PitchBook News - SaaS is stuck in a rut

Insurtech stumbles on road to recovery; infrastructure outstrips other real assets; Princeton NuEnergy bags $30M for lithium-ion battery recycling
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The Daily Pitch: VC
June 18, 2024
Presented by Lucas Institute for Venture Ethics
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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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Infrastructure shines bright among other real assets
In Q1 2024, real assets fundraising was light—but by no means stagnant—reaching $26.8 billion following an active Q4. The capital raised was overwhelmingly allocated to infrastructure vehicles due in part to their dependable cash flows amid the high interest rate environment, while other sectors like oil and gas experienced a decline, as reported in our Q1 2024 Global Real Assets Report.
  • After a massive $106.8 billion in Q4 commitments, a natural fundraising lull occurred in Q1, leading to a 74.9% quarterly drop in raised capital.

  • Of the 13 infrastructure funds that closed, nine were core, core plus or debt vehicles, indicating some preference for lower-risk, lower-return strategies.

  • While natural resources are seeing more activity in the public markets, private investors continue their pivot away from the sector following peak prices reached around the global financial crisis.
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A message from Lucas Institute for Venture Ethics  
Trusted AI assessment designed by VCs for early-stage companies
Concerned about staying ahead of regulatory hurdles and meeting enterprise and government AI standards? The Lucas Institute's Trusted AI assessment is here to help you unlock the potential for accelerated growth! Designed with insights from limited partners, venture capitalists, leading tech teams, and policymakers, this 10-minute assessment is tailored for early-stage companies and their investors. By addressing potential regulatory challenges early, your portfolio companies can stay on track to meet their growth targets and scale faster.

Encourage your companies to start their RAI assessment now and pave the way for rapid, trustworthy growth.

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Insurtech stumbles on road to recovery
VC investment in insurtech companies dropped across the board in the first quarter, according to our latest Emerging Tech Research. But as startups in the sector benefit from renewed momentum in tech stocks, our analysts anticipate a possible rebound in the coming quarters.

One area of interest: Startups like DigitalOwl and Federato are leveraging AI to streamline insurance underwriting and personalize policies. The report also covers key trends, deals and players in the industry, with company spotlights on Hyperexponential and Peppercorn AI.
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Generative AI seed funding plunges as investors take a breath
(Drew Sanders/PitchBook News)
Even with AI, what goes up must eventually come down.

For two consecutive quarters generative AI dealmaking at the earliest stages has declined, dropping 76% from its peak in Q3 2023 as wary investors sit back and reassess following the initial flurry of capital into the space.

Investors at the earliest stages say the bar for generative AI keeps rising as larger competitors launch new products and features.
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Does PE need to be 'bag ready' for new UK tax plans?
Labour Party leader Keir Starmer speaks during the UK party's June 13 launch of its general election statement.
(Anthony Devlin/Getty Images)
Fund managers are weighing up their options after the UK's Labour Party—which is widely expected to take power next month—doubled down on its commitment to increase tax on PE pay.

With the Labour Party saying it plans to "close the loophole" on capital gains tax, some investors are looking at alternative locations in Europe that might offer a more favorable tax regime.
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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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