| | | | | The Weekend Pitch | December 13, 2020 ![]() | | Presented by ON Partners | | | | | Nine months ago, the pandemic began. Eight months ago, Airbnb raised $2 billion in debt and equity at an $18 billion valuation, nearly halving its prior private valuation. Seven months ago, the company laid off about 1,900 workers, or roughly a quarter of its entire workforce.
And this week, Airbnb executed an epoch-defining IPO, one that raised $3.5 billion and was followed by a first-day pop that temporarily took the company's market cap past $100 billion, leaving CEO Brian Chesky quite literally speechless.
That was only half the story. DoorDash also completed an enormous IPO of its own, raising $3.4 billion and ending the week with a market cap of about $55 billion, well over three times greater than its last private valuation. The tech IPO market is flying as high as it has in two decades—and there seem to be few signs of a return to Earth any time soon.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. Wall Street continues to go gaga over VC-backed debuts, which is one of nine things you need to know from the past week: | | | | | |  | | Airbnb and DoorDash both raked in billions in a week when anything seemed possible. (WIN-Initiative/Getty Images) | | | 1. The pandemic pipeline
My colleagues Vishal Persaud and James Thorne spent most of this week following every twist and turn of the Airbnb and DoorDash debuts, so I'll turn you over to them for the specifics. Vishal has all the numbers on Airbnb, including a timeline of the firm's chaotic year. James dug into the details on DoorDash, and took a more in-depth look at what has been a record-breaking year for VC-backed IPOs.
And Airbnb and DoorDash are just two very prominent examples of the trend. Enterprise software company C3.ai saw its share price nearly triple this week between a Wednesday debut and Friday's close, taking its market cap to nearly $11.5 billion. Roblox and Wish are both expected to conduct highly anticipated IPOs in the coming weeks. Recent reports indicate that Robinhood, Coursera and Squarespace are among those preparing for listings in 2021.
To get a sense of what's coming next, I checked with David Peinsipp, co-chair of the global capital markets practice at Cooley, a major Silicon Valley law firm. He said he and his colleagues are preparing for the frenzy to continue, pointing to the "extraordinary pipeline" of companies waiting to make debuts of their own.
"We expect 2021 to be as active as 2020, and maybe even better," Peinsipp said in an email. "Parade mentality or FOMO are legitimate drivers of capital markets, and so we expect companies that might otherwise have waited to see what's happening and reconsider their timing, and potentially accelerate their plans in 2021."
As touched on earlier, Airbnb's IPO is the latest step in a remarkable recovery from the earliest days of the coronavirus crisis. Instead of viewing the pandemic as a potential existential threat, Airbnb is now pitching it as a newfound opportunity, describing its service in its S-1 filing as a tool to help people escape the financial ravages of the virus: "[A]s the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people."
DoorDash never had the same fears as Airbnb. While travel restrictions and populations being told not to leave their homes would seem on the surface to be very bad for a vacation rental company, they would seem to point toward a significant boost for a food delivery company. And indeed, DoorDash's business boomed this year, surely the biggest reason for immense investor optimism. As one example, its Q3 revenue jumped 268% on a year-over-year basis, climbing to $879 million.
Instead, DoorDash's largest pandemic concerns seem to center on restaurants and delivery drivers, the two foundations of the company's business. Longstanding feuds with both groups have recently come to a head: In September, a St. Louis restaurant launched a class-action lawsuit accusing DoorDash of illegally steering potential business away from restaurants who wouldn't partner with the company. And about two weeks ago, the company agreed to pay $2.5 million to settle a separate lawsuit alleging it misled customers and pocketed tips that were meant for drivers.
In New York, other food delivery drivers are organizing to demand better pay and conditions, saying they're tired of being treated like "insects." Meanwhile, about one in six US restaurants closed their doors between the start of the pandemic and September, according to the National Restaurant Association.
It was a week of celebration and unfathomable profits for many executives and investors. But I would guess many of these drivers and restaurateurs have a different take on the matter.
There was one other particularly notable figure that caught my eye this week: $47 billion. That was Airbnb's fully diluted valuation at its IPO price, before its first-day pop. And $47 billion, you may recall, was also the final private valuation bestowed upon WeWork before that company aborted its planned IPO last year, a collapse that led to predictions of a new era of increased caution and austerity when it comes to tech unicorns.
That's not to compare Airbnb's way of doing business with WeWork's. But it seemed like an appropriate symbol of how quickly attitudes have changed, allowing a company that's still never turned an annual profit to ascend to such lofty heights.
