PitchBook News - The alphabet soup of VC round labels

Plus: Building a better budgeting app, PE dealmaking still growing. the European startup lifecycle & more
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The Weekend Pitch
June 16, 2024
Presented by Masterworks
(Mara Potter/PitchBook News)
German graphene-based chipmaker Black Semiconductor recently raised €254.4 million ($272.2 million) for its Series A, a large amount but by no means the biggest of its ilk to close this year. In April, Chicago biotech startup Xaira Therapeutics closed a staggering $1 billion Series A, while generative AI company H Company pulled in $220 million for its seed just a few weeks ago.

The rounds show that eyewatering amounts can be raised even in this challenging fundraising market. They are also proof that the alphabetical labeling convention for funding rounds has become increasingly meaningless, particularly for early-stage companies, offering a skewed perspective on a startup’s growth journey.

The origins of the traditional VC labels—seed, Series A, Series B, etc.—are unclear, but they have been used for decades to provide a clear framework for understanding a startup’s development and funding expectations. But as disparity in deal sizes within stages has grown over the last few years, the lines between the categories have become blurred.

It's past time to clear up this picture.

I'm Leah Hodgson and this is The Weekend Pitch. You can reach me at leah.hodgson@pitchbook.com or on X @LeahFHodgson.
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A message from Masterworks  
The unexpected billionaire asset class smart money is buying this week
One group of investors is getting proceeds from an $8 million sale this month, and more are piling in. Few people realize that one asset class has quietly outpaced the S&P 500 with -.06 correlation (‘95-’23): contemporary art.

Now, one firm has taken on roughly $1 billion of investor funds across over 400 art investments. After all, with stocks breaking record prices, the Fed keeping interest rates high, and POTUS proposing to double capital gains taxes, now the savvy are trying to diversify their wealth.

That firm has already achieved representative net annualized returns like 17.6%, 17.8%, and 21.5% from 23 investment opportunities to date.

New investors are considered on a first-come, first-serve basis, but PitchBook readers can skip the waitlist.

Past performance is not indicative of future returns. Investing involves risk. masterworks.com/cd
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Trivia

The VC dealmaking landscape has been tough, with investors taking a cautionary approach to investing. In Europe, according to PitchBook’s Q1 2024 European Venture Report, the number of active VCs has shrunk by more than 50%. How many active European investors have there been so far in 2024?

A) 1,955
B) 1,223
C) 906
D) 871

Find your answer at the bottom of The Weekend Pitch!
The never-ending search for the perfect budgeting app
(SolStock/Getty Images)
After two leading personal financial management apps—Mint and Wesabe—ended up in the trash heap, some fintech investors may wonder if a consumer-focused budgeting app can make it.

But a few promising VC deals in the last couple of quarters have boosted expectations, according to our latest Emerging Tech Research. Among the standouts are Goalsetter, Ellevest and Cleo—and generative AI as well as the generational wealth transfer could supercharge their growth.
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Out of the shadows: PE manages to sustain deal activity
(Delmaine Donson/Getty Images)
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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From seed to exit (or bankruptcy)
(Sarayut Thaneerat/Getty Images)
How many rounds of VC financing does the average European startup raise?

If you said four, you were right. And despite some startups these days going on to Series G, H and even I rounds, the median European startup that had a €500-million-plus exit (about $537.9 million) only went as far as a Series C. That's one of the many findings on the startup lifecycle uncovered in PitchBook's latest analyst note.

By collecting and evaluating more than a decade of historical data, the research gives new clarity to common patterns and nuances in Europe's venture dealmaking world.
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Quote/Unquote

"The day when enterprise and developer teams do not have access to the source code of foundation models will be the day innovation dies."

—Yair Adato, CEO and founder of AI image generation startup Bria, speaking to PitchBook about the need for startups to challenge big tech companies like Apple that are entering the AI space.
 

Stay tuned

Keep an eye out for these insights and research reports coming out this week:
  • Q1 2024 Enterprise SaaS Report
  • Q1 2024 Mobility Tech Report
  • Q1 2024 Insurtech Report
  • Q1 2024 Pharma Services
  • Q1 2024 E-commerce Report
 

Trivia

Answer: C)

There have only been 906 active investors in Europe so far this year, according to PitchBook data, more than 50% lower than 2023’s total of 1,955. You can read more about the trends and what’s behind them in PitchBook News’ latest article on the topic here.

This edition of The Weekend Pitch was written by Leah Hodgson and Jacob Robbins. It was edited by Andrew Woodman and Ron Prichard.

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