It’s been just over three weeks since the Federal Deposit Insurance Corporation swept in after the failure of Silicon Valley Bank and saved depositors. But the venture capital industry is still reeling from the near-catastrophe.
“I’m very much in the bearish camp,” Crunchbase CEO Jager McConnell told me during a conversation on Friday. “We’re still not out of it.”
From McConnell’s seat in the market—as both the CEO of a venture-backed, 241-person startup, as well as a funding data and information provider to 80 million users—the ultimate impact of the tech industry’s banking crisis is going to be substantial, and it’s already showing up in the data.
Startups, venture capital firms, and limited partners alike are all rethinking their banking strategy, McConnell says—whether they had relationships with Silicon Valley Bank or not. Crunchbase, which had moved its money out of Silicon Valley Bank as part of a previous funding round, is still rejiggering its own capital.
“We’re not going to leave 100% of our dollars in [a single bank] like we have done in the past,” McConnell says. “We’ll pull out a large chunk of that money and put it in different places.”
It’s possible that, at scale, companies and firms shuffling some 50% or more of their capital around could damage even well-established banks, McConnell says. Even if it doesn’t, that shuffling takes time.
“When that stuff is going on, VC firms aren’t going to be making investments; LPs aren’t going to be doing capital calls, because they’re too worried about protecting their dollars,” McConnell says. “You’re going to see an absolute slowdown. We already are absolutely seeing that in March.”
Global funding is already at a low. Companies raised $76 billion in the first quarter of this year, a 53% year-over-year decline from 2022 figures, according to new Crunchbase data released this morning. That’s despite Microsoft’s $10 billion infusion into OpenAI and Stripe’s $6.5 billion investment in Stripe, which skewed the figures.
McConnell expects the numbers will continue to go down as more instability shows up in the market. “You’re going to see people pull back even harder to make sure that their dollars are protected,” he says, noting that only high-demand companies will be getting capital and that we can expect very aggressive term sheets in the near future, meaning that founders will have the short end of the stick. And don’t expect the data to tell the full story: It usually lags behind the markets by about a quarter or so—and many companies are shying away from disclosing new funding rounds altogether, as they’d prefer to keep quiet about a down round.
Internally at Crunchbase, McConnell says his team has been talking about adding a “confidence meter” to company profiles, suggesting that their valuation may be outdated or pointing out recent layoffs. “Speculating is a dangerous game to get into, but internally we do it all the time,” McConnell says.
McConnell has been with Crunchbase since he left an 11-year career at Salesforce to help spin the data company out as an independent company from AOL in 2015. Crunchbase now has 60,000 paying subscribers, according to the company. About two-thirds of its revenue comes from software subscriptions like Crunchbase Pro, and the rest from data licensing to other applications.
But the times are tight, and Crunchbase is feeling it, too—rethinking its pricing structure (nearly all its users get the software for free) and cutting out unnecessary expenses. McConnell canceled the holiday party in December this last year, saying it just “didn’t feel right” to burn half a million in VC funding to celebrate when the markets were at such a low. McConnell says Crunchbase is aiming to achieve profitability within the next two years.
“I’m running the business as if I will never fundraise again,” McConnell says. “And I think every CEO should be thinking like that unless you just are blockbuster metrics across the board. I’d rather not fundraise again unless they’re kicking down my door to do the fundraising. I don’t want to go begging with my hat out to try to get dollars from people.”
Another founder arrested…Charlie Javice, the founder of the startup sold to JPMorgan Chase in 2021 for $175 million, was arrested Monday evening after the Department of Justice filed criminal charges against her, alleging she defrauded the bank. She faces more than 100 years in jail if convicted. Finance reporter Luisa Beltran has the full story here. And if you’re wondering how JPMorgan got duped into paying the big bucks for 4 million fake accounts, you can read about that here.
Checking in on the Trump SPAC…Yesterday former President Donald Trump voluntarily surrendered himself to Manhattan prosecutors and has pled not guilty to the 34 felony charges against him. Meanwhile, shares of Digital World Acquisition Corp., which has been trying to merge with the parent company of Trump’s social media business Truth Social, have been having a pretty good week, as Trump has used the platform to keep his fans updated about the arrest. The SPAC merger has yet to be approved and has been caught up in two investigations by federal authorities over potential violations of securities laws and potential improper trading.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
Submit a deal for the Term Sheet newsletter here.
Correction, April, 5, 2023: The online version of this newsletter has been corrected to reflect that Crunchbase plans to become profitable in the next two years, not four to five.
Jackson Fordyce curated the deals section of today’s newsletter.
VENTURE DEALS
- Travelport, a London-based travel retail platform, raised $200 million in funding from Siris Capital Group and Elliott Management.
- LayerZero Labs, a Vancouver-based messaging protocol developer, raised $120 million in Series B funding. A16z crypto, BOND, Christie's, Circle Ventures, OpenSea Ventures, Samsung Next, Sequoia Capital, and others invested in the round.
