Coronavirus updates (Sept. 14-Sept. 28): Coronavirus effects on private markets

*Practice rounds began this week for the U.S. Open golf championship in New York with new safety precautions and restrictions in place. (Jamie Squire/Getty Images)*

PitchBook is providing ongoing coverage of the coronavirus outbreak and its effects across the private markets and the economy.

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The pandemic is driving new VC interest in retail health

Venture firms funneled nearly $2 billion to retail-oriented companies in the health and wellness industry during the second quarter of 2020, the latest sign of spiking interest in the space. As the biggest global health crisis in a century continues to unfold, investors have been eager to back startups offering telehealth tools and a wide array of other services aimed at keeping patients well.

The rise of remote care driven by stay-at-home orders has been one major impetus, according to a new piece of Emerging Tech Research focused on retail health and wellness tech. But a number of other shifts in the industry are also driving deals, including a focus on preventative care and the ever-expanding cost of traditional healthcare. Other highlights include:

A growing elderly population and increased life expectancy have expanded demand for many healthcare services
Consumer wellness startups are inking new corporate partnerships in a bid to improve employee benefits

—Kaia Colban, 9:15 a.m. PDT, Sept.24

Coronavirus effects on venture capital

Lab-grown meat: The promising alternative that may be years away from appearing on dinner plates

The recent pandemic-induced panic around meat production could have posed a unique opportunity for many cell-based meat startups to make their way into the industry limelight as viable protein alternatives.

But many of those startups are still a long way from delivering lab-grown chorizo or cultured salmon to consumers’ dinner plates. What’s holding them back? —Priyamvada Mathur, 9:30 a.m. PDT, Sept. 23

Quibi mulls sale amid struggle for new subscribers

Less than six months after going live, Quibi is exploring its options, which include a potential sale, a merger with a blank-check company or raising more capital, according to The Wall Street Journal.

The short-form video streaming service has reportedly struggled to gain subscribers as streaming competitors rush to release their platforms in the throes of the coronavirus pandemic. It’s hoping to draw the attention of technology and media companies including Amazon and Alphabet, the report said.

Founded by Hollywood executive Jeffrey Katzenberg and run by Silicon Valley veteran Meg Whitman, Quibi had planned to sign up 7.4 million paid subscribers by next April, but won’t pass the 2 million mark at its current pace, the WSJ reported in June.

Quibi is also caught in a legal battle with interactive video startup Eko over patent infringement claims. Eko alleged earlier this year that it created and patented the technology used in Quibi’s “turnstyle” feature, according to reports, which plays videos based on how viewers hold their phones.

In March, Quibi reportedly closed a $750 million funding round, bringing its total investments to $1.75 billion. —Vishal Persaud, 10:00 a.m. PDT, Sept. 22

Chime passes Robinhood in US consumer fintech hierarchy

Online bank operator Chime has more than doubled its valuation in less than a year to $14.5 billion, making it the most valuable VC-backed consumer fintech company in the US.

The $485 million Chime landed for its latest fundraise underscores how some consumer tech companies have continued to grow during the pandemic. Chime is said to be profitable on an EBITDA basis, with its revenue tripling so far this year. —James Thorne, 9:00 a.m. PDT, Sept. 21

Personal fitness platform Tonal secures $110M

Fitness startup Tonal has raised $110 million in funding from investors including L Catterton, Shasta Ventures, the Amazon Alexa Fund, and professional athletes Stephen Curry and Michelle Wie. The San Francisco-based company is the maker of an AI-based strength training device for in-home use. The company’s personal training approach resembles Peloton, which has seen accelerated growth during the pandemic, as well as Mirror, which Lululemon agreed to acquire for $500 million earlier this summer. —James Thorne, 10:00 a.m. PDT, Sept. 18

Opendoor to go public in merger with Social Capital SPAC

Opendoor has agreed to merge with Chamath Palihapitiya’s special-purpose acquisition company, Social Capital Hedosophia Holdings Corp. II, in a deal that gives the real estate tech business an enterprise value of $4.8 billion. Opendoor was valued at $3.8 billion last year, according to PitchBook data.

