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SVB Turmoil Could Crack Open M&A Window
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By Marc Vartabedian, WSJ Pro
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Good day. One potential effect of the Silicon Valley Bank turmoil is an uptick in startup mergers and acquisitions.
Valuations have been down and sellers have been inclined to hold out on M&A in hopes that prices go back up, said Larry P. Naughton, a corporate attorney with the law firm Mintz. “It may be that they see this situation and see that it’s not getting better any time soon so they may as well accept the valuations that are out there, especially if their cash runway has them running out of cash this calendar year, as it could be hard to raise a new round.”
Silicon Valley Bank’s collapse and uncertain future has only damped investor appetite for keeping startups afloat.
"This just tipped the scale in terms of investor sentiment,” said David Spreng, the founder and CEO of venture debt firm Runway Growth Capital. The Woodside, Calif.-based firm lends to pre-profit companies to help fund acquisitions but doesn’t typically participate in leveraged buyout deals in which private-equity funds are buying control of a profitable company.
Add to this the sudden difficulty many entrepreneurs are experiencing in raising alternative financing such as debt, and an M&A transaction looks more and more attractive.
It is worth watching the M&A window and the startups best suited to hop through it.
And now on to the news...
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Artificial-intelligence startup Artifact has hit a wall trying to secure credit from several large banks, said co-founder and Chief Executive Nate Sanders. The Artifact team in a meeting.
PHOTO: ARTIFACT
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Debt markets. With Silicon Valley Bank’s future uncertain, startups backed by venture capital looking for new lenders are facing higher borrowing costs, onerous terms or even closed doors, potentially throttling their growth, WSJ Pro reports.
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Artificial-intelligence startup Artifact has hit a wall trying to secure credit from several large banks, said co-founder and Chief Executive Nate Sanders. The Salt Lake City startup began looking for alternatives for its multimillion-dollar venture-debt facility with SVB when the bank collapsed earlier this month, turning first to big banks, he said.
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“It’s just obvious they have zero appetite for talking about venture debt,” Mr. Sanders said, referring to a loan in which a venture-backed company’s assessed value serves as collateral.
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Axios’s Software Business Raises Cash to Fund AI Expansion
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Axios’s software business raised $20 million from investors that it plans to use to build new artificial-intelligence-powered communication tools with the help of ChatGPT creator OpenAI, the company’s chief executive said, The Wall Street Journal reports. Axios HQ, which was spun off from Axios last year when the digital publisher was sold to Cox Enterprises Inc., makes software that helps businesses communicate with employees and investors in a concise way that was championed by Axios—snippets that break down the main points of an article and explain why it matters.
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Pentagon Woos Silicon Valley to Join Ranks of Arms Makers
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The Pentagon is seeking to enlist Silicon Valley startups in its effort to fund and develop new weapons technology and more-nimble suppliers, as the U.S. races to keep pace with China’s military advances, The Wall Street Journal reports. The push to tap private capital comes in the midst of concern that U.S. defense-industry consolidation has led to dependence on a few large companies that rely on government funding for research and is hampering innovation. Meanwhile, China has pulled ahead in some key technologies, ranging from small drones to hypersonic missiles, helped by Beijing’s use of external public-private guidance funds, according to current and former Pentagon officials.
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Marathon Gears Up for Middle-Market Lending Push
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Marathon Asset Management is making a push into direct lending, capitalizing on banks’ retrenchment and surging demand for borrowing, The Wall Street Journal reports. Direct lenders, which generally charge higher interest rates than banks, tend to be less stringent than banks and more willing to finance deals in volatile times. Banks typically sell the loans they arrange to outside investors, a harder sell when markets turn. Last year, banks issued about $80 billion in leveraged buyout loans that they haven’t been able to syndicate, according to a recent estimate from private-credit provider Oaktree Capital Management.
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Funds
Nonprofit climate tech investor Elemental Excelerator is in the process of closing an additional $5 million for its Cohort 12 and $30 million for a new offering that will fund three to six community-based projects.
People
Robotic 3D printing technology provider Branch Technology said Ryan Lusk will join the company as chief executive early next month. He most recently spent 11 years at Jackson Furniture.
Data security platform Veza appointed Jason Garoutte as the company’s first chief marketing officer. He previously served as vice president of growth at Twilio.
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Vital, a Claymont, Del.-based startup whose software facilitates communication between hospitals and patients, raised $24.7 million in Series B funding led by Transformation Capital.
Britive, a Glendale, Calif.-based cloud identity security platform, landed $20.5 million in Series B funding led by Pelion Venture Partners.
Vue Storefront, a provider of front-end website technology for ecommerce businesses, picked up a $20 million investment. Felix Capital led the round, with Julien Codorniou joining the company’s board.
Two, an Oslo-based business-to-business payments startup, picked up €18 million in Series A funding led by Shine Capital.
Frontier Aerospace Corp., a Simi Valley, Calif.-based maker of liquid rocket engines for in-space propulsion, closed a $10 million Series A round from AEI HorizonX.
Pragma Bio, a South San Francisco, Calif.-based drug discovery platform formerly known as VastBiome, added $10 million in funding led by The Venture Collective.
Windfall Bio, a Menlo Park, Calif.-based agtech startup, completed a $9 million seed round from investors including Mayfield. The company is developing technology for capturing and transforming methane emissions into organic fertilizer.
Dylibso Inc., a startup helping teams take the binary instruction format WebAssembly to production, secured $6.6 million in seed financing. Felicis Ventures led the round, which included participation from boldstart ventures.
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Chinese company Huawei salvaged some of its smartphone business by spinning off a brand of devices so that it could continue to acquire blocked U.S. technology. PHOTO: CFOTO/ZUMA PRESS
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Loophole allows U.S. tech exports to banned Chinese firms
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China hits back on TikTok, says it doesn’t ask firms for foreign data
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Alibaba co-founder Jack Ma returns to China after a year away
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Uber Eats to take down thousands of virtual brands
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Where to put your money during a banking crisis
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Google made the Bard AI chatbot boring. On purpose.
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