declines. A stronger recovery is being held back by sluggish PE dealmaking, according to our latest Global M&A Report, sponsored by Liberty GTS.

Q1 M&A deal activity rose 5% year-over-year, reaching 10% despite falling short of Q4 2023 totals. Deal multiples have remained stable—a sign that the valuation reset may be complete—and might have room to move higher to catch up with elevated prices of public companies.

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VC investor headcount stalls after years of rapid growth

(Zeyu Wang/Getty Images)

Turnover at the largest US venture firms is rising, a sign that years of unchecked growth among investment teams may finally be at an end.

The number of investors at the 500 largest US VC firms by assets under management swelled 77% from 2017 through the end of 2022. But over the past 15 months, that growth slowed to just 2%, according to an analysis for PitchBook by Live Data Technologies, which tracks job change data.

Looking ahead, the growth of the leading VC firms will heavily depend on their ability to raise ever-larger funds, a prospect dimmed by high interest rates and a subdued IPO market.

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Divestitures rise as PE firms seek value

For nearly a decade, PE investors sought growth over value—a strategy that was rewarded as long as multiples expanded. But higher borrowing costs have capped valuations and sent investors flocking to a strategy long out of vogue: divestitures.

PE-led acquisitions of corporate divestitures have risen steadily as a share of all buyouts from an all-time low of 5.7% in Q4 2021 to 12.6% in Q1 2024, our latest analyst note explains. Divested assets tend to be cheaper, allowing firms with a clear valuation strategy to win big at a time when financial leverage is less impactful.

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People

Barclays hired Stephen Pick from Credit Suisse to lead its M&A business in the EMEA region.

Kegan Greene and Rob Freiman have resigned from their posts as co-heads of financial technology investment banking at Jefferies, Bloomberg reported.

VC Deals

Generative AI search startup Perplexity AI has raised $62.7 million at a $1.04 billion valuation in a round led by investor Daniel Gross.

International money transfer startup Pomelo raised $35 million in a Series A led by Vy Capital, TechCrunch reported.

Nominal, a defense software startup operating in stealth, raised more than $27 million from investors including Lux Capital, General Catalyst and Founders Fund, Bloomberg reported.

CN Bio raised $21 million in the first close of its Series B from investors including Bayland Capital and CN Innovation Holdings. The biotech company aids drug discovery with digital models of human organs.

Exowatt, which makes modular renewable energy systems for data centers, raised a $20 million seed round from Andreessen Horowitz, Atomic and Sam Altman.

Chinese startup Brise Pharmaceuticals, which is developing treatments for pain relief, raised $20 million in funding from investors including Shunxi Fund and Sherpa Healthcare Partners.

Protein snack maker Wilde raised $20 million in a round led by PE firm KarpReilly.

Austin-based Outpost, which is creating a parking network for semitrucks, raised $12.5 million in Series A funding led by GreenPoint Partners.

Maine-based industrial software startup HighByte raised a $12 million Series A led by Standard Investments.

Paris-based proptech startup Zefir raised €11 million in a round led by Zigg Capital.

PE Deals

Ardian agreed to sell a majority stake in UK music equipment maker Audiotonix to PAI Partners for around £2 billion.

KKR is acquiring Swedish pharmaceutical company Immedica Pharma, becoming an equal owner with healthcare investor Impilo.

General Atlantic has led a strategic minority investment in Brazilian sports company LiveMode.

APG has invested in Michigan-based textiles company CF Stinson.

IK Partners has acquired a minority stake in industrial polymers company A-Safe

Exits & IPOs

Infinite Reality acquired esports business Drone Racing League for $250 million, valuing the combined company at $3.5 billion. Drone Racing was backed by RSE Ventures, Formula One owner Liberty Media and Ferrari owner Exor.

Sichuan Baicha Baidao, a PE-backed Chinese bubble-tea maker, saw its shares drop 27% following its trading debut in Hong Kong.

Crescent Midstream, an oil pipeline company backed by The Carlyle Group, is exploring a sale valuing the company at about $1.3 billion including debt, Bloomberg reported.

Main Capital Partners sold Enovation, a Dutch digital care platform, to French infrastructure company Legrand.

Affinity Equity Partners is selling Island Hospital, a Malaysian healthcare provider valued at over $800 million, The Wall Street Journal reported.

Dutch mobility company AutoBinck acquired car sharing company SnappCar, Silicon Canals reported. SnappCar previously raised more than $26 million from AutoBink and other investors including Founders and Pymwymic, according to PitchBook data.

Fundraising

Texas-based PE firm The Sterling Group, which focuses on the middle market, has closed its sixth flagship fund on its $3.5 billion hard cap.

New York-based middle-market firm Vestar Capital Partners has closed a $1.2 billion continuation vehicle for its Circana stake.

Bay Area-based Crosslink Capital closed its 10th flagship VC fund on $350 million.

Swiss early-stage VC firm 14Peaks Capital has closed its debut fund on $30 million.

Belgian VC Impact Shakers Ventures raised a €20 million impact fund.

San Diego-based Behind Genius Ventures raised $8.9 million for its second fund, Fortune reported.

Chart of the Day

"Many female angel investors took a step back in 2023, however, as evidenced by the number of active angel investors, which dropped by more than half. Given the current state of the larger dealmaking environment, new entrants may be deterred from starting new ventures, and investors are now more wary of risky bets that have a lower chance of securing subsequent sources of capital through institutional investors and lenders. As a result, deal flow for female-founded companies receiving any angel investments stalled in 2023."

Source: 2023 US All In: Female Founders in the VC Ecosystem

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PitchBook News - Turnover on the rise at venture firms

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