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The Weekend Pitch |
August 2, 2020 
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Presented by RSM |
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On Wednesday, the leaders of Amazon, Apple, Facebook and Google—four of the five most valuable companies in the US—submitted to more than five hours of virtual grilling by members of Congress who spent the past year investigating whether these tech giants have misappropriated their vast power to squelch the competition.
It was an insightful session, if not a revelatory one. No jaw-dropping surprises emerged, and no verdicts were handed down. But it became obvious that legislators are taking very seriously the idea of addressing these companies' growing market domination. The hearing seemed like the first public step on a journey to determining if, how, why and when the US government may take antitrust action against some of its most prominent tech champions.
Any such action could have seismic effects across the business world. And the private markets are no exception.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. The impacts of a potential reckoning for big tech wouldn't be limited to big tech. That's one of 10 things you need to know from the past week: |
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| Mark Zuckerberg testifies remotely before Congress this week. (Pool/Getty Images) |
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1. Monopoly musings
Any antitrust action could still take many different forms, up to and including forcing companies like Amazon and Google to break up their globe-spanning empires. What might it all mean for startups, venture capitalists and the rest of the private markets if the government opted to take that ultimate step?
One possibility is that some or all of these companies could be forced to auction off some of their assets, flooding the merger market with attractive options. A sale of Instagram, for instance, would likely draw a wee bit of interest. Or, perhaps high-profile subsidiaries like Instagram, YouTube and Amazon Web Services would instead spin out as their own companies, creating new, independent industry giants overnight.
If Amazon, Apple, Facebook and Google were compelled to reduce their acquisitive activity, it could eliminate some of the most sought-after exit routes for tech startups. And those companies haven't been shy about dealmaking. Combined, the four have made 466 acquisitions since the start of 2010, according to PitchBook data, an average of almost one per week. (That includes deals made by AWS, but none of the companies' other subsidiaries.)
Their absence from the takeover market would also present new opportunities for other firms and strategic investors. The private equity industry, for instance, has in recent years shown a growing appetite for tech deals. Perhaps tech-focused buyout firms such as Silver Lake and Vista Equity Partners would become even more popular options for founders and early investors who are eyeing an exit.
Antitrust action against the four tech behemoths could also cause companies in a wide array of other industries to breathe a sigh of relief, with the knowledge that a potentially terrifying competitor had been eliminated. Consider, for instance, how Amazon's respective investments in Whole Foods and PillPack sent shock waves through the grocery and pharmacy spaces. These companies have the mass to shift the tides of other companies simply by their presence. The removal of that threat would alter the gravity of the whole M&A marketplace, causing changes big and small in how hundreds, perhaps thousands of other companies operate.
For some, those changes could include a dialing back of ambitions. Take Uber, which seems to be following the same playbook as Amazon, Google and the other companies in question: Dominate one specific area first, and then diversify. If regulators decide to take action against the four companies from this week's hearing, it might be a bad sign for other instances of consolidation like Uber's pending deal to purchase Postmates.
Any move to break up or weaken the tech giants could also cause a shift in aims and ambitions for the swath of companies whose business is reliant on these big tech platforms. One example that's made recent headlines is Jamf, a Vista Equity portfolio company that helps other enterprises manage their Apple devices. Jamf raised $468 million in an IPO, and its market cap is approaching $5 billion. A change at the top of the Amazon, Apple, Facebook or Google ecosystems could have cascading effects all the way down the food chain.
There are probably limitless other ways the congressional investigation could ultimately shake up the market. Perhaps it will lead to no changes at all. For now, it's all still uncertain. But one sure thing does seem to have emerged from this week's hearing: The question of antitrust action against these tech titans isn't going away any time soon.
2. TikTok turmoil
It been quite a few days for the wildly popular app. On Friday, reports emerged that Microsoft was in talks to buy TikTok. Later that night, President Trump told reporters on Air Force One that he opposed such a deal, and, for good measure, said he was planning on banning TikTok in the US. On Saturday, The Wall Street Journal reported that Microsoft had halted its TikTok talks in the wake of Trump's comments. There was TikTok drama earlier in the week, too: CEO Kevin Mayer published a blog post accusing Facebook of copying TikTok with its new Reels offering, and Reuters reported that an investor group including Sequoia and General Atlantic had offered to acquire the company at a valuation of some $50 billion.
3. A sports SPAC
Billy Beane is best known for playing a starring role in baseball's analytics revolution, ultimately inspiring the book and movie "Moneyball." For his next act, the veteran executive is teaming up with RedBird Capital Partners, a sports-focused private equity firm, to launch a new $500 million special-purpose acquisition company that will aim to acquire a professional sports franchise.
4. Healthcare mega-deals
A handful of notable healthcare startups hauled in new funding this week. Online medicine upstart Ro (formerly known as Roman) raised $200 million at a reported $1.5 billion valuation in a round led by General Catalyst. Nanox, a developer of less-expensive alternatives to traditional medical imaging, reportedly added $59 million onto its existing Series B, taking the round's total to $110 million. And Heal raised $100 million from Humana to build out its telemedicine and in-home healthcare offerings.
5. Up in the air
A pair of European investors raised new capital this week that will go toward startup exploring the friendly skies. Italian investor Primomiglio held a first close on €58 million (about $68 million) for Primo Space, a new vehicle that will stake early-stage space startups. In France, meanwhile, a new aviation fund called Ace Aero Partenaires revealed it has raised €630 million toward a €1 billion goal, with backing from Tikehau Capital and a series of aerospace companies. |
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| To infinity and beyond (CSA Images/Getty Images) |
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6. Red to black
The first quarter brought disastrous earnings reports from each of the four major publicly traded private equity firms. This Thursday, both Apollo Global Management and The Carlyle Group reported much-improved results for Q2, with both firms returning to profitability after posting net losses for the first three months of the year.
