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| | | | | | Top of the Morning | | Source: Giphy Last January this space called the startup valuation peak. What followed was painful for many, as equity prices declined and jobs were lost. Why it matters: Twelve months is an eternity for young companies, which means the time for wound-licking should be over. Founders now must choose caution or courage. - This isn't an argument for frivolity or wasteful spending.
- Instead it's a reminder that, historically, the strongest startups have been those that grew through market tumult — innovating and grabbing market share while incumbents were preoccupied with Wall Street scrutiny.
- Maybe the real "TAM" isn't quite what founders put on their pitch decks, but some percentage of it is still out there for the taking.
The big picture: Many startups raised excess venture capital over the past couple of years, sometimes multiples of what they originally sought. Often thanks to fund managers who wanted to keep resetting fee streams. - The smart founders and executive teams banked much of that money, and now can use it as a cudgel. Including against startups rivals that overhired.
- Yes, it will be harder to raise that next round than it was in 2020 or 2021, particularly without dilution or structure. But U.S. venture funds raised record amounts of capital last year, so the hurdle might not be quite so lofty.
Driving the news: Corporate earnings kick off this week, with expectations of Q4 pain and Q1 warnings. That's against a backdrop of Friday's strong jobs report, and a new CPI report dropping this Thursday. - As of now, it appears that a recession (if it happens) would be mild.
- That said, none of us knows the future. Except that it will feature big surprises.
The bottom line: There's an old business cliche about sticking to your knitting. For those who recognized the 2022 sea change before being drowned, 2023 is the year to pick those knitting needles back up. |     | | | | | | The BFD |  | | | Illustration: Victoria Ellis/Axios | | | | AstraZeneca (LSE: AZN) agreed to buy CinCor Pharma (Nasdaq: CINC), a Boston-based biopharma focused on hypertension and chronic kidney disease, for upwards of $1.8 billion. Why it's the BFD: This reflects the symbiotic mashup of falling biotech stock prices, and incumbent drugmakers needing to refresh portfolios as top-sellers fall off the patent cliff. Details: AstraZeneca will pay $1.3 billion in cash, or $26 per share (121% premium), plus up to $500 million in contingent payments. CinCor went public in early 2022, and major shareholders still include Sofinnova Ventures (13.89%), 5AM Ventures (11.28%), Sofinnova Partners (9.64%) and General Atlantic (9.6%). Elsewhere in kidneys: Baxter (NYSE: BAX) said it will spin off its global renal care operations, which generate around $5 billion of annual revenue, into an independent, publicly traded company. The bottom line: "CinCor traded above $30 throughout much of the fall of 2022, only to plummet precipitously in late November when the biotech shared phase 2 data on aldosterone synthase inhibitor baxdrostat in uncontrolled hypertension. The clinical trial missed its primary endpoint. And, while CinCor committed to moving into phase 3 in 2023, investors fled and dragged the company's share price down to around $12. The sharp shift in sentiment created an opportunity for AstraZeneca." — Nick Paul Taylor, Fierce Biotech | | | | | | | | Venture Capital Deals | | 🚑 Amolyt Pharma, a French developer of therapeutic peptides for rare endocrine diseases, raised €130m in Series C funding. Sofinnova Partners and Intermediate Capital Group co-led, and were joined by Tekla Capital Investment, CTI Life Sciences and insiders Andera Partners, Novo Holdings, Kurma Partners, EQT Life Sciences, Innobio 2, Sectoral Asset Management, Pontifax, Orbimed, Mass General Brigham Ventures, ATEM, Credit Agricole Creation and Relyens Innovation Santé/Turenne Capital. www.amylotpharma.com • Superscript, a London-based insure-tech focused on SMEs and high-growth tech companies, raised £54m in Series B finding. BHL UK led, and was joined by The Hartford and Concentric. https://axios.link/3iqRSuK • Doorstead, an SF-based rental property management startup, raised $21.5m in Series B funding. Avanta Ventures led, and was joined by MetaProp, M13 and Madrona. https://axios.link/3vLn22O • World Enterprises, a Dallas-based industrial automation startup, raised $21.2m in Series A-1 funding. Moneta Ventures led, and was joined by insiders Align Capital, Green Park & Golf Ventures, Chevron Technology Ventures, Piva Capital, Perot Jain and Capital Factory. www.worlds.io 🚑 Qritive, a Singapore-based digital pathology startup focused on cancer, raised $7.5m. MassMutual Ventures led, and was joined by SEEDS Capital and Exfinity Venture Partners. www.qritive.com • Releaf, a Nigerian palm oil provider, raised $3.3m in new funding led by insider Samurai Incubate Africa. https://axios.link/3IyZ2HS | | | | | | | | A message from PwC | | 2023 M&A outlook: What will drive successful deals? | | |  | | | | Approximately 90% of executives tell us they're concerned about macroeconomic conditions. What you need to know: Looking ahead, there are factors that will help drive successful dealmaking. PwC walks through each — along with breakdowns by industry — in the U.S. Deals 2023 outlook. Read more. | | | | | | Private Equity Deals | | • Harbor Logistics, a portfolio company of NOVA Infrastructure acquired ATS Logistics, a provider of transportation and warehouse services at the Port of Charleston, S.C. https://axios.link/3GNEkmu • HKW acquired CMIT Solutions, an Austin, Texas-based IT managed service provider. It also acquired HTW, which is CMIT's largest franchisee. www.cmitsolutions.com • Next Level Apparel, a Torrance, Calif.