Coronavirus updates (Sept. 29-Oct. 11): Coronavirus effects on private markets

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The US Postal Service is expecting a record number of mail-in ballots in this year’s election due to the coronavirus pandemic. (John Moore/Getty Images)

PitchBook is providing ongoing coverage of the coronavirus outbreak and its effects across the private markets and the economy.

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Instacart becomes most valuable US VC-backed food delivery company at $17.7B

Instacart has been valued at $17.7 billion with a new $200 million round, underscoring a sustained demand for grocery delivery and a shift in how Americans shop for food during the coronavirus pandemic.

With the investment, Instacart is now the sixth-most valuable VC-backed company in the US, according to PitchBook data, and has surpassed DoorDash to become the most valuable food delivery company in the country.

The coronavirus outbreak forced brick-and-mortar grocers to scramble for the digital infrastructure needed to meet customers’ demand for online shopping, said Alex Frederick, an emerging tech analyst at PitchBook. “Grocers are increasingly turning to Instacart to obtain online capabilities and keep pace with Amazon and Walmart.”

The San Francisco-based company has now raised a total of $525 million since the outset of the pandemic in March. Its valuation has more than doubled since the end of 2018. —James Thorne, 6:55 a.m. PDT, Oct. 9

Tech deals buoy private equity as the crisis recovery continues

Thanks to the coronavirus crisis, the rate of US private equity dealmaking in 2020 continues to lag well behind past years. But there are reasons to think the market is beginning to bounce back after bottoming out during the second quarter—a recovery that’s been driven in part by a stream of tech buyouts that not even a pandemic could halt.

Our Q3 2020 US PE Breakdown examines the industry’s insatiable appetite for tech deals, plus 2020’s ongoing SPAC frenzy and other trends defining this time of transition across private equity. Key takeaways include:

  • PE firms have capitalized on a swift recovery for public equity markets with a string of multibillion-dollar exits via IPO
  • New government guidelines and a potential change to the tax code could lead to an uptick in dealmaking
  • Current signs point to a feverish finish to the year for PE fundraising

—Wylie Fernyhough, 6:48 a.m. PDT

Coronavirus effects on venture capital

Quarterly VC funding for female founders drops to three-year low

Venture funding for female founders has hit its lowest quarterly total in three years. Firms invested a total of $434 million in Q3—the lowest figure since the second quarter of 2017, according to PitchBook data. The third quarter total also amounts to a 48% drop in funding from Q2, when female founders received $841 million across 132 deals.

“When it comes to unraveling systemic racial and gender bias in the investment community, this data affirms that we are only at the beginning of a very long and difficult fight,” said Melissa Withers, who co-founded RevUp Capital in 2015.

The pandemic has dealt a disproportionate blow to female business owners, with 2020 on pace to be the worst investment year since 2017 of the decade. —Priyamvada Mathur, 8:25 a.m. PDT, Oct. 8

Pandemic-proof tech listings bring life to slow UK IPO market

The £1.9 billion (around $2.5 billion) London debut of ecommerce company The Hut Group has signaled a rebound for an IPO market hard hit by the coronavirus pandemic and Brexit. And more listings are expected in the coming months.

When compared to the US IPO market, recovery in Europe has been slower, but some industry experts are hopeful that those companies successfully weathering the pandemic could lead a revival. —Andrew Woodman, 8:43 a.m. PDT, Oct. 5

Uber looks beyond ridehailing with $500M freight business boost

More than six months after the pandemic devastated Uber’s core ridehailing business, the company’s future continues to take shape.

Uber Freight has raised $500 million—its first external funding—led by private equity firm Greenbriar Equity. The deal underscores Uber’s plan to diversify its business away from ridesharing by accelerating the growth of its end-to-end delivery network. —James Thorne, 8:30 a.m. PDT, Oct. 5

First-time funds: Fewer but bigger

Fundraising activity for first-time funds has taken a hit during the pandemic, with only $1.9 billion raised so far this year versus $5.3 billion for all of last year, according to preliminary PitchBook data for the third quarter.