"We went through a period of heavy focus on profitability and predictability, and all of that remains important," Peinsipp told me. "But growth and disruption, driven by technology, seems to us to continue to capture investor attention. COVID accelerated that focus. … It's more than raising money, it's perpetuating innovation."
This week, at least, that investor attention was certainly captured. Now, we'll buckle in and see how much crazier things can get.
2. Facebook's future
On Wednesday, the FTC and nearly every state in the union came together to file antitrust lawsuits against Facebook, the most meaningful escalation yet of the ongoing feud between regulators and the biggest tech companies in the US. The suits call for Facebook to break up its social media empire by splitting off WhatsApp and Instagram as separate companies, moves that would undo Facebook's two most significant acquisitions to date. It seems very safe to say that we'll hear a whole lot more about this one in 2021.
3. Uber's shift
After years of trying to establish itself as a player in the race to develop self-driving cars, Uber is taking the exit ramp. The company agreed to sell its autonomous vehicle unit to Aurora Innovation, a startup active in the space, in a complex transaction that will result in Uber owning a 26% stake in Aurora at a reported valuation of $10 billion. Uber also walked back another prior moonshot bet this week, agreeing to offload its air taxi unit to Joby Aviation.
4. Star gazing
The music rights business continues to boom, as Bob Dylan (sorry—Nobel Prize winner Bob Dylan) agreed to sell his full catalog to Universal Music Publishing Group for a reported $300 million. A much younger star was also in the news: Josh Richards, an 18-year-old TikTok phenomenon, is joining early-stage firm Remus as a venture partner. And then there was ByteDance, the parent of TikTok, which is reportedly raising a new $2 billion round led by KKR and Sequoia at a $180 billion valuation. | |  | Perhaps the coolest image to ever appear in this newsletter.
(Michael Ochs Archives/Getty Images) | | | 5. As the SPACs turn
The SPAC gold rush isn't slowing down yet. Paysafe, a payments company backed by Blackstone and CVC Capital Partners, lined up a $9 billion reverse merger with a SPAC this week. HydraFacial, a skincare company with PE backing of its own, agreed to a $1.1 billion SPAC combination. And electric and autonomous vehicle companies continue to lead the way, with EVBox and Innoviz both securing deals to go public via SPAC at separate $1.4 billion valuations.
6. Shorting startups
An intriguing new player emerged on the venture landscape this week in the form of Apeira Capital, led by Natalie Hwang, formerly the head of Simon Property Group's venture arm. Apeira plans to use about 70% of its capital to make traditional VC deals, but the rest of its capital will go toward creating what The Wall Street Journal described as "venture synthetics"—bespoke instruments that will essentially allow the firm to take short positions in startups by betting against others' investments. Apeira is reportedly seeking $150 million for its first fund.
7. Security variety
The UK's G4S agreed this week to be bought by fellow private security specialist Allied Universal in a PE-backed deal worth £3.8 billion (about $5 billion). Thoma Bravo made a growth investment in Venafi that valued the machine identity management company at $1.15 billion. In VC, cloud security company Wiz emerged from stealth with a $100 million Series A. And Dragos, a company that deploys a fleet of Ivan Drago lookalikes to … shoot, that's wrong. Dragos is a cybersecurity company that raised $110 million of its own this week.
8. IT takeovers
Platinum Equity unveiled the biggest private equity buyout of the week, agreeing to purchase Ingram Micro, a California-based company that provides a wide range of tech and supply-chain services, in a $7.2 billion transaction. Veritas Capital made a major move of its own in the IT industry, agreeing to buy the federal IT and mission support services business of major defense contractor Northrop Grumman in a $3.4 billion deal.
9. Taking care in business
We end with a pair of startups concerned with the world of care that both raised funding this week at unicorn valuations. Calm, which fosters self-care through its meditation and sleep-aid services, hauled in $75 million at a $2 billion valuation. And Tempus, a healthcare company using AI to develop personalized medicines, raised $200 million in venture funding at a valuation of $8.1 billion.
View the full list online | | | | | | | | | | A message from ON Partners | | | | C-level job demand surges in second half of 2020 | | While the pandemic's ripple effects can be blamed for a C-level hiring slowdown in private equity during Q2 2020, analysis by top-20 retained executive search firm ON Partners points to a rebound to close the year, with four key leadership positions experiencing a higher demand: CEO, CRO, CFO and CTO.
Key market indicators also show a jump in executive search hiring demand overall, with a 12% increase from Q2 to Q3.
To learn more about the state of the executive recruiting market and which leadership roles are experiencing the highest demand in the second half of 2020, click here. | | | | | | | | |  | | (Wenmei Zhou/Getty Images) | | | | The past decade has largely been one of progress for women in venture capital, according to All In, our annual look at female founders and CEOs in the US venture ecosystem. More recently, this year has been one of increased awareness throughout the industry, with conversations about the importance of both racial and gender diversity bubbling up more frequently among investors.
