Big tech's approach to AI

Rothermere preps $1.1B Daily Mail take-private; Flipkart hits $37.6B valuation; Remote reels in $150M; Microsoft eyes VC-backed RiskIQ
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The Daily Pitch: VC
July 13, 2021
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Big tech's approach to AI: Build, not buy
(Jorg Greuel/Getty Images)
When it comes to growing their artificial intelligence capabilities, leading tech companies have largely preferred to invest internally rather than snap up startups.

Our recent analyst note explores M&A trends for VC-backed AI and machine learning companies. Key highlights include:
  • Acquisition deal counts and deal values barely grew in 2020, and just $1 billion worth of acquisitions were recorded in the first quarter of 2021. Natural language processing and consumer AI applications have proved to be regular targets for acquisition.

  • The R&D budgets of the leading five tech companies are so massive that their combined AI and ML investments could reasonably exceed the $29.3 billion that VCs invested in North America in 2020.

  • But Microsoft's $16 billion deal to acquire conversational AI company Nuance in April shows that big tech is willing to spend big for the right opportunity.
read it now
 
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Rothermere prepares $1.1B take-private bid for Daily Mail owner
(Leon Neal/Getty Images)
UK media mogul Lord Rothermere could take Daily Mail & General Trust, owner of British newspaper Daily Mail, private in a deal valuing the group at around £810 million (about $1.1 billion) including debt.
  • The deal is reliant on DMGT selling a stake in online car retailer Cazoo, which is planning to go public in New York via a merger with blank-check company Ajax I in a $7 billion deal. It's also dependent on the sale of DMGT's insurance risk division, Risk Management Solutions.

  • The Rothermere family is looking at offering 251 pence per share to acquire the roughly 65% stake in DMGT that it doesn't already own. The acquisition will be made via the family's Bermuda-registered vehicle, Rothermere Continuation.

  • DMGT, which also owns the i and Metro newspapers, has gone through a significant restructuring and generated around £1.2 billion in value from the sale of education company Hobsons, energy data provider Genscape, and real estate platform Zoopla. The company also picked up New Scientist magazine for £70 million in March.

  • If the deal goes ahead, Rothermere will reportedly not need shareholder approval, as the family owns all the voting shares in the group's two-tier stock structure.
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A message from NSF
Invention to impact
Using microbes, Biomason is growing bio-based cement products as an alternative to traditional cement, which produces more carbon emissions. The North Carolina-based company will begin producing flooring for H&M stores using its bio-cement.

Biomason is one of hundreds of deep tech startups funded annually by the National Science Foundation, a government agency that plays a central role in accelerating discoveries into the marketplace.

Each startup can receive up to $2 million to support translational research and development. NSF helps teams navigate the earliest stages of technology translation, investing roughly $200 million annually in startups. In the last five years, these companies have gone on to raise billions in follow-on capital, and the portfolio has had 100-plus exits.

Learn more about NSF funding at seedfund.nsf.gov
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PE tech investors move beyond their traditional hunting grounds
The Denver area has seen an influx of tech-driven PE buyouts.
(Lightvision, LLC/Getty Images)
Nestled at the base of Colorado's Rocky Mountains, Boulder is not synonymous with tech investment. Yet the city was home to one of 2020's biggest deals when EQT, Ardian and Digital Colony bought communication infrastructure company Zayo Group for $14.3 billion.
  • The Zayo Group buyout is just one of many deals happening in America's lesser-known tech-driven cities. The Denver area has seen a large influx of tech-driven PE buyouts, and it's not alone. Miami, better known for its beaches and nightlife, has also seen a strong uptick in tech buyout deals.

  • With tech becoming a ubiquitous feature of the economy, PE dealmakers are looking beyond familiar tech hubs such as Silicon Valley and New York.
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Recommended Reads
Before its recent public debut on the NYSE, Didi Global tried balancing pressure from Chinese regulators and its investors. It ended up satisfying neither. [The Wall Street Journal]

Lego is responsible for producing 100,000 metric tons of plastic waste worldwide every year. Now the decades-old company has finally created an eco-friendly alternative. [Wired]

The depressed valuations of Britain's public companies are creating a surge of interest from buyout firms. But private equity's advance is causing alarm for some. [Financial Times]
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Quick Takes
  The Daily Benchmark  
  2013 Vintage European PE Funds  
  Partner Perspectives  
  How PE value-creation software playbooks are changing amid record competition  
  VC Deals  
  Flipkart valued at $37.6B with new funding  
  Remote picks up $150M  
  Gembah secures $11M  
  Exits & IPOs  
  Microsoft to acquire VC-backed RiskIQ  
  Fundraising  
  Zeal Capital Partners closes $62M+ fund  
  Investors  
  Richard Branson backs space-focused venture firm  
 
