Pre-Money: June 17, 2024

Unwise crowds, mergers rebound, healthy IPOs, Databricks building faster & more

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The Vibe

The week’s most important happenings

Inflation cooled again, and the fed tempered expectations on rate cuts, but mergers and acquisitions look to be back in vogue as the market charges ahead. This week we’re looking at:

  • Unwisdom of the crowd?

  • AI’s changing the game

  • Merger mania time?

  • Europe’s VC resignation

  • Databricks on the warpath

  • IPOs get healthy

  • and more…


The week’s top performance indicators

Based on publicly available data from Thompson Reuters, NASDAQ, CNN Business & other third-party sources. As of June 14th market close.


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Dots & Lines

The week’s top takeaways

  • The IPO Market gets healthy: This month saw two healthcare companies go public. Tempus ($TEM), the Chicago-based diagnostics company led by Groupon founder Eric Lefkowitz, started trading Friday after raising $410M, with its shares rising 10% to finish the week at a $6.6B market cap. This was on the heels of Waystar ($WAY), a medical payments software provider raising $968M in an IPO one week earlier, valuing the company above $3.5B. As the IPO window continues to open, it’s possible that advances in health will contribute to a consumer renaissance fueled by technological advancement and customer expectations. Hopefully this will herald a continued flow of public, venture-backed businesses.

  • Mergers on the rise: M+A has been scarce for the past couple years, but with the anticipated Fed rate cuts looking more likely, consolidation is in the air. Financial research Alphasense bought Tegus, a financial data provider, for a reported $930M, raising $650M in the process, to reach a $4B valuation. Meantime, French mobile games company Voodoo acquired BeReal, a social networking app, for $530M+. Legal AI company was said to be considering acquiring vLex, an incumbent legal research firm. And the list goes on, spanning stage and sector - Google buying Cameyo, Miro acquiring Uizard, and even touching tech’s largest companies, who had been avoiding buyouts of late. Acquisition activity picking up is a positive signal, as it provides exits for founders, liquidity for investors, and leaves fewer, stronger companies in the market.

  • Dark days for crowdfunding: The SEC exemptions codified under the 2016 JOBS ACT are central to enabling individual participation in private markets. Regulation A, which enables businesses to raise up to $75M per year from unaccredited investors, has unlocked more than $6B of investment. But the companies most successfully utilizing the exemption are under pressure - like portable home manufacturer Boxabl and EV maker Aptera. Critics of the businesses, which raised a combined $170M, complain about slow delivery times, limited communications, flagging sales numbers and outsized executive compensation. Such complaints have been levied against crowdfunding companies more broadly. To be fair, though, many venture-backed companies face similar challenges as they seek to disrupt the status quo, but tend to handle them behind the shield of a venture-backed structure versus in the open in front of thousands of individual investors. Crowdfunding investors face another, unrelated challenge. Evolve, one of the space’s top banks, is under investigation by the federal reserve for its practices on the heels of fintech Synapse’s bankruptcy, where $85M+ of investor funds are unaccounted for. All of this underscores the need for private market investors to do their own research, with some arguing for a sophistication test instead of accreditation as the correct barometer for readiness to invest in private deals.

Source: WSJ

  • The AI roller coaster lurches forward: The idiosyncratic cycles of Silicon Valley innovation are are coming into question behind closed doors by the fast and relentless influence of AI. Everyone can see the market rapidly evolving, but few know where it’s heading. Government is playing its part, advancing a liability bill that will either slow innovation or save the world, depending who you ask. And even as AI funding is all the talk, early-stage dealmaking looks to be slowing - with a steep dropoff to less than 500 financings in Q2 from more than 1000 in Q1. Meanwhile, a growing number of funded companies seek exits. And the potential of startups to scale breakout innovations is being effectively blocked by big companies. The only constant is change, and investors should hold onto their hats for a wild ride ahead.

Smart Humans Podcast

In the latest episode of Smart Humans, Slava Rubin talks with Percent CEO and Founder Nelson Chu about private credit investing, optimizing yield and what’s in store for private markets.

Deal Points

A few items of interest

Stay true to the founders - IPOs are much more likely when you do

The Forecast

Looking ahead to this week

During the week of June 17th, keep your eye on:

  • Earnings from Carmax ($KMX) and Accenture ($ACN)

  • May retail sales and business inventories on Tuesday

  • Relax and honor the Juneteenth holiday on Wednesday

  • May housing starts and building permits on Thursday

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