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Corporate Buybacks Leave Unicorns in Limbo
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Good day. The startup sector’s most valuable companies are fast becoming victims of their own success, according to a recent research note by market analytics firm PitchBook Data Inc.
Facing poor market conditions for public debuts, and wary of selling equity stakes at a discount to fuel growth, many startups valued at $1 billion or more—known as unicorns—are left looking for deep-pocketed buyers as a way for investors to cash out.
Problem is, few buyers with that kind of money are making deals these days.
According to PitchBook, only five unicorns were acquired in 2022, down from 24 in 2021 and 17 in 2020. And it expects that drought to continue well into 2023.
Among other reasons—including President Biden’s antitrust crackdown on the tech sector—the decline is because many of the kinds of large publicly traded companies that in the past might have bought a billion-dollar tech startup are instead buying back their own shares, PitchBook said.
Corporate buybacks, in which companies buy their own shares from investors, hit a record $1.2 trillion in 2022, with an estimated $175 billion in planned buybacks this year as of February, more than double the amount during the same period a year ago, the firm said.
Typically, the goal of returning cash to shareholders is to signal confidence in the company’s long-term outlook, while potentially boosting its stock price by reducing the overall number of outstanding shares—an attractive proposition for well-capitalized firms in today’s slumping markets.
That is likely a key driver behind a sharp downturn in mergers and acquisitions. Among U.S. and Canadian companies, for instance, first-quarter merger-and-acquisition deal value fell 44.7% from the year-earlier period, S&P Global Market Intelligence reported last week. The number of deals in the first quarter was also down by 28.2%, S&P said.
“The rate of acquisition for unicorns is likely to remain limited for at least the remainder of 2023, which will surely have implications for the broader venture ecosystem,” PitchBook said.
And now on to the news...
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First Republic’s profit fell 33% in the first quarter.
PHOTO: THALIA JUAREZ FOR THE WALL STREET JOURNAL
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First Republic lost $100 billion in deposits in banking panic. Customers pulled more than $100 billion in deposits out of First Republic Bank last month, when a pair of bank failures shook Americans’ faith in regional lenders, The Wall Street Journal reports.
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The bank’s first-quarter earnings report Monday detailed its precarious financial situation following the massive withdrawals.
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The bank’s profit fell 33% in the first quarter to $269 million from $401 million a year earlier. Revenue dropped 13% to $1.2 billion.
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Most of the quarter happened before the deposit run forced the bank to take on expensive loans from the Federal Reserve and Federal Home Loan Bank.
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10%
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The rise in median CIO salaries between 2021 and 2022, compared with 21% between 2020 and 2021, according to staffing firm Mondo.
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Corporate Tech Leaders Get Back to Basics
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The era of the unicorn chief information officer is over, executive recruiters say, WSJ reports.
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Many companies are now looking for IT chiefs who can deliver on the basics—including uptime, security and cost optimization—rather than tremendous innovators who can push boundaries and drive major change.
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To blame are tighter budgets, lower appetite for risk and a realization that some companies haven’t done a great job of keeping their foundational IT investments in order in the first place, recruiters said. The shift is a natural symptom of the economic cycle, they said.
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How Supply Chains Are Being Reshaped
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When a measure of strains on global supply chains fell earlier this year to levels last seen before the Covid-19 pandemic, it signaled to some that the product shortages, port bottlenecks and shipping disruptions of the past three years were over and that a new era of stability was on the horizon, WSJ reports.
But industry experts say a “return to normal,” as the Federal Reserve Bank of New York described its Global Supply Chain Pressure Index in February, hardly means that companies are going back to conventional, some would say complacent, supply chains.
Instead, say academics and consultants, the experiences during the pandemic, along with changes in geopolitics, are leading to broader, potentially long-lasting changes in how companies manage the flow of goods, from the sourcing of raw materials to manufacturing and distribution.
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Funds
Ridge Ventures, which makes seed and early Series A-stage enterprise software investments, closed its fifth fund and related entities with nearly $180 million in commitments, exceeding its initial fundraising target. Headquartered in San Francisco, the firm now has over $540 million in assets under management.
People
Network security provider MixMode Inc. appointed Karen Buffo as chief marketing officer. She was most recently CMO at Anomali.
Commercial real estate investing platform Keyway named Shara Birn to the post of chief business officer. She was previously at One Medical and Cityblock Health.
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SPAN, a San Francisco-based smart energy startup, scored $96 million in Series B2 funding. Wellington Management led the round, which included participation from Congruent Ventures, Qualcomm Ventures, Munich Re Ventures and others. The company is developing products that enable electrification and simplify the adoption of clean energy including solar, batteries and electric vehicles.
Super.com, whose SuperCash card offers cashback and helps build credit, closed an $85 million Series C round led by Inovia Capital. The company was previously known as Snapcommerce.
Avalanche Energy, a Seattle-based fusion energy startup, completed a $40 million Series A round led by Lowercarbon Capital. The company develops micro fusion power packs with a range of applications including carbon-free energy generation, advanced space propulsion, microgrids and transportation.
Ebb Carbon, a San Carlos, Calif.-headquartered ocean-based carbon dioxide removal startup, raised $20 million in Series A funding from investors including Prelude Ventures. The company uses electrochemistry to help remove atmospheric carbon quickly enough to counteract climate change and de-acidify seawater.
Riverlane, a quantum engineering startup with offices in the U.K., Cambridge, Mass. and San Francisco, landed £15 million (about $19 million) in Series B funding led by Molten Ventures.
Stack Identity, a Menlo Park, Calif.-based startup that automates identity and access management governance to identify and eliminate cloud data threat vectors, emerged from stealth with $4 million in seed funding from investors including WestWave Capital.
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JB Straubel served as Tesla’s technology chief for 14 years until he resigned in 2019.
PHOTO: JAMES GLOVER/REUTERS
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Despite slowdowns in the European tech ecosystem, Finnish startups reached a new record in 2022 (Tech.eu)
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