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The NBA is planning to come back from the coronavirus by locking down a few hundred of the world's best basketball players within the friendly confines of Disney World. Baseball's players and owners may be drawing closer to a deal to resume action after months of contentious and confusing negotiations. The English Premier League returned to play Wednesday, with a full slate of games in the ensuing days playing out in massive stadiums completely devoid of fans.
In various wacky ways, professional sports leagues are attempting to start back up after the pandemic resulted in months of suspended play. And investors and executives may want to take note. Some of the problems and opportunities presented by these various restarts could be a preview of what's to come for companies across the economy.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. The resumption of football, baseball, soccer and more is a sports story. But it's also a business story, and that's one of nine things you need to know from the past week: |
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| Fans were only in virtual attendance when Manchester City and Arsenal squared off this week. (Laurence Griffiths/Getty Images) |
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1. Restarting sports
The stresses of the pandemic have heightened tensions between labor and management in multiple sports, as players and owners debate how—and whether—they should play out abbreviated seasons in the months to come.
In pro baseball, many of the issues at hand are financial, including debates over how the risk of infection should be factored into compensation, echoing recent discussions about hazard pay at companies like Instacart and Amazon. But in basketball, the issue seems to be more about whether players are willing to isolate themselves in a metaphorical bubble for weeks on end during a time when many feel there are much bigger issues at hand than putting a ball in a hoop.
The dynamics are obviously different, but countless other companies are wrestling with how to get back to business as usual. Bosses may want their employees back in the office, but do employees feel the same? Will workers want to spend eight hours a day wearing a mask, boxed in at their desks behind plexiglass partitions? If such measures aren't in place, will they feel safe?
The NBA, NHL and MLS all plan to alleviate at least some of these worries by locking down players in bubbles, where coronavirus tests will be plentiful and traffic in and out will be limited. But that isn't an option at most workplaces. No matter how much planning is done, every office might be one positive test away from another closure. For companies with hundreds or even thousands of employees, sports leagues' recent struggles demonstrate just how difficult it may be for workplaces to start filling back up.
Another parallel between pro sports and the economy at large is that the pandemic could be an inflection point at which certain names rise and others fall.
In recent weeks, it has started to seem like a real possibility that MLB might cancel its season because players and owners couldn't come to terms. A new proposal from the league this week seems to make that less likely, but it's still a worrying prospect. The last time MLB ended a season because of labor unrest, in 1994, is widely seen as an event that alienated fans and caused the league's popularity to crater. It's not hard to find fans on social media who say the past few months of squabbling have already caused them to lose interest.
If things go downhill, it could be an opportunity for a league like MLS to fill the gap, winning over new fans who just want some sport, any sport, to occupy their TV screens.
The same dynamics are at play in the broader business world. The pandemic is shaking up many industries, sending some established players into financial distress and opening up new opportunities for other upstarts. The aftermath of the last financial crisis turned into a breeding ground for the next generation of tech giants. The same could eventually prove true of this current moment.
Everyone wants to return to normal. We want to watch sports. We want to go back to work. But as the coronavirus lingers—and in some states, begins to surge—it's increasingly apparent that it might still be quite some time before there's any real normal to return to.
2. Well-fed unicorns
Three companies that entered the week with lofty valuations either raised new funding or are in talks to raise new funding that would make those valuations even loftier. UiPath, which makes automation software, is negotiating a new round that could take its valuation from $7 billion up above $10 billion, Bloomberg reported. DoorDash confirmed new funding at nearly a $16 billion valuation, up from a reported $13 billion figure last year. And Epic Games, the developer of "Fortnite" as well as other video games and game-creation tools, is nearing the close of a new round at a $17 billion valuation, again according to Bloomberg, up from an estimated $15 billion in 2018.
3. New bankruptcies
24 Hour Fitness filed for Chapter 11 protection Monday, becoming the latest private equity-backed consumer business to be forced into bankruptcy by the pandemic and its side effects. A very different kind of company also filed for Chapter 11 this week: Proteus Digital Health, a maker of so-called smart pills and other digital health tools that was valued by VCs at more than $1.5 billion back in 2016, according to PitchBook data.
4. Old bankruptcies
The week brought updates for two Texas-based companies that filed for bankruptcy protection earlier this year. Storied retail chain Neiman Marcus won court approval to immediately access $250 million in debtor-in-possession financing from its creditors, plus up to $150 million in additional funding in September. And Borden Dairy, which filed for bankruptcy back in January, agreed this week to sell itself to KKR and Capitol Peak Partners. |
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| Borden Dairy's cows produce some 500 million gallons of milk each year. (Cole Burston/Getty Images) |
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5. Jumping for Jio
Jio Platforms, India's rising internet giant, continued a run of some serious fundraising this week. First, the company pulled in $600 million from TPG Capital and $250 million from L Catterton in separate investments. And on Thursday, Jio hauled in $1.5 billion from Saudi Arabia's Public Investment Fund. It wasn't all good news, though: Antitrust regulators in India plan to review Facebook's recent deal to pump $5.7 billion into Jio, Bloomberg reported.
6. A record IPO
Founded back in 1996, Royalty Pharma has built its business in the ensuing decades by buying up biopharmaceutical royalties. Wall Street showed its optimism in the model this week, when Royalty conducted a public offering on the Nasdaq that raised $2.2 billion, the year's biggest US IPO to date. In the first day of trading, shares in Royalty soared nearly 60%, taking its market cap to nearly $30 billion.
