| | | | | The Weekend Pitch | January 10, 2021 ![]() | | Presented by Allvue | | | | | As of this writing, it has been less than 48 hours since rioters ransacked the US Capitol in a bid to overturn the results of a presidential election. I am probably not the only one among us who found it a bit difficult this week to focus on startups and buyouts.
But startups and buyouts are what we do around these parts. So we shall plow ahead. Maybe it will help to lead off with what might be the furthest possible thing from insurrection: cheerfully animated video games for children.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. Roblox, which saw its business boom last year amid the pandemic, is now one of the most valuable VC-backed private companies in the world—but it won't be staying private for long. And that's one of 10 things you need to know from the first week of 2021: | | | | | |  | | The Roblox game "Jailbreak" has been played more than 4 billion times. (Courtesy of Roblox) | | | 1. Game on
Roblox filed for an IPO last November. Just a few weeks later, it delayed the listing until 2021, seemingly because the massive first-day pops recorded by Airbnb and DoorDash in their respective IPOs had raised concerns about leaving too much money on the table.
This week, the social gaming company revealed its solution. Roblox raised $520 million in new funding at a $29.5 billion valuation and announced that it will go public via a direct listing instead of a traditional IPO, joining names like Spotify, Slack and Palantir Technologies on the short list of VC-backed companies that have opted to eliminate underwriters and list their shares directly.
Roblox's sky-high valuation represents a more than seven-fold increase from last February, before the onset of the pandemic, when Andreessen Horowitz led a $150 million investment in Roblox at a $4 billion valuation, according to PitchBook data. The new deal is an unusual solution to the puzzle of how best to go public, with Roblox choosing to raise one last batch of cash privately rather than take advantage of a very recent change in SEC rules that will allow companies to raise capital in direct listings for the first time.
Roblox was founded in 2004 as a self-contained platform for game developers and gamers. Most of its titles are aimed at younger users, employing a blocky animation style reminiscent of Lego or "Minecraft." Over the next decade, it raised a few million in venture funding, but there were few, if any, signs that the company was a budding colossus.
That began to change in 2017, when the San Mateo, Calif.-based company brought in $25 million at a $500 million valuation, according to PitchBook data. And the company's growth curve started to go vertical last year, when the pandemic caused millions of socially distancing children to turn to Roblox as a new platform for fun and social interaction.
Roblox had 31.1 million daily active users as of the end of Q3 2020, up nearly 82% from the same period in 2019. Users spent 22.2 billion hours on its platform during the first nine months of last year, up 122% year-over-year. Revenue is up 68%. Last year, the company claimed that about half of all American children under the age of 16 are on its platform. And those kids aren't only using Roblox to play wildly popular games with names like "Jailbreak" and "MeepCity." It has also become something of a social network, a place where locked-down 10-year-olds might host a virtual birthday party.
For teen game developers, meanwhile, Roblox has emerged as a place where they can make a whole lot of money.
The video game industry in general has seen interest soar over the past 10 months. Epic Games, the creator of "Fortnite" as well as the Unreal Engine, a widely used game development tool, raised venture funding last August at a $17.3 billion valuation. Unity Software, another VC-backed game development platform, went public last September at a $13.7 billion valuation.
The companies have their differences: Roblox's games can only be played on the company's own platform, while Unity and Epic's software can be used to develop games across a broad spectrum of platforms.
But all three have emerged as key bits of infrastructure in a rapidly growing segment, as video games continue their decades-long shift from nerd-dom into the cultural mainstream.
And the post-IPO success of Unity is surely one reason Roblox was able to attain such a lofty valuation in its latest round. Unity closed this week with a market cap of nearly $40 billion, up more than 190% from the time of its IPO less than four months ago.
Expecting a similar surge from Roblox might be a stretch, considering the company's attempt to bake much of its valuation growth into this week's new funding round. But if Roblox can continue its transformation into the preferred virtual playpen of the American child, its ceiling will continue to rise.
2. SoFi's SPAC selection
Like Roblox, SoFi announced plans to go public this week. And like Roblox, the personal finance company is eschewing a traditional IPO. Instead, SoFi will conduct an $8.65 billion reverse merger with Social Capital Hedosophia V, the latest SPAC helmed by Social Capital leader Chamath Palihapitiya. It will become the fourth major company in the past two years to merge with a Social Capital-backed SPAC, joining Virgin Galactic, Opendoor and Clover Health.
3. IPOs around the corner
Many companies, though, are still opting for IPOs, hoping to ride a wave of hugely lucrative debuts that occurred in Q4. Fintech startup Affirm set a price range for its coming debut this week, a listing that could value the company at more than $10 billion. Online fashion marketplace Poshmark also set terms for an imminent IPO, as did private equity-backed companies Petco and Driven Brands, the latter of which is the parent of Meineke, Maaco and other auto-care providers.
4. IPOs on the horizon
The week also brought notable news from several companies planning IPOs a bit further in the future. Oat milk maker Oatly—backed by Blackstone, Oprah Winfrey and more—is getting ready for a listing sometime this year, CNBC reported. Controversial Israeli spyware manufacturer NSO Group is also mulling a public offering, daily newspaper Haaretz reported. And Bloomberg reported that Robinhood is considering selling some of its shares to its own users when the stock-trading company conducts an IPO that could occur as soon as this quarter. | |  | Oprah Winfrey sees an IPO in her future.
(Steve Jennings/Getty Images) | | | 5. Media moves
Less than three months after announcing plans to shut down, Quibi has found a new home for its short-form video content, agreeing to sell its portfolio to Roku for what The Wall Street Journal reported is "significantly less" than $100 million. Elsewhere, local news app News Break brought in $115 million in a round led by Francisco Partners. And in the waning days of 2020, Amazon dipped its toes into podcasting with a deal to purchase Wondery at a reported valuation of $300 million.
