Thoma Bravo takes a break from new crypto investments, laying out ethical concerns

At the time, crypto startups had become all the rage in Silicon Valley, garnering rapid growth figures and high volumes, and even attracting pension funds to the cap table. Bravo’s PE firm, Thoma Bravo, had recently hired General Atlantic vice president Christine Kang to lead the firm’s growth equity business’ Web3 and crypto investments, and Bravo was hinting that its minority investments in the sector might just be an introduction into bigger buyout deals. 

Oh, how quickly things can change.

In an interview yesterday with the Financial Times, Thoma Bravo’s chief executive said the private equity firm, which has backed at least five crypto companies since last fall, is pressing pause on new investments in the sector. Bravo took it a step further, calling into question some of the ethical practices he was seeing in the broader industry.

“I’ve gotten to know that world a little bit more, and some of the business practices don’t rise to the level of ethics that we’re all used to in private equity with your investors and your customers and your community, and that has been a bit disappointing,” he told the Financial Times, adding that he was happy with the deals Thoma Bravo had already done and believed the industry was young and that ethical issues would “get fixed over time.”

Bravo’s statements are certainly a radical departure from a mere five months ago, when he was praising how crypto business models tend to have better margins than software startups. Even in July, Thoma Bravo had brought on a new hire to invest in Web3 companies. Since the end of last year, Thoma Bravo has backed FTX, Anchorage Digital, FalconX, Figment, and TRM Labs. Thoma Bravo’s team had been working with crypto-native funds to better understand the space for a year prior to its first investments.

Why the sudden change of tone?

For starters, the crypto markets are horrendous, if you haven’t noticed already. Bitcoin is trading around $20,000 as I write this—worth about half of what it was going into this year. Ether is trading at around $1,300, down from $2,800 in January.

Not to mention a slew of suspicious activity has left a bitter taste in people’s mouths. There’s the two hedge fund investors who blew up their own multibillion firm. Do Kwon, who founded the Luna and TerraUSD tokens that collapsed in May, is facing arrest in Korea, and his whereabouts are unknown. The Celsius Network allegedly advertised its crypto deposit account as a high-yield savings account, and investors who say they lost everything are fighting to get some of their money back in court.

But while the headlines have been extra devastating in recent months, none of this is new for anyone who has been paying attention to cryptoland. (And if you haven’t, you can just read the blog “Web3 is going just great” to get yourself caught up.)

After all, crypto isn’t regulated, and there have been plenty of bad actors to point at. So why now?

You have to wonder whether this shift in attitude has anything to do with crypto investments being less sexy these days on the scorecard. In 2021, crypto valuations were soaring, and fledgling startups were becoming unicorns in less than a year—offering VCs immediate results. Now tokens are plunging. Those declining metrics look a whole lot worse when sitting next to the cushioned performance figures for private eqity and venture capital that don’t necessarily reflect reality. Here’s the thing: Even if valuations across the private market are on the decline, most VCs don’t have to write down their investments until a formal liquidity event when they are reporting performance figures to their LPs. But if they own crypto tokens, which are even more liquid than equities, they don’t have a choice. (Investors typically have some combination of tokens and equity, although it can sometimes just be equity)

Or perhaps some investors are just now noticing the bad actors who have been galloping around in the first place, experiencing firsthand the interconnectedness of the market, or realizing how it may not be as easy as you would think to spot a winner in such a volatile, chaotic market. Whatever the reason, some seem to think it’s a better idea to sit on the sidelines until it’s more evident how all of this will play out.

Either way, Bravo hasn’t gone sour on crypto altogether. Bravo is still bullish on bitcoin, he told the Financial Times, and he seems pleased with the firm’s current investments. The firm would “certainly look at” pouring more capital into crypto exchange FTX, which has been scooping up other crypto startups during the downturn and doesn’t appear to be facing a downround.

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Flatfile, a Denver-based data exchange platform, raised $50 million in Series B funding. Tiger Global led the round and was joined by investors including Gradient Ventures, Scale Ventures, Workday Ventures, Afore Capital, Two Sigma Ventures, and other angels. 

- Sanity Group, a Berlin-based cannabis company, raised $37.6 million in Series B funding.  BAT Group led the round and was joined by investors including Redalpine and Casa Verde Capital. 

- Hadean, a London-based metaverse infrastructure company, raised $30 million in funding. Molten Ventures led the round and was joined by investors including 2050 Capital, Alumni Ventures, Aster Capital, Entrepreneur First, and InQTel. 