The merger will provide the San Francisco-based company with around $1 billion in cash, including a $600 million PIPE investment from new investors BlackRock and the Healthcare of Ontario Pension Plan, as well as existing Opendoor shareholders. The company’s existing investors, which include NEA, GGV Capital and Norwest Venture Partners, will roll their equity stakes into the new entity.

Opendoor operates a digital platform that streamlines the process for buying and selling homes. The company expects revenue to fall 48% to $2.5 billion this year, down from $4.7 billion in 2019, according to an investor presentation. It also has plans to expand operations from 21 US real estate markets to at least 100 markets across the nation.

The SPAC deal marks a change of fortune for Opendoor, which reportedly laid off 35% of its staff in mid-April. The business paused new home purchases in March due to the pandemic and resumed with modified operations in May. —James Thorne, 5:40 p.m. PDT, Sept. 16

Klarna now Europe’s most valuable fintech startup with $650M round

Swedish payments startup Klarna has reached a $10.65 billion valuation with a $650 million investment led by Silver Lake.

Klarna has nearly doubled its valuation since its last funding round in 2019
The business has seen a surge in demand since the beginning of the pandemic as shops close and transactions move online
Despite the crisis, European fintech startups have proved more resilient than most raising billions in VC funding

—Leah Hodgson, 3:07 p.m. PDT, Sept. 15

On the podcast: European VC plows ahead despite COVID-19

The COVID-19 pandemic has left no part of the global economy unscathed. But the European VC landscape has remained surprisingly resilient, driven in large part by continued investment in tech and a proliferation of sizable late-stage rounds.

PitchBook analyst Nalin Patel joins the latest episode of “In Visible Capital” to break down the current state of the European venture scene, including:

How COVID-19 has caused Europe’s work-from-home, healthcare, biotech and pharmaceutical industries to boom
Why median valuations, deal sizes and step-up rounds have remained strong, with European corporate venture capital spending especially robust
How a continued surge in European VC specialist funds targeting tech, healthcare and more has helped overall European VC fundraising stay relatively stable

—Adam Lewis, 2:48 p.m. PDT, Sept. 15

Coronavirus effects on private equity

Fresh power boost for video game valuations

Video game developers such as Epic Games and Unity Software have seen their valuations soar in recent months, as investors take note of an uptick in consumer spending in the gaming sector during the pandemic.

With the launch of its newest Xbox consoles less than two months away, Microsoft is getting in on the action with the $7.5 billion acquisition of the company behind “The Elder Scrolls,” “Fallout” and other beloved titles. —Kevin Dowd, 10:00 a.m. PDT, Sept. 22

Flywheel to shut down as COVID-19 continues to upend fitness industry

Flywheel Sports, a New York-based operator of boutique spin studios that received prior backing from L Catterton and others, has filed for Chapter 7 bankruptcy and will permanently close all its locations, according to reports, the latest sign of how the pandemic has changed the fates of companies across the fitness industry.

The news comes seven months after Flywheel settled a patent lawsuit brought by Peloton, which resulted in Flywheel admitting it had copied some of its would-be rival’s technology and shutting down its own in-home bike offering. In the months since, the pandemic has provided a tailwind for many in-home fitness companies. Peloton’s stock price has roughly quadrupled. Mirror lined up a $500 million sale to Lululemon. And on Tuesday, Apple announced the launch of Fitness+, a subscription platform geared toward at-home fitness.

Many brick-and-mortar fitness companies, meanwhile, have struggled with shutdowns and store closures. Both Gold’s Gym and 24-Hour Fitness have filed for bankruptcy amid the pandemic.