6. Going green
In the same week that Elon Musk became the richest man in the world, a Bloomberg report indicated that prospective Tesla rival Rivian is in talks to raise new funding at a $25 billion valuation, the latest sign of investor appetite for electric vehicles. And in private equity, former Goldman Sachs CEO Henry Paulson announced plans to join TPG Capital as the leader of a new fund that will invest in climate-focused companies.
7. Unicorn foals, Pt. I
On average, more than one new company per day hit the $1 billion valuation level during the first week of the new year. Healthcare testing startup Color was valued at $1.5 billion as part of a $167 million round, and fellow health technology company Hinge Health hauled in $300 million at a $3 billion valuation. Along with healthcare, the data analytics industry also has a pair of new billion-dollar companies, as Dremio brought in $135 million at a $1 billion valuation and Andreessen Horowitz led a $100 million investment in Starburst at a $1.2 billion valuation.
8. Unicorn foals, Pt. II
Startups from several other sectors also got in on the action. Cybersecurity specialist Lacework banked $525 million at a $1 billion valuation. Corporate fintech provider Divvy is now worth $1.6 billion after a $165 million round. Quantum Metric, which helps companies build digital products, topped a $1 billion valuation with $200 million in new funding, and SalesLoft collected $100 million at a $1.1 billion valuation to fund its sales software.
9. Healthcare consolidation
The pursuit of corporate synergies in the healthcare industry continued this week with a trio of billion-dollar deals. UnitedHealth agreed to pay $7.84 billion for Change Healthcare, which is partially owned by Blackstone, a move that should expand UnitedHealth's technology offerings. AmerisourceBergen agreed to acquire the Alliance Healthcare pharmacy business from Walgreens Boots Alliance for $6.5 billion. And Centene struck a $2.2 billion deal to acquire Magellan Health in a bid to build out its behavioral health services.
10. Eyes on Indonesia
Tokopedia and Gojek have both been losing market share of late in their home nation of Indonesia. So now, the two startups—potentially valued at a combined $18 billion—are in talks to merge, according to reports, a deal that would bring together Tokopedia's ecommerce offerings with Gojek's ridehailing, food delivery and payments services in a bid to hold off rivals such as Shopee and Ovo.
View the full list online | | | | | | | | | | | | Eliminating boundaries between systems, information, and people | | As fund managers raise fresh assets, bring on additional investors, and navigate increasingly complex, changing markets, the state of their underlying technology becomes critical. What's most challenging for managers, though, is having to work with data kept in multiple spreadsheets or disparate point solutions, which can inhibit information sharing and decision-making.
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Learn how a holistic data strategy can help GPs | | | | | | | | |  | | (serggn/Getty Images) | | | | In a span of just a few months during 2020, special-purpose acquisition companies transformed from an afterthought into some of the buzziest entities in all of finance. Investors, entrepreneurs, executives and celebrities all got in on the craze, combining to raise tens of billions of dollars last year in an unprecedented run of IPOs.
As James Thorne writes in this detailed look at the state of the SPAC market, raising all that money might have been the easy part. Now, they have to find the right companies to spend it on. | | | | | |  | | The UK has bid adieu to unified Europe. (Alan Powdrill/Getty Images) | | | | More than four years after the UK stunned the world by voting to leave the European Union, the nation's Brexit is finally complete. The effects of the departure will be myriad and complex, leading to changes in everything from higher education to fishing rights.
In Andrew Woodman's new look at what the UK's exit from Europe will mean for private equity, two things stand out. One is the potential for more deals. The other is the potential for more red tape. | | | | | |  | | (RapidEye/Getty Images) | | | | I am among the more than 60 million people who have watched "The Queen's Gambit," a wildly popular Netflix show about a young chess prodigy named Beth Harmon (based on Walter Tevis' excellent novel of the same name). So too, I would hazard a guess, are Victoria Grace and Anastasia Nyrkovskaya, two executives who recently launched a sustainability-focused SPAC called Queen's Gambit Growth Capital, with hopes of raising $225 million.
The name would seem to come from the fact that Queen's Gambit Growth Capital boasts an all-woman management team and board—including Grace, who is a founding partner at early-stage fund Colle Capital, and Nyrkovskaya, who is the CFO of Fortune Media. Or maybe they just really like chess: The logo for Grace's Colle Capital also appears to be a queen. | | | | | | Recommended reads An oral history of the Xbox, a video game console that was nearly canceled and went on to change Microsoft forever. [Bloomberg]
A moving and thought-provoking field trip to Kenya to visit Najin and Fatu, two northern white rhinoceroses who are literally the last of a dying breed. [The New York Times]
The immediate health concerns raised by the COVID-19 pandemic are obvious. Are worries about mental health being overlooked? [TechCrunch]
Skiing is not a sport that has been historically known for racial diversity. For nearly 50 years, though, the National Brotherhood of Skiers has been doing its part. [Outside]
Inside the US Army's warehouse full of Nazi art. [The New Yorker]
The rescheduled 2020 Summer Olympics in Tokyo are less than 200 days away. Is there any chance they actually happen? [Intelligencer]
For decades, Americans could find almost anything they wanted at Sears. Now, those abandoned superstores are playing a key role in vaccine rollouts. [The Wall Street Journal]
Previewing 46 of the most anticipated new books of 2021. [Vulture] | | | | | | Quote of the week "Because this is America, the 82-year-old hands that used to pick somebody else's cotton went to the polls and picked her youngest son to be a United States senator."
—Rev. Raphael Warnock, speaking about his mother casting her vote for him in Tuesday's Senate runoff election in Georgia | | | | | | The Weekend Pitch is produced by editor Kevin Dowd.
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