-based portfolio company of Blue Point Capital Partners, acquired Stedman, a German provider of casual and sportswear blank apparel to the printwear market. www.nextlevelapparel.com • OceanSound Partners invested in Gannett Fleming, a Harrisburg, Pa.-based provider of infrastructure consulting services. www.gannettfleming.com • PNC Riverarch Capital acquired Backerhaus Veit, a Canadian baker of breads, rolls and soft pretzels to retail and foodservice customer, from Swander Pace Capital. www.backerhausveit.com • Redwood Software, a Frisco, Texas-based portfolio company of Turn/River Capital, Tidal Software, a Chicago-based enterprise workload automation provider, from Dillon Kane Group. www.redwood.com • Vista Equity Partners agreed to acquire Duck Creek Technologies (Nasdaq: DCT), a Boston-based provider of insurance industry SaaS, for $2.6b, or $19 per share (46% premium). www.duckcreek.com | | | | | | | | Public Offerings | | • This week's IPO market will be headlined by Skyward Specialty Insurance Group, a Houston-based specialty property and casualty insurer focused on underserved markets, which plans to raise around $128m. It would be the first company to raise over $100m in an U.S. IPO since last October (Mobileye). https://axios.link/3ZiBI7f 🚑 WeDoctor, a Chinese digital hospital, plans to file for a U.S. and Hong Kong IPO by the end of April, per Bloomberg. Backers include Sequoia China, CIC Capital, AIA Group and Tencent. https://axios.link/3XhFUm0 | | | | | | | | SPAC Stuff | | 🚑 iCoreConnect, a Winter Garden, Fla.-based provider of a HIPPA-compliant workflow platform, agreed to be acquired by FG Merger (Nasdaq: FGMC). https://axios.link/3il3fEo 🌎 UNSDG Acquisition, a decarbonization and digitalization SPAC chaired by James Boettcher (Focus Ventures), withdrew registration for a $100m IPO. https://axios.link/3GtC6qQ | | | | | | | | Liquidity Events | | 🚑 Qiagen (NYSE: QGEN) acquired Verogen, a San Diego-based DNA biometrics company, from Telegraph Hill Partners for $150m in cash. https://axios.link/3vR6A1k | | | | | | | | More M&A | | • Canaccord Genuity Group (TSX: CF), a Toronto-based investment bank, said that its management group is seeking to take it private in a C$1.13 billion deal. https://axios.link/3CyKeFm 🚑 Chiesi Farmaceutici of Italy agreed to buy Amryt Pharmaceuticals (Nasdaq: AMYT), a London-based rare disease drugmaker, for $1.7b upfront and upwards of $225m in earnouts. https://axios.link/3GqQ2lF • Mexico's government will pay around $42m to buy the brand and select assets of defunct airline Mexicana. https://axios.link/3Czb2pb • Nuvei (Nasdaq: NVEI) agreed to buy Atlanta-based payments firm Paya (Nasdaq: PAYA) for $1.3b in cash, or $9.75 per share (25.1% premium). www.paya.com 🚑 Pfizer (NYSE: PFE) is moving away from early-stage R&D for rare disease drugs, and plans to sell off some related assets, per Fierce Biotech. https://axios.link/3jZvA3C • Tianqi Lithium, a Chinese lithium producer, agreed to buy Australian lithium explorer Essential Metals (ASX: ESS) for A$136m. https://axios.link/3ZmXdnp | | | | | | | | It's Personnel | | • Daniel Forman joined Jefferson River Capital, the family office of Blackstone's Tony James, as chief investment officer. He previously led asset management for Emerson Collective. https://axios.link/3Qt4FcO • Dan Glaser, former president and CEO of Marsh McLennan, joined Clayton, Dubilier & Rice as an operating partner. www.cdr-inc.com 🚑 Kaveh Samie, former head of MENA for Neuberger Berman and KKR, joined Patient Square Capital as a partner, CEO of MENA and head of international fund partnerships. www.patientsquarecapital.com • Daniel Tiemann (ex-KPMG) joined Odyssey Investment Partners as a managing principal and head of portfolio operations. Odyssey also promoted Bill Schwartz to principal and promoted Kyle Dedrick, Katie McCartin, Christian Pinto and Logan Walker to senior associates. www.odysseyinvestment.com • Infinedi Partners promoted Dan Conlon to vice president. www.infinedi.com • Partners Capital promoted Emma Bewley and Sud Murugesu to partners, and promoted Anne Duggan, Leslie Fitzgerald and Sam Hufton to managing directors. www.partners-cap.com • Spectrum Equity promoted Parag Khandelwal to managing director. www.spectrumequity.com | | | | | | | | Final Numbers |  Data: FactSet; Chart: Axios Visuals Government bond yields plunged on Friday, as expectations of a "soft landing" rose, Axios' Matt Phillips reports. | | | | | | | | A message from PwC | | The power of portfolio renewal and the value in divestitures | | |  | | | | Divestitures can be hard. That's why it's important to understand factors in decision-making and execution that create positive shareholder returns. 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