7. A second chance
On May 1, travel software specialist Sabre terminated an agreement to buy Farelogix, a creator of software for airlines, after UK regulators ruled the takeover would be anticompetitive. This week, Farelogix landed on a different deal, agreeing instead to sell to Vista Equity Partners' Accelya, yet another provider of travel software.
8. Big bets
Sam Altman, formerly Y Combinator's president, is teaming up with his brothers Max and Jack to launch a new fund that will invest in "moonshot" startups seeking to change the world in major ways, Forbes reported. The $3 million fund will have a very apt name: Apollo. For now, at least, Apollo plans to invest from Altman's personal fortune rather than raise outside capital.
9. The cutting edge
Two companies that seem like they might fit into the moonshot category raised new funding this week. QuantumScape, a Stanford University spinout that makes solid-state batteries, scored a $200 million investment from Volkswagen. And Zero Mass Water, a startup that has built panels it says can harvest water out of nothing more than sunlight and air, thus creating a renewable resource, raised $50 million in an equity round led by BlackRock.
View the full list online |
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A message from Goldman Sachs
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Diverse teams drive strong returns
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Through Launch With GS—a $500 million investment strategy grounded in the belief that diverse teams drive strong returns—Goldman Sachs continues to focus on increasing access to capital, facilitating connections and providing virtual resources for women, Black, Latinx and other diverse entrepreneurs. Learn more. |
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| (Jiri Hera/Getty Images) |
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PitchBook is used to bringing you the written word. Now, my colleagues Adley Bowden and Adam Lewis will also be breaking down the latest news from the private markets via the spoken word, in the form of "In Visible Capital," a new weekly podcast built around interviews with PitchBook journalists, analysts and other industry experts.
The first season of the show is dedicated to examining the ramifications of the coronavirus pandemic on venture capital, private equity and other private-market segments. The first four episodes are all streaming right now. |
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| Small burger, or huge chopsticks? (Malte Mueller/Getty Images) |
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Instacart raised new venture funding earlier this month at a hefty new $13.7 billion valuation, the latest sign of how stay-at-home orders and restaurant closures have driven more and more shoppers toward grocery delivery. In a new note, our analysts argue that the shift in consumer preference is likely to continue even when the pandemic is a thing of the past.
The changes the pandemic has wrought on the insurance sector may be less obvious than food delivery. But as another new note from our analysts demonstrates, insurance tech startups are now contending with a number of new possibilities, including the potential for significant financial losses in the short term and significant room for growth in the future. |
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PE potpourri
Add-ons continued to spike in popularity during the first three months of the year, according to PitchBook's Q1 2020 US PE Middle Market Report, and dealmaking activity stayed roughly in line with last year's rate. But just like in every other subset of the private markets, the true effect of the pandemic on dealmaking in the middle market is still playing out.
A recent ruling from the Labor Department opened the $6.2 trillion 401(k) market in the US up to private equity. Adam Lewis took a look at what the change might mean.
PitchBook's analysts turned their attentions this week to the trend of buyout firms acquiring publicly traded tech companies. One takeaway is the targets of such takeovers now tend to have been on the public market for much less time than before. |
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Born out of angry guitars and angsty lyrics of the 1970s, the universe of hardcore music has since come to encompass a seemingly ever-growing list of sub-genres, many of which play off the hardcore name. There's grindcore and horrorcore, metalcore and rapcore, and even an island-influenced subset called ska-core.
What does this have to do with startups? This week, a British business with the mosh-tastic name of SLAMcore raised a reported €4.4 million (about $5 million) in venture funding for a mission that has absolutely nothing to do with power chords and sludgy bass lines: Instead, the company is working on spatial AI technology for robots and drones. I guess that's hardcore in its own way? |
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Recommended reads
The roots of racism in Silicon Valley run deep. Which means that for some black CEOs, humiliation is part of doing business. [Bloomberg]
Amid a pandemic, many executives are understandably focused on the present. When they start setting their sights on the future, creativity will be key. [Harvard Business Review]
In the latest step of his educational reform efforts, the billionaire founder of Netflix is building a mysterious ranch in the Rocky Mountains to train the next generation of teachers. [Recode]
An early-stage VC weighs in on how software will shape our world in the decade to come. [TechCrunch]
What's it like to live through a deadly pandemic that you predicted? Nathan Wolfe is just one virologist who has been proven horrifically right. [Wired]
How are the world's biggest ships built? You might have to see it to believe it. [The New York Times]
Is a guru named Paramahamsa Nithyananda a living god, or the leader of a cult? A Canadian YouTube star who was once his biggest fan has changed her tune. [Gizmodo]
Why venture capital doesn't build the things we really need. [MIT Technology Review]
America's twin crises of racial inequality and the coronavirus pandemic are colliding inside a notorious Arkansas prison. [The New Yorker] |
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Quote of the week
"IRRs are not rates of return. Something large PE firms have in common is that their early investments did well. These early winners have set up those firms' since-inception IRR at an artificially sticky and high level. The mathematics of IRR means their IRRs will stay at this level forever, as long as the firms avoid major disasters. In passing, this generates some stark injustice because it is easier to game IRRs on LBOs in Western countries than in any other PE investments."
—Ludovic Phalippou, a professor of financial economics at the University of Oxford, in a new paper entitled "An Inconvenient Fact: Private Equity Returns & The Billionaire Factory" |
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The Weekend Pitch is produced by editor Kevin Dowd.
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