- Covariant, an Emeryville, Calif.-based A.I. robotics company, raised an additional $75 million in Series C funding. Radical Ventures and Index Ventures co-led the round and were joined by Canada Pension Plan Investment Board, Amplify Partners, Gates Frontier Holdings, AIX Ventures, and Northgate Capital.
- Everstream Analytics, a San Marcos, Calif.-based supply chain insights and risk analytics company, raised $50 million in Series B funding. Morgan Stanley Investment Management and StepStone Group co-led the round and were joined by Columbia Capital.
- 4.screen, a Munich-based driver interaction platform, raised €21 million ($22.99 million) in Series A funding from S4S Ventures and Continental Corporate Venture Capital.
- Strivacity, a Herndon, Va.-based customer identity and access management platform, raised $20 million in Series A-2 funding. SignalFire led the round and was joined by Ten Eleven Ventures and others.
- Finanzguru, a Frankfurt, Germany-based financial advisor platform, raised €13 million ($14.23 million) in funding. SCOR Ventures and PayPal Ventures co-led the round and were joined by Deutsche Bank, coparion, VR Ventures, Hannover Digital Investments, Venture Stars, and former Postbank CEO Frank Strauss.
- Tado, a Munich-based home energy management startup, raised an additional €12 million ($13.14 million) in funding from S2G Ventures.
- Fetcherr, a Netanya, Israel-based demand prediction and algorithmic pricing optimization solution, raised $12.5 million in Pre-Series B funding co-led by Left Lane Capital and M-Fund.
- Agnostiq, a Toronto-based computing startup, raised $6.1 million in seed extension funding. Differential Ventures led the round and was joined by Scout Ventures, Tensility Venture Partners, Green Egg Ventures, and Jane Street Capital principal Rob Granieri.
- Teton.ai, a Copenhagen-based A.I. platform for nurses to monitor patients and optimize workflows, raised $5.3 million in funding led by Plural.
- CarmaCare, a Chicago-based car ownership affordability platform, raised $4.5 million in seed funding. Inspired Capital, Twelve Below, Revelry, and 81 Collection invested in the round.
- Ecosapiens, a San Francisco-based carbon-backed collectible company, raised $3.5 million in seed funding. Collab+Currency led the round and was joined by Slow Ventures, Menlo Ventures, Alumni Ventures Blockchain Fund, and other angels.
PRIVATE EQUITY
- Eir Partners acquires a majority stake in Gifthealth, a Columbus, Ohio-based pharmaceutical software company. Financial terms were not disclosed.
- Marquis Software Solutions, backed by Rockbridge Growth Equity, acquired ZAG Interactive, a Glastonbury, Conn.-based website design and hosting services provider. Financial terms were not disclosed.
- Mercer Global Advisors, backed by Oak Hill Capital and Genstar Capital, acquired Andesa Financial Management, an Allentown, Pa.-based wealth management firm. Financial terms were not disclosed.
- PSG acquired Buxton, a Fort Worth-based customer analytics platform. Financial terms were not disclosed.
- Rcapital acquired a majority stake in British Corner Shop, a London-based online grocery store. Financial terms were not disclosed.
- Redwood Services acquired a majority stake in Keefe’s A/C, Heating & Electrical, a Harvey, La.-based HVAC business. Financial terms were not disclosed.
EXITS
- Funds managed by Stone Point Capital acquired a 20% stake in Truist Insurance Holdings, the Charlotte, N.C.-based insurance brokerage arm of Truist, for $1.95 billion.
- Rathbones Group agreed to acquire the U.K. wealth management business of Investec, a New York-based banking and wealth management company. The deal is valued at £839 million ($1.05 billion).
- Repario, a JLL Partners portfolio company, acquired Modus eDiscovery, a Cary, N.C.-based technology solutions provider for law firms, corporations, and government entities, from Azalea Capital. Financial terms were not disclosed.
OTHER
- L’Oréal agreed to acquire Aesop, a Melbourne, Australia-based cosmetics brand. The deal is valued at $2.53 billion.
- vLex, a Miami-based legal tech company, and Fastcase, a Washington, D.C.-based legal tech company, have merged together. Financial terms were not disclosed.
IPOS
- Yibin City Commercial Bank, a Yibin, China-based bank, is considering a Hong Kong initial public offering that could raise about $200 million to $300 million, according to Bloomberg.
FUNDS + FUNDS OF FUNDS
- KKR, a New York-based investment firm, raised $8 billion for a fund focused on European buyouts.
- Cure Ventures, a Boston-based venture capital firm, raised $350 million for a fund focused on early-stage investments in the life science and biotechnology sector.
- Theory Ventures, Portola Valley, Calif.-based venture capital firm, raised $230 million for a fund focused on investing $1 million to $25 million in early-stage software companies.
- Iron Pillar, a Bangalore, India-based venture growth investor, raised $129 million for a fund focused on Series B and C stage cloud software companies from India.
PEOPLE
- Red Arts Capital, a Chicago-based private equity firm, hired Mary Murphy as an operating partner. Formerly, she was with BlueGrace Logistics.
This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers. Sign up to get it delivered free to your inbox.