  • However, the few newcomers who do score with LPs are coming away with more firepower. Median fundraising for first-time funds has risen this year to a new high of $42.3 million, up from $35 million last year.
  • One member of the 2020 freshman class is Will Ventures, led by former Harvard football players Isaiah Kacyvenski and Brian Reilly. Their early-stage fund weighs in at the high end of the first-timer group, with a final close of $55 million to invest in startups focused on services and products catering to the growing sports market.

—Alexander Davis, 7:28 a.m. PDT, Sept. 30

Corporate VC firms buck ‘tourist’ reputation with pandemic dealmaking

Corporate venture capital firms are cementing their presence in the startup ecosystem in a year when they could have retreated to the sidelines. So far in 2020, these investors have participated in 25.5% of all US venture capital deals, on pace to match a recent high in 2018, according to PitchBook data.

That activity defies a perception that CVCs are part of a class of tourist investors that tend to back off in difficult economic circumstances. Such was the case following the global financial crisis when CVC investment fell to 16% in 2012, according to PitchBook data.

In the first few months after lockdown measures were put in place, venture capital firms of all stripes paused new deal activity to focus on their portfolios and assess the changing landscape. But as the stocks of big tech companies bounced back, it became obvious that investor sentiment in the private tech sector had also stabilized. —James Thorne, 7:30 a.m. PDT, Sept. 29

Coronavirus effects on private equity

Restaurant woes lead Ruby Tuesday to Chapter 11

Ruby Tuesday has filed for Chapter 11 bankruptcy protection, the latest sign of the financial damage the coronavirus crisis has wrought across the restaurant industry. Ruby Tuesday plans to continue operating its restaurants throughout the restructuring process. NRD Capital has owned the Tennessee-based chain since completing a $146 million acquisition in 2017. —Kevin Dowd, 12:28 p.m. PDT, Oct. 7

Crowdfunding startup Crowdcube buys Seedrs

UK equity crowdfunding business Crowdcube has agreed to buy its rival Seedrs. The two companies say the deal will create one of the world’s largest private equity marketplaces. Both were hit hard by the pandemic. In June, Crowdcube saw investments on its platform were down 10% compared to May 2019. Meanwhile, Seedrs made salary cuts and furloughs in June.

Shareholders in Crowdcube, which raised over £35 million from investors including Draper Esprit and Balderton Capital, according to the PitchBook platform, will hold 60% of the combined group, which will be run by Seedr’s current CEO Jeff Kelisky. Seedrs has secured more than £30 million in funding. It is backed by VCs including Augmentum, Bluebird Partners and LC Ventures.

Since 2011, over 1,500 companies have received more than £2 billion across both business’ platforms. Payments group Revolut and beer maker Brewdog are among those to have used their crowdfunding services. The merger is expected to complete by the end of the year of early 2021. —Leah Hodgson, 8:48 a.m. PDT, Oct. 5

Nordic Capital hits €6.1B close after remote fundraise

Swedish PE firm Nordic Capital has hit a hard cap of €6.1 billion (about $7.2 billion) on its latest flagship fund after less than six months on the road and no face-to-face meetings. The vehicle, which launched at the start of the COVID-19 crisis with a €5 billion target, is the firm’s biggest yet.

Nordic’s Fund X is perhaps not the first remote fundraise in Europe—Tenzing Private Equity reached a £400 million (about $515 million) final close on its second buyout fund in June after nine-weeks on the road—but it is perhaps the largest. It is also Europe’s second-largest vehicle in 2020, according to PitchBook data, surpassed only by CVC Capital Partners’ mammoth eighth flagship buyout fund, which reportedly amassed around €21.3 billion in July.