- GlossGenius, a New York-based business solution for the beauty and wellness industry, raised $25 million in Series B funding. Imaginary Ventures and Bessemer Venture Partners co-led the round and were joined by Left Lane Capital.

- JITX, a Berkeley and San Jose-based circuit boards design company for engineers, raised $12 million in Series A funding. Sequoia Capital led the round and was joined by investors including Y Combinator, Funders Club, and Liquid 2. 

- Carats & Cake, a New York-based financial operating system for the events industry, raised $10.6 million in Series A funding. 1Sharpe Ventures led the round and was joined by investors including Founders Fund, Acrew Capital, Moore Specialty Credit, Correlation Ventures, GMO VenturePartners, Argosy Capital, and SilverCircle. 

- Cake, a Los Angeles-based sexual wellness brand, raised $8 million in Series A funding. Silas Capital led the round and was joined by investors including Lerer Hippeau, Bullish, Selva Ventures, and Finn Capital Partners.

- Checkmate, a San Francisco-based smart shopping tool company, raised $5 million in seed funding. Fuel Capital led the round and was joined by investors including f7 Ventures, Blackbird Ventures, Scribble Ventures, Hyper, Susa Ventures, and former CEO of Ebates at Rakuten Kevin Johnson. 

- Quilo, a Staten Island-based loan syndication network, raised $5 million in Series A funding co-led by FinCapital, StudioVC, Venture Center, and others.

- Halo, a Chicago-based research and development collaboration platform, raised $2.6 million in seed funding led by Asymmetric Capital Partners. 

- Employee Cycle, a Philadelphia-based HR analytics dashboard for small and medium-sized businesses, raised $2.5 million in seed funding. Impellent Ventures led the round and was joined by investors including Collab Capital, Converge VC, and others.

- Gently, a San Francisco-based secondhand shopping platform, raised $2 million in pre-seed funding. Launch, Bloom Tech’s Austen Allred, Shutterstock’s Jon Oringer, RXBar’s Peter Rahal, Dorm Room Fund, and V1.VC invested in the round.

- Kalogon, a Melbourne, Fla.-based smart wheelchair cushion company, raised $1.9 million in seed funding. DeepWork Capital, SeedFundersOrlando, VenVelo, and others invested in the round. 

PRIVATE EQUITY

- Quickparts, a portfolio company of Trilantic North America, acquired Xcentric Mold & Engineering, a Clinton Township, Mich.-based digital manufacturing company. Financial terms were not disclosed. 

- Stonepeak acquired a minority stake in Equalbase, a Singapore-based development and asset management platform focused on the logistics sector across the Asia Pacific. Financial terms were not disclosed. 

EXITS

- Berkshire Partners agreed to acquire a majority stake in AHEAD, a Chicago-based enterprise cloud services provider, from Centerbridge Partners. Financial terms were not disclosed. 

OTHER

- Sendinblue acquired Yodel.io, a remote-based cloud-based business phone solution. Financial terms were not disclosed.

SPAC

- NioCorp Developments, a Centennial, Colo.-based mineral development company, agreed to go public via a merger with GX Acquisition Corp. II, a SPAC. A deal values the company at $313.5 million.

FUNDS + FUNDS OF FUNDS

- Industrial Opportunity Partners, an Evanston, Ill.-based private equity firm, raised $650 million for its fourth fund focused on acquiring and overseeing middle-market manufacturing and distribution businesses. 

- Further, an Abu Dhabi-based venture and investment firm, allocated $200 million for a fund focused on digital assets, fintech, and supply chain investments. 

PEOPLE

- Antler, a Singapore-founded venture capital firm, hired Robbie Crabtree as venture partner. 

- Concord Health Partners, a Summit, N.J.-based investment firm, hired Robert B. Schulz as managing director. Formerly, he was with CB Health Ventures and Health Enterprise Partners.

- Ronin Equity Partners, a New York-based private equity buyout firm, hired Davis Hein as senior financial analyst. Formerly, he was with Greystar. 

- TA Associates, a Boston-based private equity firm, hired Jennifer Barbetta as COO, Lori Stachelski as chief talent officer, and Darlene Karis as global head of human resources. Formerly, Barbetta was with Starwood Capital Group, Stachelski was with Abry Partners, and Karis was with Bain Capital.