In January, shortly before Flywheel settled its Peloton suit, owner Kennedy Lewis Investment Management agreed to sell the company to fellow New York-based fitness studio chain Town Sports for $25 million. But Town Sports canceled the deal in April as the effects of the pandemic kicked in; earlier this week, the company filed for Chapter 11 bankruptcy protection. As that deal crumbled, Flywheel found other means to stay afloat, taking out a Paycheck Protection Program loan of between $1 million and $2 million in April. —Adam Lewis, 5:52 p.m. PDT, Sept. 16

PitchBook reports on the coronavirus impact on private markets

Agtech investment tops $2B in Q2 despite pandemic headwinds

The coronavirus outbreak has created significant obstacles for the agtech industry, exposing vulnerabilities in supply chains and driving down demand for major commodities like cotton and corn. Yet in Q2, VC investment in agtech companies totaled $2.1 billion, up more than 170% from Q1.

At the moment, investors are focused on sustaining their existing portfolio companies—but that may change. The pandemic is likely to accelerate trends toward automation and robotics, and new opportunities are expected to arise as growers seek out solutions in their new environment, according to our inaugural Emerging Tech Research report on agtech. Other key takeaways include:

Venture funding in agtech had a CAGR of nearly 33% from 2010 to 2019, driven primarily by climate change and global population growth
The ag biotech sector carried the bulk of VC activity last quarter, with $1 billion raised across 20 deals
Agtech exit activity has remained remarkably low over the past decade, in part because of agriculture’s long development times

—Alex Frederick, 5:00 p.m. PDT, Sept. 17

How the pandemic is accelerating digital transformation and DevOps adoption

The coronavirus outbreak and subsequent shelter-in-place restrictions are increasing the pressure to continuously develop digital products and services, as developed societies place more value on the ability to work, learn and communicate remotely.

Companies with sophisticated IT capabilities are thriving in this new environment, but legacy non-technology businesses face significant risks for disruption, according to our Q2 Emerging Tech Research report on Cloudtech and DevOps. Other highlights include:

VCs poured $1.1 billion into Cloudtech and DevOps deals in Q2, bringing 2020’s total to $2.1 billion through June 30 and keeping the year on pace with 2019
Venture investment in collaboration tools is accelerating, with several new unicorns minted in the space
While 2020 is likely to cause IT budgets to tighten in the near-term, the industry’s strong tailwinds will keep dealmaking steady
Exit value through Q2 was subdued compared with 2019, which saw a record of nearly $50 billion in exit value due to several notable IPOs

—Paul Condra, 3:49 p.m. PDT, Sept. 16

Digital therapeutics’ prescription for growth

The digital therapeutics industry is expected to be worth $6.9 billion by 2025, as the promise of more effective, efficient healthcare helps drive new growth. These medical treatments can make it easier and more economical to customize, monitor and scale care to many patients, creating a large market opportunity for VC investment.

Our latest analyst note centers on emerging healthcare products and services that rely on software and data. Among the findings:

VC funding in the space has surged from $134.3 million in 2015 to $1.2 billion in 2019
Acquisitions by or partnerships with big tech companies in the healthcare market could give startups a tailwind

—Kaia Colban, 12:10 p.m. PDT, Sept. 14

Pandemic pushes automation as AI & ML investment tops $12B in Q2

Venture investors poured $12.6 billion into artificial intelligence & machine learning companies in Q2, with mega-deals in late-stage unicorns in the US and China accounting for most of that total. Valuations spiked in H1 relative to full-year 2019, with median valuations at the early and late stages up nearly 45% and 38%, respectively.

The pandemic has driven demand for AI & ML products and encouraged automation across the economy, according to PitchBook’s newest Emerging Tech Research report. But budgets aren’t rising in tandem, pushing companies to do more with less in order to add AI capabilities. Other takeaways include:

The AI & ML sector is projected to be a nearly $125 billion market in 2023, growing at a CAGR of more than 20%
Exit activity was sluggish in Q2, with just $2 billion in disclosed deal value across 36 exits
Autonomous robotics could see renewed investor interest as multiple trends converge in the sector

—Brendan Burke, 1:00 p.m. PDT, Sept. 9

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