Around 90% of the LPs from Fund IX re-upped for Nordic’s latest vehicle, which secured 66% of its commitments from existing investors. The firm says Fund X will focus on non-cyclical, growth investments across healthcare, financial services and technology. The fund made its first investment in September with the acquisition of Siteimprove, a Danish company that makes user-friendly software for people with disabilities.

PE fundraising is expected to be significantly lower in 2020 than in previous years due to the pandemic, but activity has picked up in recent weeks. In September, France’s Ardian secured €2 billion for its fifth expansion fund, just a few days after Bridgepoint Development Capital reportedly received £1.5 billion for its fourth vehicle. —Leah Hodgson, 4:45 p.m. PDT, Oct. 1

Apollo approaches bookmaker William Hill

Gambling group William Hill has received separate takeover proposals from Apollo Global Management and Caesars Entertainment. The UK-based company has a market cap of over £3 billion (about $3.8 billion). Last month, it announced a 32% year-over-year decrease in revenue for H1 2020 and said it would permanently close 119 locations due to the pandemic. —Kevin Dowd, 8:00 a.m. PDT, Sept. 29

PitchBook reports on the coronavirus impact on private markets

Pandemic pressures weigh on IoT venture ecosystem

VCs poured $5.1 billion into the internet-of-things sector in the first half of 2020, a 17% increase in capital invested year-over-year. Deal count was down for the IoT industry as a whole, and the industrial, smart retail and software subsectors experienced dramatic declines. IoT security, however, has emerged as an outstanding opportunity in the software space.

Although supply chain constraints and other pandemic-related challenges have largely frozen growth in IoT, a significant snapback in demand is likely in a recovery, according to our H1 2020 Emerging Tech Research report on the sector. Other key takeaways include:

  • VC exit value is on pace to set a record in 2020, following the substantial acquisitions of security specialists CyberX and Armis
  • Microsoft and Google are compounding their advantages in the industrial IoT and consumer device markets, respectively, through M&A
  • Additional connectivity standards are still needed to drive the continued expansion of IoT devices

—Brendan Burke, 7:45 a.m. PDT, Oct. 2

Navigating cash flows and capital at risk during a crisis

Over the past 15 years, steadily falling interest rates have driven yield-hungry allocators to shift trillions of dollars into the private markets. For the LPs managing all those commitments, the coronavirus crisis has caused a number of new stressors—including the risk for some overexposed allocators that portfolio holdings could lose significant unrealized value.

Even with months passing since the start of the crisis, the waters are still murky for LPs. Our latest Quantitative Perspectives research looks back to the global financial crisis to present a data-driven picture of what LPs should expect in the months to come in terms of managing cash flows, plus a new framework that can help investors better evaluate their capital at risk. Key takeaways include:

  • LPs should expect capital calls to outpace fund distributions while the crisis persists
  • GPs who entered the crisis with much of their capital called down and little in realized distributions may struggle the most
  • Preliminary data suggests private fund valuations have fallen materially in 2020 for many vintages

—Andy White and Zane Carmean, 7:31 a.m. PDT, Sept. 30

The pandemic is driving new VC interest in retail health

Venture firms funneled nearly $2 billion to retail-oriented companies in the health and wellness industry during the second quarter of 2020, the latest sign of spiking interest in the space. As the biggest global health crisis in a century continues to unfold, investors have been eager to back startups offering telehealth tools and a wide array of other services aimed at keeping patients well.

The rise of remote care driven by stay-at-home orders has been one major impetus, according to a new piece of Emerging Tech Research focused on retail health and wellness tech. But a number of other shifts in the industry are also driving deals, including a focus on preventative care and the ever-expanding cost of traditional healthcare. Other highlights include:

  • A growing elderly population and increased life expectancy have expanded demand for many healthcare services
  • Consumer wellness startups are inking new corporate partnerships in a bid to improve employee benefits

—Kaia Colban, 9:15 a.m. PDT, Sept.24

Did you miss any of our continuing coverage of COVID-19? Find our most recent updates below:

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