7. Patricof's plans
At 85 years old, longtime investor Alan Patricof is ready for a new act. The co-founder of both Apax Partners and Greycroft teamed with veteran executive Abby Miller Levy this week to launch Primetime Partners, a new venture fund that will invest in companies building products aimed at aging populations and companies led by older founders. The firm will launch with a debut fund reportedly totaling $32 million.
8. Mega-IPOs
Less than two years after SAP completed an $8 billion acquisition of Qualtrics, the software giant is now planning an IPO for the maker of survey software, an abrupt reversal after a headline-grabbing deal. SAP plans to maintain a majority stake in Qualtrics after the offering. This week also saw Rocket Companies, the parent company of Rocket Mortgage and Quicken Loans, establish the initial range for an IPO that's expected to occur this coming week, one that could raise as much as $3.3 billion.
9. IPO potpourri
The summer continues to be chock full of IPO activity. Chinese electric automaker Li Auto raised $1.1 billion in a US IPO this week, then saw its stock soar around 50% on its first trading day. Online lending specialist Affirm is reportedly preparing an IPO or merger with a SPAC that could result in a $10 billion valuation. And Bloomberg reported this week that construction software startup Procore has laid off about 180 workers in advance of a planned public debut.
10. Lockdown workouts
Home fitness startup Tempo raised $60 million this week at a reported $250 million valuation, the latest example of the sector's growing attractiveness during our new socially distant era. In late June, Lululemon indicated plans to expand into the space with a $500 million agreement to buy Mirror, another home fitness specialist. And Peloton's stock continues to surge, with the company reaching a market cap of over $19 billion at week's end.
View the full list online |
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| (Jonathan Kitchen/Getty Images) |
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Across almost every segment of the private markets, the coronavirus crisis has caused a slowdown in dealmaking. It's a different story, though, for European venture capitalists. Among the many startling takeaways from PitchBook's latest quarterly report on the sector is this: With €9.5 billion in deal value during Q2, European VCs logged their third-largest quarter on record.
On the other side of the pond, the current venture picture is more muted, and the outlook for the months ahead remains anything but certain. PitchBook analysts Daniel Cook and Andy White joined our "In Visible Capital" podcast this week to break down the numbers on how the VC strategy fares during times of economic uncertainty. |
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| (Neil Hamilton Photography/Getty Images) |
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For some emerging tech sectors, the pandemic is causing investor interest to surge. For others, not so much. And the data doesn't always fall in line with popular perception.
Shelter-in-place orders and other shutdowns have caused millions to forgo travel and remain close to home. Yet mobility tech startups raised $10.8 billion in Q2, up 7% from that period last year. You can learn more on how the space is adapting in the preview of an Emerging Tech Research report published this week by PitchBook's Asad Hussain.
On the other side of the coin, the looming specter of a mysterious disease has pushed healthcare into the global spotlight. As Kaia Colban lays out in the preview of a new Emerging Tech Research report of her own, though, VC investment in the health and wellness sector experienced a 30% year-over-year drop in H2. |
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| A robot solving a binary Rubik's Cube? Arguably cooler than banking. (KTSDESIGN/Getty Images) |
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There is nothing wrong with building cloud-based banking platforms. I'm sure it's a very exciting business. Deep down, though, I have always been a little disappointed that Thought Machine, a London-based fintech startup that added $42 million to its existing Series B this week, doesn't do something a little, well, cooler. It sounds like the name of a company that's trying to read brain waves, or build a quantum computer, or develop AI that could win at "Jeopardy!"
But who am I judge? I am, after all, someone who just listed winning "Jeopardy!" as one of the coolest things I could think of. |
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Recommended reads
A tale of bunkers, secrets, and a yearslong quest to topple a libertarian ideologue turned dark web tycoon. [The New Yorker]
Private equity firms continue to buy up medical practices, creating new ethical problems for both doctors and investors to consider. [Forbes]
The Arctic is rapidly changing. But as one writer found on an excursion into the great unknown, magic remains at the top of the world. [Outside]
China has pledged to become the global leader in AI. For the nation's billion-plus citizens—and for many more around the globe—the achievement of such a dream could turn daily life into an inescapable panopticon. [The Atlantic]
At Google, advertising and search are inexorably intertwined. With his new startup, a 15-year veteran of the tech giant is trying a very different tack. [Protocol]
The Segovia Brothers Circus was stranded in a foreign country in the midst of a pandemic, running out of food and money. It was time for a great escape. [National Geographic]
After a brief pandemic hiatus, debt-backed dividends are returning to the private equity scene. [Bloomberg]
Less than two decades ago, Henry Blodget was a disgraced financial analyst. Now, he's a financial media kingpin—thanks in part to some help from Jeff Bezos. [Institutional Investor]
The 2010s were the decade of the gig economy. Will the hustle economy come to dominate the 2020s? [OneZero] |
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Quote of the week
"When these laws were written, the monopolists were men named Rockefeller and Carnegie. Today the men are named Zuckerberg, Cook, Pichai and Bezos. Once again, their control of the marketplace allows them to do whatever it takes to crush independent business and expand their own power. This must end."
—David Cicilline (D-R.I.), chairman of the US House antitrust subcommittee, speaking Wednesday at a Congressional hearing investigating potential anti-competitive behavior by Amazon, Apple, Facebook and Google |
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The Weekend Pitch is produced by editor Kevin Dowd.
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