 
The Daily Benchmark
2013 Vintage European PE Funds
Median IRR
14.19%
Top Quartile IRR Hurdle Rate
20.10%
1.31x
Median TVPI
Select top performers
TDR Capital III
Synova Capital Fund II
Mandarin Capital Partners Fund II
*IRR: net of fees
20 Funds in Benchmark »
Check out the latest version of PitchBook Benchmarks
Partner Perspectives
How PE value-creation software playbooks are changing amid record competition
Grant Thornton
Accelerated by the COVID-19 pandemic's ripple effects, PE investment in software has surged to a record level. Amid this intense competition, PE fund managers have been retooling their value-creation playbooks across fledgling software segments and business models. Grant Thornton's latest industry-focused report explores these evolving tactics as well as additional datasets to produce insights and identify key trends, including:
  • How fund managers are embracing a greater variety of growth strategies
  • The implications of PE's primary focus in B2B software
  • What healthy exits portend for the most active firms in the space
Read it now
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VC Deals
Flipkart valued at $37.6B with new funding
Indian ecommerce giant Flipkart has raised $3.6 billion in financing led by Singaporean sovereign wealth fund GIC, Canada Pension Plan Investment Board, SoftBank's Vision Fund 2 and Walmart at a valuation of $37.6 billion. Other investors in the round included Qatar Investment Authority, Franklin Templeton and Tiger Global. The company is considering going public in the US, Bloomberg reported earlier this year.
Additional Investors:
DisruptAD, Khazanah Nasional Berhad, Tencent Holdings, Willoughby Capital, Antara Capital
View round
 
View 22 competitors »
 
Remote picks up $150M
Accel has led a $150 million Series B for Remote, the developer of an employment platform designed to help companies hire international employees and manage processes like payroll, taxes and compliance. The funding values the San Francisco-based company at more than $1 billion. Existing investors Sequoia, Index Ventures, Two Sigma, General Catalyst and Day One Ventures also participated in the funding.
View round
 
View 12 competitors »
 
Gembah secures $11M
Gembah has raised an $11 million Series A led by ATX Venture Partners, TechCrunch reported. The startup operates a product development platform that helps entrepreneurs, ecommerce sellers and small and medium-sized businesses research, design and manufacture products in industries such as consumer electronics, beauty and home décor. Austin-based Gembah will reportedly use the new funds to grow its engineering team.
Additional Investors:
Flexport, Silverton Partners
View round
 
View similar company »
 
Exits & IPOs
Microsoft to acquire VC-backed RiskIQ
Microsoft has agreed to buy San Francisco-based RiskIQ, a cybersecurity startup that operates a platform to detect and respond to cyber threats. Bloomberg reported that Microsoft will pay over $500 million in cash for the company, which was valued at $300 million last year, according to PitchBook data. RiskIQ has received prior backing from Summit Partners, Battery Ventures, MassMutual Ventures and others.
View details
 
View 109 competitors »
 
Fundraising
Zeal Capital Partners closes $62M+ fund
Zeal Capital Partners, a Washington, DC-based venture firm that invests in startups with diverse founders across sectors including fintech and education, has closed its first fund on $62.1 million. Truist Ventures and PayPal were the anchor LPs in the oversubscribed vehicle. Zeal Capital was founded by a solo GP, Nasir Qadree.
View fund
 
View 5 investments »
 
Investors
Richard Branson backs space-focused venture firm
Virgin Galactic founder Richard Branson has purchased a stake in Seraphim Space Investment Trust, a UK-based venture capital firm that invests in space tech startups, Bloomberg reported. The size of the deal wasn't disclosed, but was part of Seraphim's £178 million (about $247 million) IPO on the London Stock Exchange. Seraphim has backed earth observation startup Spire and space object tracking company LeoLabs.
View details
 
View 35 investments »
 
Chart of the Day
"PE dealmaking in software continued to post exceptionally strong numbers in Q2 2021, with cybersecurity emerging as a particular area of focus. Cloud-centric cybersecurity services are cementing themselves as a major need as organizations continue to grapple with the digitization of business infrastructure and the security challenges of remote work."

Source: PitchBook's Q2 2021 US PE Breakdown
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