AI IPO gives VCs a reality check for exits

VC cooks up foodtech solutions; Australia, New Zealand's young markets face stress; crypto VC Paradigm counts out $850M for Fund 3
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The Daily Pitch: VC
June 14, 2024
The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data
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Today's Top Stories  
Tempus AI prices IPO at 38% cut from valuation peak
(LL28/Getty Images)
AI-powered precision medicine company Tempus AI raised nearly $411 million in its IPO at a fully diluted market capitalization of $6.38 billion—a 38% discount from its $10.25 billion valuation set in 2022, according to PitchBook data.

While a great result for many investors, the pricing is a tough pill to swallow for others like Google, which bought into the healthtech specialist at a valuation above $8 billion in 2020. The company's largest institutional shareholder, Baillie Gifford, held shares worth $350 million at the IPO price.

The IPO pricing is a reality check that shows even an AI-heavy roadshow pitch must still overcome an unforgiving exit environment for unprofitable VC-backed companies.
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Out of the shadows: PE manages to sustain deal activity
Middle-market dealmaking continued to show year-over-year growth in Q1 despite plateauing from a burst of activity late last year, our latest US PE Middle Market Report shows. Factors including the recovery of deal multiples, improved borrowing costs and a continued focus on selling the best assets first have characterized the middle-market dealmaking so far.

While below their historical average, middle-market funds continue to outperform mega-funds, with a one-year horizon return of 12.7% compared to the latter's 7.6%.
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VC cooks up foodtech solutions
VC dealmaking in the foodtech industry has remained relatively static—with just over $2 billion invested across 246 deals in the first quarter, according to our latest Emerging Tech Research.

While global challenges linger, opportunities have sprouted in the sector. Analyst Alex Frederick highlights how foodtech startups are creating solutions to supply chain disruptions and other challenges in the cocoa crisis.
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Australia, New Zealand's young private markets face strong headwinds
While still in their early stages, Australia and New Zealand's private markets have not been immune to the challenging dealmaking climate—with PE and VC investments in the region slowing in recent years.

Exit value in both countries has yet to exceed the annual amount invested in PE or VC in any year, according to our inaugural 2024 Australia & New Zealand Private Capital Breakdown, sponsored by J.P. Morgan.

But optimism remains. The number of investors and amount of capital available for startups overall has grown significantly in the past decade, while PE dealmaking is still registering above 2020's levels.
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LP access to fund information hangs in the balance
(Drew Sanders/PitchBook News)
For the foreseeable future, the information imbalance between fund managers and their various limited partners may be in the hands of market players, not regulators.

Last week, a federal appeals court in New Orleans rejected the Securities and Exchange Commission’s recent amendments to the Investment Advisers Act of 1940, marking a major setback in the commission's campaign to level the playing field for investors.
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People  
Rachel Stock and Cecilia Kwan have been named chief compliance officer and CFO, respectively, of middle-market PE firm HGGC. Stock will also serve as general counsel.
 
VC Deals  
Dublin-based AccountsIQ has received a €60 million Series C from Axiom Equity for its accounting platform.

Avava, a Massachusetts-based startup developing laser skin-pigmentation treatment, raised a $35 million Series C from Jeisys Medical and Catalio Capital.

Echion Technologies, a UK-based developer of advanced lithium-ion battery materials, has received a £29 million Series B led by Volta Energy Technologies.

Findigs, a New York-based company that develops property management software, raised a $27 million Series B led by Nyca Partners.

Better Health, a San Francisco-based medical supplies specialist, raised a $14 million round from investors including Healthworx, University of Miami Health System and Mosaic General Partnership.

Unigrid, a startup creating batteries for long-term energy storage, received a $12 million Series A led by Transition VC and Ritz Venture Capital.

Fuze, formerly known as ChargeFuze, raised an $11.5 million Series A led by Beverly Pacific for its pay-per-use charging devices.

Berlin-based Restate, which helps developers build distributed applications, has secured a $7 million seed investment from Repoint Ventures, Essence VC and Firstminute Capital.
 
PitchBook webinar: Navigating the evolving credit landscape
As the debt markets surge and conditions become increasingly favorable to borrowers and their sponsors, competition for leveraged buyouts between syndicated lenders and private credit grows more and more pronounced. Now, as interest rates remain high, borrowers are experiencing much more flexibility throughout the credit landscape.

Join our credit experts as we leverage our enhanced credit intelligence solutions—powered by LCD—to discuss what market participants can expect for the remainder of the year. Learn how to streamline your credit workflows with PitchBook.

Register now to secure your spot.
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PE Deals  
Remaining bidders for Aareon, the software business of Aareal Bank, include Hellman & Friedman, TPG and Vista Equity Partners, Bloomberg reported.

RedSail Technologies, a company providing pharmaceutical software solutions, received a strategic growth investment from Leonard Green & Partners. Francisco Partners has also reinvested in the company.

Ardian is in talks to buy a majority stake in Alstef Group, a company that offers robotic solutions for airports and logistics.

BGF has exited UK cybersecurity company Garrison Technology following its acquisition by TPG-backed Everfox.

Doozer, a Germany-based property management software company, has been acquired by Zig, its Netherlands-based peer backed by Main Capital.

Maven Capital has completed an exit from GradTouch, a platform for graduate employers, to Pelican Capital, generating a 1.7x return.
 
Exits & IPOs  
Alamo Drafthouse Cinema, a dine-in movie theater chain with 35 locations, has been acquired by Sony Pictures Entertainment.

Penna Cement has agreed to be bought by Ambuja Cements, a company owned by publicly listed Adani Group, for 104.2 billion rupees (about $1.2 billion).

GLP Capital Partners, a real estate investment firm with assets across Asia, Europe and the Americas, is in talks to be acquired by Ares Management, Bloomberg reported.

NIP Group, a Sweden-based esports organization with professional teams in Europe and Asia, has filed for its US IPO.

Uizard, a Copenhagen-based product design platform provider, has been acquired by San Francisco-based visual workspace company Miro.
 
Fundraising  
Paradigm, a VC firm investing in cryptocurrency technology, raised $850 million for its third fund, according to co-founder Matt Huang.

JP Morgan has closed its first life sciences PE fund on $500 million. The fund will target biotech companies focusing on weight loss drugs, Bloomberg reported.

Northleaf Capital Partners has raised $370 million for its third VC fund focused on Canadian startups. The Canadian government invested in the fund through the Venture Capital Catalyst Initiative.

Kensington Capital Partners has raised $290 million for its third VC fund, also receiving support from the Venture Capital Catalyst Initiative.
 
Chart of the Day  
Source: Q1 2024 Medtech Report
 
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