News: Retail fintech fights inflation's bite

Monday, March 27, 2023

Retail fintech fights inflation's bite

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The Daily Pitch: VC, PE and M&A

March 27, 2023

The Daily Pitch is powered by PitchBook's industry-defining research and best-in-class data

In today's Daily Pitch, you'll find:

First Citizens Bank has agreed to buy most of Silicon Valley Bank, weeks after the lender’s collapse sent shockwaves through the banking system.

Unpacking emerging opportunities for retail fintech investors in loyalty and rewards, alternative investments and more.

A tighter debt market has created opportunities for alternative lenders.

A nuanced analysis of the top five arguments against the use of ESG strategies.

Today's Top Stories

Credit card perks and loyalty bonuses: Retail fintech fights inflation's bite

Retail fintech deal activity has aggressively reverted to pre-2021 levels and last quarter was no different. Our Q4 2022 Retail Fintech Report uncovers the recession indicators within the data: Deal values, exits and counts fell across the board, while loyalty programs and alternative assets present winning opportunities in today's high-inflation era.

Retail fintech VC deal value declined 73.4% year-over-year in Q4, reaching its lowest level since Q3 2018. Late-stage retail fintechs had a particularly hard fall: Exit value dropped from $195.3 billion in 2021 to $5.7 billion in 2022.

Fintech investors are shifting toward B2B: Just 38.4% of all fintech VC deal value for 2022 was in retail. Meanwhile, B2C digital banks like Chime and Varo are facing the heat as investors remain unconvinced of profitability and higher borrower delinquencies risk hurting bottom lines.

Alternative asset providers are another niche primed for takeoff, ranging from NFTs and fine-wine investing to real estate.

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Failed SVB to be taken over by First Citizens

(NurPhoto/Getty Images)

North Carolina-based First Citizens Bank has agreed to buy most of SVB just weeks after the lender’s collapse.

SVB’s startup and venture customers will now have a new home but the failure of the leading tech lender will have lasting impacts on the VC industry.

10 largest private debt funds find opportunity in tight lending market

(BestStock3D/Shutterstock)

Private debt funds currently in the market are eyeing a mix of opportunities arising from tightening lending conditions.

This year, some of the largest private debt funds are weighing investment strategies from direct lending to distressed debt. Some fund managers are seeking capital to plug a financing gap created by increasingly skittish banks, while more are building up their war chests for bets on companies undergoing a period of distress or change.

Sorting through the top criticisms of ESG

Tracking and mitigating material environmental, social and governance-related risks within investments strikes some GPs and LPs as common sense. But the ESG strategy rankles some investors, especially those who view the now-politicized risk evaluation framework as a form of virtue signaling.

Our recent analyst note dissects five oft-repeated arguments against the use of ESG—spelling out which concerns are based in reality and which are born from misinformation.

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European PE funds shift to value investing to counter volatility

(alexkich/Shutterstock)

As interest rates have risen, European private equity funds have doubled down on creating value from their existing portfolios. Many deals are now add-ons rather than new acquisitions, and dealmaking is being approached with added caution—particularly given the unpredictable economic and geopolitical environment punctuated by bank sector turbulence.

PE buyout fundraising notched €40.6 billion (about $43 billion) across 65 funds in 2022, down from 2017's peak of €92 billion for 174 funds. Also within Europe, the UK is no longer the leader in sponsored loan volume, though some investors see it as a good bounce-back candidate.

Recommended Reads

Despite steps to support small Black-owned businesses, there remains a lack of support or funding for those trying to break through the UK's glass ceiling. [Financial Times]

Strategy Capital, a tech-focused hedge fund, is a reminder that one year of performance doesn't make or break a manager. [Institutional Investor]

Most carbon emissions caused by businesses are hidden from sight. US and California regulators are pushing to require companies to fully disclose them. [Wired]

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VC Deals

B2B data integration specialist Adeptia has raised $65 million in a round led by PSG.

Savings and investment marketplace Raisin has secured a €60 million Series E from investors including M&G Investments and Goldman Sachs.

GT Medical Technologies, which makes medical devices for patients with brain tumors, has raised $45 million in a Series C led by Gilde Healthcare Partners.

Spatial biology startup Lunaphore has raised 40 million Swiss francs (about $44 million) in a round led by EGS Beteiligungen.

Axios HQ, a software business spun off from digital publisher Axios, has raised $20 million led by Glade Brook Capital Partners and Greycroft Partners, The Wall Street Journal reported.

Smart basketball hoop startup Huupe has raised $11 million led by Protagonist VC, Marvan Ventures, TRI Investments and Kawn VC, TechCrunch reported.

Tel Aviv's Daily.dev, which offers a professional network for software developers, has secured an $11 million seed investment from investors including Aleph, Jibe Ventures and Secret Chord Ventures.

Climate-tech startup Lun has raised €10.3 million from investors including Norrsken VC, Partech and Lowercarbon Capital.

Grocery delivery company Good Eggs has taken a 94% hit to its valuation, The Information reported, closing a $7 million down round led by Glade Brook Capital Partners. The company previously raised $60 million in late 2020.

PE Deals

Bain Capital has proposed a take-private buyout of Estia Health for A$775 million (about $517 million). Estia runs residential care facilities for the elderly in Australia.

LDC has invested in Idwal Marine Services, a UK-based shipping sector inspection services provider. The company has a presence in the UK, Greece, China and Japan.

Alpine Investors-backed lifestyle and emotional wellness platform Ingenio has acquired Kasamba, a website that provides customers with online psychic readings, from LivePerson.

Exit & IPOs

Apollo Global Management-backed German bank Oldenburgische Landesbank has halted its plans for an IPO, Bloomberg reported. The lender had been considering a float in May.

Mental health services company SonderMind has acquired the assets of Mindstrong, a telehealth startup for mental well-being previously backed by VCs including General Catalyst and Arch Venture Partners.

HIG Capital has sold Brazilian specialty chemical manufacturer Elekeiroz to Oswaldo Cruz Química, another Latin American chemical company.

Fundraising

In April, buyout firm KPS Capital Partners plans to begin raising $8 billion to $10 billion for its latest main fund, KPS Special Situations Fund VI, The Wall Street Journal reported.

Corporate M&A

Brazilian lender BTG Pactual has agreed to buy Luxembourg's FIS Privatbank. The bank's clients include high net worth individuals, family offices and institutional investors.