| Hey Insiders, Today we are taking a look at the rise in M&A transactions, why VCs are scaling down megafunds, and Industry Ventures' $1.4B secondary fund. Scroll down for some quick hits, and then let us know what other content you'd like to see in future issues. Karan
p/karan-chafekar | |
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The deal value of M&A transactions increased by 23% in Q2 2023 compared to the preceding quarter, per Dealogic data reviewed by The Information. Investment bank William Blair's co-head of technology, Christopher Lane, said that M&A activity has concentrated between the $200M and $2B bracket so far this year, but he expects larger deals to come as the year progresses. More: - TPG's $2.45B acquisition of cloud security firm Forcepoint from Francisco Partners and GTCR's acquisition of a controlling stake in payments firm Worldpay at $18.5B valuation are two of the most significant M&A transactions completed so far this year.
- Software companies, including cybersecurity startups, are currently prime targets for acquisition deals.
- In addition to large tech firms, even private equity firms are actively pursuing acquisitions.
- The M&A transactions are providing exit opportunities for existing backers.
- PE firm Vista has cashed out of five portfolio companies this year.
- It sold business software company Apptio to IBM for $4.6B, Datto for $6.2B, Ping for $2.8B, and Cvent for $4.6B.
- Despite market volatility, Vista has been able to roughly triple its return on investments over the past year.
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What the numbers say: So far this year, VCs have launched only seven megafunds over $1B due to a lack of investment opportunities, macroeconomic uncertainty, and a tougher fundraising environment. VCs are scaling down their megafunds, instead adopting a more modest approach. Per Pitchbook, VCs raised 33 megafunds in 2022 and 23 in 2021. Relevance: Chamath Palihapitiya's VC firm, Social Capital, shelved plans to raise a $1B fund. Per sources, Andreessen Horowitz is considering raising smaller funds dedicated to specific sectors. Tiger Global Management lowered its fundraising target for its latest fund from $8B to $5B. The firm has been able to raise only $2B so far toward its latest fund, per security filings seen by WSJ. Where to see the impact: The challenging fundraising climate initially impacted emerging fund managers. However, even established fund managers are starting to feel the effects of the macroeconomic headwinds. Tiger Global was looking to liquidate its portfolio stakes in the secondary markets earlier this year to return some cash to investors. | | | |
| 3 | | Industry Ventures secured $1.4B in capital commitments toward its latest flagship secondary fund, per SEC filings seen by Business Insider. The fund exceeded its initial target of $1B. More: - Sources informed Business Insider that Industry Ventures is still actively fundraising for the current fund as it still has nearly $52M of unsold equity.
- The fund is backed by Goldman Sachs Asset Management and other investors.
- The firm last raised a $300M fund in October 2022 to back early and mid-stage tech startups.
- Many VCs are diluting their portfolio stakes in the secondary market due to the tough fundraising environment and lack of exit opportunities.
- As a result, some investors can scoop up shares of promising startups at steep discounts, sometimes as high as 80%.
Zoom out: - Industry's fund is one of the largest secondary funds ever raised, with StepStone Group's $2.3B secondary fund in 2021 still holding the record for the largest secondary fund.
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| 4 | | Los Angeles-based VC firm Westlake Village BioPartners launched a $450M third fund to invest in early-stage biotech startups. Westlake's managing director, Mira Chaurushiya, said, "A large area of focus here at Westlake amongst the team has classically been in metabolic disease. You'll continue to see us do work there." Additionally, the firm is looking at immunology, inflammation, and neuroscience domains. More: - The current fund brings Westlake's total funds raised to date to $1.3B since its founding in 2018.
- Westlake's portfolio includes 20 startups, including gene therapy startup Kate Therapeutics, cell therapy biotech Arsenal Biosciences, and biopharma firm Acelyrin.
- The firm expects to back nearly a dozen startups with the latest fund.
Zoom out: - Per Pitchbook, pharma and biotech startups raked in $10B in funding in the first half of the year, nearly half the funds raised in the same period a year ago.
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| 5 | | Israeli VC firm TLV Partners' Fund V secured $250M in capital commitments from investors, bringing its total Assets under management (AUM) to $1.07B. The firm will invest in the nation's AI, developer tools, cybersecurity, fintech, and biotech sectors. More: - The firm typically leads or co-leads the investments.
- Initial ticket sizes will range from $4M to $8M, with follow-on funding checks up to $20M.
- TLV intends to back 25 startups between seed to Series A stages.
- TLV has backed 60 startups and successfully exited 10 investments, including Granulate, Oribi, Neosec, Skyline, Stoke, and Guesty.
- Notable portfolio startups include Aqua Security, Next Insurance, Aidoc, Run:ai, Quantum Machines, Immunai, Deepcure, Zencity, Laminar, and Port.
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| 6 | | Today's Funding: Biotech - British medtech firm OrganOx secured £25M ($32.7M) in growth funding led by Lauxera Capital Partners.
Blockchain - Blockchain-powered gaming platform developer SKYPLAY secured $10M from LDA Capital Limited.
Healthcare - Herself Health, a St. Paul, Minnesota-based startup providing primary care to women over the age of 65, raised $26M in Series A funding led by Michael Cline with participation from Juxtapose.
- Medical device company Octet Medical raised $10M in Series B funding from undisclosed investors.
Supply chain - End-to-end supply chain visibility platform Leverage raised $7M led by Chicago Ventures. The round received additional support from Las Olas Venture Capital, Remarkable Ventures, Tensility, and Florida Funders.
Web3 - Web3-based music platform Sound nabbed $20M in Series A funding led by a16z crypto. Palm Tree Crew, Scalar Capital, A Capital, Sound Ventures, Archetype, and others participated in the round.
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| 7 | | Quick Hits: - It's true: there really is a once-in-a-lifetime IRS kickback available to 80% of businesses. Apply Now.*
- LGT Capital Partners held the final close of its Growth Opportunities IV fund at $930M, surpassing the initial target of $750M.
- Character.AI, an AI startup that has a chatbot that mimics famous personalities, is in advanced talks with investors to raise a fresh round of financing, sources informed The Information. Four months ago, the firm raked in $150M at a $1B valuation.
- Private market infrastructure firm Flow inked a strategic partnership with global financial services company Apex Group to develop software and services for venture capital investors.
- Swiss VC firm Giano Capital secured €20M ($22.5M) in capital commitments from investors towards its secondary fund.
- Indian VC firm CapFort Ventures is looking to raise a debut fund of $24M.
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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