There is a lot going on in the world of finance and investment. Here are some noteworthy news nuggets you need to know:
Happy belated birthday to the U.S. Social Security program, which turned 86 years old recently. Luckily for many older Americans, it hasn't been gutted or dismantled yet like the previous presidential administration was considering. Stocks overall climbed to a new record last week despite mixed signals from a pessimistic consumer sentiment index and an optimistic jobless claims report. But markets are very volatile in Europe and the Middle East after recent events have caused further instability. The economy and markets may fluctuate due to this transition and future implications.
Fintech garners the most attention from top VCs in Q2 Our Emerging Tech Indicator report provides a quarterly overview of startups receiving seed and early-stage investments from a select group of top-performing VC firms, and is meant to offer perspective on the products and technologies driving growth opportunities. In the second quarter of 2021, our analysts tracked 211 such deals involving the top 15 VC firms. Key takeaways from the report include: The top five areas of technology investment in Q2 included fintech at $920 million, followed by enterprise SaaS, health and wellness tech, decentralized finance, and ecommerce. ETI deal activity reached $5 billion across the 211 deals, compared with the $6 billion raised across 197 deals in Q1. Our analysts recorded eight ETI deals of over $100 million in Q2, compared with 12 in the previous quarter. The largest deal in Q2 was a $185 million Series A for Forte, the developer of a blockchain-based economic platform.
The past year has made the M&A space more exciting and dynamic than ever. Mergers and acquisitions is on the rise and providing a home for businesses amid the uncertainty, volatility and disruption surrounding global markets. Organizations are focusing on stability and growth when looking at their strategic goals. Many business processes can be outsourced, allowing the key players to focus on the core objective of a merger or acquisition. These include customer service, accounting, payroll, human resources management and compliance. Read Elements Global Services' new white paper, BPO in Mergers & Acquisitions, to gain a better understanding of these points: M&A in today's modern market The benefits of business process outsourcing for M&A BPO in global mobility and compliance
Pandemic puppy boom fetches big deals in Silicon Valley. Pet startups have snatched up more than $1.1 billion of venture capital investment so far this year, easily surpassing a high-water mark set a couple years ago. The pandemic added to a banner year for new pets: Approximately 20% of U.S. households took in a dog or cat between March 2020 and May 2021. Pet-crazy Millennials are also driving a long-running trend of more—and more expensive—pet ownership. Pet insurance is a particularly hot category. London-based Bought By Many raised $350 million in the largest pet-related VC deal of 2021. Don't call it a blip: Investors believe that demographic forces and shifting consumer preferences spell robust growth for pet startups.
How farmers are battling sustainability challenges with agtech It's getting hot out there. News this summer has been filled with stories about drought, wildfires and other effects of climate change on our health, safety and livelihoods. The food system, in particular, is gaining attention for its role as both a significant contributor to and recipient of these changes. For example, a recent UN study linked food systems to one-third of global greenhouse gas emissions. So, what technologies are being developed to address these challenges? Click for a larger version of our visual agtech overview. In a report last quarter, we introduced sustainability challenges and investment opportunities throughout the food system. Our latest research focuses on the sustainability challenges facing farmers and the emerging technologies transforming the agriculture industry. In the note, we find that global food demand is increasing along with population growth, which is expected to reach 9.7 billion by 2050. At the same time, extreme weather events, water shortages and harsh industrial agriculture practices are threatening productivity and long-term farm fertility. To fight back, farmers and other agriculture stakeholders are turning to diverse agtech solutions that mitigate sustainability challenges or help adapt to shifting conditions. Here are a few highlights: Emerging technologies, including biotech feed additives, field monitoring and analysis tools, and advanced farm equipment are addressing pollution challenges. Innovative irrigation solutions, indoor farming strategies, and ag biotech inputs are helping agricultural operations adapt to drought. Farms are tackling food waste challenges by identifying new ecommerce sales channels, deploying robotics and automation to perform agricultural tasks, and optimizing farm planning and management with new software tools.