And yet. The All In report includes a number of metrics that highlight how the pandemic has had a disproportionate effect on female founders, including this one: Total deal value for female-founded companies is down 31.3%, far more than the 17.9% drop seen across all US companies.
Check out the report for a bevy of other facts and figures—including reasons for optimism in the years to come. | | | | | |  | | (PM Images/Getty Images) | | | | A shift in PitchBook methodology means that the latest edition of our Global Fund Performance Report is able to offer more up-to-date data than ever before. And in terms of usefulness to you, dear reader, the shift couldn't have come at a better time.
The one-year horizon IRR across all private capital funds dipped to just 2% during the first quarter of 2020, part of the widespread financial fallout from when the pandemic began in earnest in March. Our new preliminary data from the second quarter, though, reveals that the recovery for fund performance was remarkably swift. How swift? Take a look. | | | | | |  | I take my private equity firms medium-rare.
(Malte Mueller/Getty Images) | | | | Last week I talked to PitchBook senior analyst Wylie Fernyhough about some of the implications of a potential $13 billion SPAC merger involving Dyal Capital Partners and Owl Rock Capital, a deal that would combine heavyweights in GP stakes investing and direct lending. This week, Wylie expanded even further in a new analyst note, including his take on why this might not be the last transaction linking SPACs and GP stakes.
Our resident GP stakes expert also published a second note on the space, this time with a different focus: What are the eventual liquidity options for GP stakes investors? One major takeaway is that it would behoove LPs to be aware of all their different options. | | | | | |  | | (Matthias Kulka/Getty Images) | | | | As you can see, it was a busy week for our analyst team. That includes two final notes that dig into ongoing shifts in the venture capital investor base.
One such shift has been driven in no small part by the coronavirus. The pandemic has led to an increase in rounds led by existing investors, a symptom of restrictions that have made it nearly impossible for many VCs to meet in person with new founders. So Cameron Stanfill examined what kind of effect these insider-led deals have on both valuations and returns.
Another shift was underway long before 2020 went off the rails. For several years now, corporate venture capital firms have assumed a growing prominence in the industry landscape. Kyle Stanford presents a data-driven look at the implications of this CVC sea change. | | | | | |  | Always keep an eye out for ice cream.
(Jean-François Monnot/Getty Images) | | | | What do you say if you find carrot lurking in your strawberry ice cream, or spinach masquerading in your mint chocolate chip? For one startup that appeared on "Shark Tank" this week—receiving two offers and declining them both—the answer is Peekaboo. A few weeks before her star turn, founder Jessica Levison and Peekaboo also won the $200,000 grand prize at the Real California Milk Snackcelerator, which is a delightful name in itself.
I've never had Peekaboo's products, but if I did, I know which one I would choose, particularly after this past week full of highly valued startups: Unicorn, a flavor that combines cake batter with zucchini. | | | | | | Recommended reads In 1986, two lovebirds busted out of a coed prison in a hijacked helicopter. They've been trying to escape ever since. [Esquire]
A few lessons from Brexit on how not to negotiate. [Harvard Business Review]
Earlier this month, a Formula One driver walked away after his car crashed into a wall and burst into flames. It couldn't have happened without decades' worth of science and innovation. [Wired]
The pandemic has been a uniquely horrifying time for many medical professionals. The same is true for many medical ethicists. [The Atlantic]
In California, some of the world's largest and oldest living things are only beginning a fight for their own survival. [The New York Times]
A lot of people don't like how they look on Zoom. Which is one reason the plastic surgery industry is booming. [The Washington Post]
Hundreds of centuries-old skeletons were found on the shores of a Himalayan lake more than 16,000 feet above sea level. Experts have spent the past eight decades trying to figure out how they got there. [The New Yorker]
At some point, nearly every company out there will have to apologize for something. Here are some tips on how to do it. [Bloomberg] | | | | | | Quote of the week "I haven't seen anything like this in over 20 years. The party is as loud and the drinks are flowing as freely as the dot-com boom, despite that we're all drinking at home and alone."
—Eric Paley, an investor at Founder Collective, speaking to The New York Times about a frenzied end to 2020 among VC dealmakers | | | | | | The Weekend Pitch is produced by editor Kevin Dowd.
Were you forwarded this newsletter? Sign up at pitchbook.com/subscribe. | | | | | | | | | Since yesterday, the PitchBook Platform added: | | 18 Deals | 81 People | 30 Companies | | | | | | | | | | | | | | |
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