PitchBook News - SaaS is stuck in a rut

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The Daily Pitch: VC

June 18, 2024

Presented by Lucas Institute for Venture Ethics

In today's Daily Pitch, you'll find:

The dependability of infrastructure funds has fueled their dominace in real assets allocations

Is AI experimentation diverting corporate dollars away from SaaS?

UK's Labour Party doubling down on its plan to increase PE tax has investors feeling flighty

Renewed momentum in tech stocks could drive a rebound for insurtech startups

Today's Top Stories

Despite AI hype, SaaS revenue growth is in a rut

Salesforce, helmed by CEO Marc Benioff, is among the software companies whose growth has slowed.
(Kimberly White/Getty Images)

As enterprises feel pressured to buy into the AI revolution, they're cutting back spending on other software tools—a shift that is crimping growth at SaaS leaders and startups alike.

Revenue growth at newly public US VC-backed SaaS companies fell sharply in 2022 and has remained low. This cohort is a bellwether for the broader late-stage software startup market and an indication that the higher growth rates that were common pre-2022 remain elusive.

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The search for the perfect budgeting app

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 recent 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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VC Deals

Oyo, an Indian budget hotel chain, is finalizing a new round of around $100 million to $125 million at a $2.5 billion valuation, TechCrunch reported.

Elion Therapeutics, an Illinois-based biotech startup developing antifungal drugs, raised an $81 million Series B led by Deerfield Management and the AMR Action Fund.

Tier IV, a Toyko-based provider of open-source software for autonomous driving systems, raised an additional $54 million for its Series B, bringing the round's total to $132 million.

SuSea, the company behind AI-powered chatbot You.com, is raising a $50 million Series B, Reuters reported. SuSea could be valued as much as $900 million, according to the report.

Finaloop, a New York-based developer of ecommerce accounting software, raised a $35 million Series A led by Lightspeed.

Princeton NuEnergy, a lithium-ion battery recycling startup, raised a $30 million Series A from investors including Samsung Venture Investment, Helium-3 and Honda.

Tinybird, which offers a data platform for data and engineering teams, has closed a $30 million Series B led by Balderton Capital.

Constructor, a San Francisco-based startup using AI to power personalized search result rankings, raised a $25 million Series B led by Sapphire Ventures that values the company at $550 million.

This, a London-based startup creating sustainable meat alternatives, secured a £20 million investment from Planet First Partners.

Omi, the Paris-based provider of a 3D image creation tool, secured €13 million in a round led by Dawn Capital.

PE Deals

Singapore state-backed investment firm Temasek is investing up to A$300 million (about $198 million) for a stake in Australian exchange-traded funds manager Betashares.

ViaPath, a company providing phone services to incarcerated people, is close to finalizing a $1.45 billion refinancing led by Texas Capital Bank, Bloomberg reported.

Asset manager Fisher Investments received between $2.5 billion and $3.5 billion from Advent International and the Abu Dhabi Investment Authority, The Wall Street Journal reported. Advent will acquire a minority stake in Fisher.

The $174 million sale of clothing retailer Express, which filed for bankruptcy protection in April, to a group led by PE-backed WHP Global has been approved, Bloomberg reported.

The Aaron's Company, a NYSE-listed leasing platform for electronics and home appliances, has agreed to be acquired by IQVentures for about $504 million.

Exits & IPOs

Hyundai Motors India, a subsidiary of the Korean carmaker, has filed for an IPO worth $3 billion, which could be the largest in India's history.

Cogentrix may be sold by The Carlyle Group in a transaction that could value the North Carolina-based power generation asset provider from $3 billion to $4 billion, the Financial Times reported.

Webtoon, a Los Angeles-based company that offers a platform for user-published visual stories, filed for an IPO of $2.6 billion, according to SEC filings.

LandBridge, a company managing natural gas resources, has filed for an IPO of $1.5 billion, according to SEC filings.

Alibaba Group could acquire Korean home goods store HomePlus, in a move to shift AliExpress into a physical retail market, The Korea Herald reported.

Fundraising

Atalaya Capital, an alternative investment firm, has raised $1 billion of a targeted $2.5 billion for its fourth special opportunities fund, The Wall Street Journal reported.

Thomas H. Lee Partners, a Boston-based PE firm, has launched a new fund targeted at $900 million, according to SEC filings.

Copilot Capital, a new PE firm backed by The Friedkin Group, is launching a $200 million buyout fund for European software and data businesses.

Kfund, a Spanish multistage VC firm, has closed its sixth fund on €70 million.

Ixia Capital, a gaming- and esports-focused VC firm and studio, has raised an initial fund of $20 million.

Nurse Capital, a new VC firm investing in healthcare startups led by nurses, has closed its first fund on $1 million.

Chart of the Day

Source: Q1 2024 US PE Middle Market Report

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PitchBook News - SaaS is stuck in a rut

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