Plant-based patties get all the love, but fake fish is growing out the gills and Big Food wants Plenty of fish in the sea. Plant-based foods have become so mainstream that alt-meat patties are regulars at Burger King, Dunkin’, Starbucks, and Walmart. Oat explosion: The global market for plant-based foods could grow to $450B by 2040, which would represent roughly a quarter of the $1.8T meat market. Soy stars: The growth has been driven by alternative milk and meat, which together make up 55% of total plant-based sales. But in the shadow of Oatly, Beyond Meat, and Impossible Foods, another alt is growing fast: fake fish. Friend keeps telling you to watch “Seaspiracy”... as you inhale spicy tuna rolls. Alternative seafood is one of the fastest growing segments of the plant-based market. Think: tuna made from tomatoes, and artichoke crab cakes. Investment in US plant-based seafood hit $70 million in the first half of 2021 — as much as in the past two years combined. But it still makes up only $12 million, or 0.1% of the $15 billion US seafood market. That’s partly because real seafood has a strong health halo. Cry me a freshwater river… Big Food may have missed the fake meat boom, but it’s not about to miss the fake fish fiesta. Tyson invested in plant-based shellfish company New Wave Foods, which launched its seaweed based shrimp this year. Nestle launched Vuna, a plant-based tuna alternative, last year. It cited stats that 90% of global fish stocks are now fully or nearly depleted. Thai Union Group, which owns tuna legend Chicken of the Sea, already makes plant-based fish and crab, and plans to launch plant-based shrimp this year. You can be late to new trends, but early to the overall opportunity… Big Food was late to plant meat and milk — but early to fake fish. There isn’t yet a dominant player in plant-based seafood, like there is for alt-meat and milk. Plus, the faux meat giants aren’t going after seafood yet. If companies can make plant-based seafood as tasty and nutritious as real fish, they could be early to a big opportunity.
In Q2, Blackstone reported record appreciation in the value of its investments. KKR raised $59 billion last quarter alone, having raised $44 billion in all of 2020. Everything, it seems, is getting easier for public PE giants these days—and the performance shows it. One trend: the timeline for everything has been truncated. Whether it's deploying funds, realizing investments, or the fundraising process in general, everything has shortened and many large funds come back to market quicker than ever. There's a lot more covered in our latest research on public PE firms, including a thorough breakdown of their latest financials.
After back-to-back record quarters for VC activity, enterprise healthtech investment dropped in Q2. Cause for concern? Not according to our analysts, as pressure persists to improve patient outcomes while decreasing costs. Those solutions will largely come from technologies that improve treatment discovery and delivery methods. Highlights from our latest research: Health insurance tech companies are racing to market and require large amounts of capital to meet regulations and invest in value-based care technology to decrease long-term costs. Consumer demand for patient engagement software is high, and these tech-enabled tools enable providers to deliver a robust and flexible experience while limiting labor costs. Real-world evidence has the potential across the entire healthcare ecosystem—including for clinical trials, care provision and determining treatment outcomes.
A record pace of exit activity continues to showcase the maturity of the foodtech sector. Indian food delivery company Zomato went public last month at an $8 billion valuation, and companies like Instacart and Eat Just are also primed for multibillion-dollar listings—perhaps by the end of the year. Our latest sector research offers a look into emerging opportunities in the foodtech space: VC investment of $6.2 billion across 280 deals in Q2 was actually down on a quarterly basis but still very strong historically. Activity was driven by ecommerce and delivery companies. Ultrafast delivery, whereby providers promise deliveries of groceries and high-demand convenience items within 20 minutes (and sometimes even 10 minutes!), has seen a massive surge of investment. Another early category gaining traction is microalgae, a segment within the alternative protein industry, as food scientists continue to explore new technologies that offer health and environmental benefits.
Mobility tech analyst Asad Hussain weighs in on recent developments in the carsharing industry, including the news that Turo has confidentially filed for an IPO: "Carsharing apps offer a significant layer of convenience and accessibility and provide an attractive alternative to the typically cumbersome process of renting a car. "Relative to traditional car rental agencies, P2P providers do not own and operate vehicles, eliminating the costs of fleet procurement and management. This creates a more easily scalable business model that has the potential to drive higher margins. "P2P carsharing is typically less expensive than traditional car rentals and creates a low-touch, seamless digital experience. "As a result, P2P carsharing startups Turo and Getaround are taking market share from the traditional car rental industry, which has struggled from its operations-heavy approach and dependence on business travel. "Turo, in particular, has benefited from pandemic conditions as consumers shy away from air travel in favor for road trips and renting local cars. As consumers can rent vehicles for multiple days, Turo is a great option for socially distanced vacations. "Turo's listing would mark the latest of a swathe of EV/mobility companies to go public, mostly through SPAC mergers. The company's decision to forgo a SPAC in favor of a traditional IPO is indicative of a broader cooling of sentiment toward SPACs. "Our EV / Mobility Price Change Index recorded a 9% loss in the first half of 2021, significantly underperforming the S&P 500's gain of 15.3% over the same period—even as several newly public mobility companies such as Nikola, Lordstown, and Canoo have hit snags."
Our insights and data featured in the press: DoorDash continues to expand into new verticals as the world of on-demand evolves. "Amazon can't handle the delivery needs of everyone." [Bloomberg] But…the FTC's scrutiny over Uber's Drizly acquisition and Gopuff partnership indicates concern over power consolidation. "For food delivery companies, there's only so many levers they can pull to make money." [Quartz] What are the factors supercharging M&A activity? "The combination of cheap financing, high stock prices, and highly confident executives is a recipe for dealmaking." [Private Equity Wire] VC investment is growing at the intersection of AI and medical imaging, "but there's still uneven adoption overall and a degree of skepticism from health care providers."
Green is the new black and cannabis is on a tear with sales at the top 10 publicly traded cannabis companies more than doubling over the last year. Scotts Miracle-Gro, the garden company whose cannabis subsidiary boomed last quarter, launched a cannabis investment arm last week. The new division already invested $150 million in a Canadian cannabis company. Also: last week, a $500M ecomm site Leafly announced plans to go public via SPAC later this year. After an infrastructure appetizer… it’s time to discuss the entree. Last week, a bipartisan group of Senators passed a historic $1T infrastructure bill to improve roads and rail, internet access, and EV networks. The tab will be partly funded by crypto taxes and Covid funds. But there’s a hook — House Dems plan to stall unless they can also tack on a $3.5T social and climate package. If the bills pass, they could kick off a new era of big government.
The DIY boom is ending, but someone still needs to fix the faucet. DIY-mania powered strong 2020 sales at Home Depot and Lowe’s. But last quarter, sales of “pro” products for contractors exceeded sales from DIYers at both companies — and helped their sales continue rising year-over-year. We’ll see if their new focus on pros through everything from tool rentals to supply chain improvements has paid off when both companies report earnings this week. Shop until the stimmies stop! After a spring of up-and-down consumer spending, retail sales rose above pre-pandemic levels in June as people spent padded savings and leftover stimulus cash on electronics, cars, and online classes. But inflation, the spread of Delta, and the end of stimulus payments could dampen the buzz. We’ll get a pulse check on America’s shopping spree when the July retail sales report, which tracks retail and restaurant spending, drops on Tuesday to see the results of the stimulus checks so far.
Seeding and anchoring: Options for accelerating the first-time fundraise. Competition to raise new personal equity funds has never been fiercer. Despite the quality of new managers seeking capital, first-time vehicles as a proportion of closed PE funds declined in 2020 and again in H1 2021. Our new data breaks down how seed and anchor commitments can help accelerate fundraising processes for new managers. A few key takeaways include: An anchor is a large LP commitment accompanied by fee-and-carry discounts. In a seed deal, in exchange for a substantial fund commitment and, in some cases, providing operating capital, the seeder receives an economic share in the GP, the management company or both. Most LPs that seed or anchor first-time funds fall into one of five categories: sponsors, large institutional LPs, funds-of-funds, family offices or endowments. The decision to take a seed or anchor is unique to each manager. First-time fund managers need to weigh the economics they'll be giving up against the potential benefits. Seeders must be highly selective in the managers they choose to back in order to avoid adverse selection effects.
WeWork is partnering with Saks Fifth Avenue to launch in-store working spaces – this time it doesn't own the leases. Can this help rescue the ravaged company and its downtrodden investors? Disney shares jumped last week after its theme parks returned to profit – but its real focus is Disney+ and its Great Media Experiment. #Benefits: Walmart and Target offer to pay 100% of college tuition for workers as companies amp up benefits to lure workers. Focus: Charles Darwin, Virgina Woolf, and Thomas Jefferson all used this three-or-four hour rule to fuel their best creative work. Make the most of your well-earned time off by planning ahead. The Ford F-150 is the best-selling car in the US — but the rest of the world has different tastes for trucks. Royal Dutch Shell finally paid an $111 million fine last week for an oil spill that happened 54 years ago in the country of Nigeria. Better late than never? Upwork CEO Hayden Brown shares her thoughts on how freelancing is changing the world of work. How can we protect outdoor workers facing heat, smoke and humidity? Technology might have the answer. How following the venture capital dollars provides insight on the next big real estate booms.
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