Arm’s IPO strategy is rewarded to the tune of a $65 billion valuation

The IPO market passed a big test Thursday when Arm Holdings, the semiconductor designer owned by SoftBank Group, rose nearly 25%.

The deal is considered a bellwether for the health of the IPO market. Arm delivered the year’s biggest IPO when it raised about $4.9 billion. Its strong performance bodes well for the rest of the IPO market, which has been nearly dormant since 2021. There are also two big deals scheduled for next week: grocery technology business Instacart and Klaviyo, a data and marketing automation firm. Birkenstock, the sandal maker, also made public the registration statement for its IPO on Sept. 12.

“It is a very positive signal for the fall IPO market that [Arm] traded up,” said Matt Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research that manages two IPO-focused ETFs (NYSE: IPO, IPOS).

Arm is the first major tech IPO this year, Kennedy said. “There was a lot of pent-up demand for new tech issuers. The underwriters appear to have structured the deal to work,” he said.

This year, the IPO market has outpaced 2022’s new issues. So far, 73 IPOs have raised $14.8 billion, according to Renaissance data. This compares to 72 offerings for all of 2022 that collected $7.7 billion.

The Arm IPO was also a big test for Goldman Sachs, which was one of four banks leading the Arm offering. Goldman is also lead underwriter on Instacart, Klaviyo and Birkenstock.

Instacart and Klaviyo both unveiled IPO valuations that were below their last rounds. Instacart is seeking a $9.3 billion valuation, which is far below the $39 billion valuation the company snagged when it raised $265 million in a 2021 funding round. Klaviyo, meanwhile, is targeting an $8.3 billion valuation, down from the $9.5 billion valuation it received in May 2021.

Arm was also cautious. The company had targeted a $60 billion to $70 billion valuation, but when its IPO priced late Wednesday Arm was valued at $52.3 billion. That soared to nearly $65 billion by the market close on Thursday.

Other companies coming to market should follow a similar playbook, Kennedy advised. “Be conservative or else,” he said.

See you Monday,

Luisa Beltran
Twitter: @LuisaRBeltran
Email: luisa.beltran@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Databricks, a San Francisco, Calif.-based platform that allows companies to combine their data, AI, and analytics on one platform, raised $500 million in funding. T. Rowe Price Associates led the round and was joined by Andreessen Horowitz, Baillie Gifford, ClearBridge Investments, Counterpoint Global, Fidelity Management & Research Co, Franklin Templeton, GIC, Octahedron Capital, and Tiger Global.

- Generate:Biomedicines, a Somerville, Mass.-based biotherapeutics company that’s using machine learning to engineer new medicines, raised $273 million in Series C funding from Amgen, NVentures, NVIDIA, MAPS Capital, Pictet Alternative Advisors, and existing investors. 

- Pixis, a Chicago-based marketing platform using AI to enhance marketing strategies, raised $85 million in Series C1 funding. Touring Capital led the round and was joined by Grupo Carso, General Atlantic, Celesta Capital, and Chiratae Ventures.

- Swan, a Paris, France-based startup that integrates banking services (like credit cards and accounts) into company products, raised €37 million ($39.4 million) in Series B funding from Lakestar and existing investors. 

- Linear, a Covina, Calif.-based platform for managing software project workflows, raised $35 million in Series B funding. Accel led the round and was joined by Sequoia Capital, 01Advisors, and others.

- Prisma Photonics, a Tel Aviv, Israel-based startup using AI to monitor and manage large scale infrastructure, like power grids, raised $20 million in Series C funding. Insight Partners led the round and was joined by Elements, SE VEntures, Future Energy Ventures, Chione Switzerland, and INcapital.

- Moment, a New York City-based startup designing tools to make bond trading and fixed-income securities more accessible for firms, raised $17 million in Series A funding from Andreessen Horowitz. 

- Iomed, a Barcelona, Spain-based company that uses AI to analyze hospital data, raised €10 million in Series A funding. Philips Ventures and XTX Ventures led the round and were joined by Fondo Bolsa Social, Redseed, and existing investors. 

- Series AI, a San Francisco-based company developing AI-powered tools to build video games, raised $7.9 million in seed funding from A16Z GAMES, BITKRAFT, F4 Fund, and the Siqi Chen Access Fund.  

- Raylo, a London, U.K.-based company that allows customers to lease tech products like iPhones, raised £5 million ($6.2 million) in funding from Macquarie Group and Channel 4 Ventures. 

- Databutton, an Oslo, Norway-based platform for building and sharing AI-powered apps using AI, raised $5.1 million in seed funding from Skyfall Ventures and Maki.vc.

- Sailes, a Kansas City, Mo. and New York City-based startup developing an AI bot to automate the prospecting process for sales teams, raised $5.1 million in Series A funding. Lewis & Clark Ventures led the round and was joined by Acronym Venture Capital, Tenzing Capital, and existing investors KCRise Fund and Valor Ventures.

- Patronus AI, a New York City-based platform that monitors and evaluates the efficiency of companies’ large language and AI models, raised $3 million in seed funding. Lightspeed Venture Partners led the round and was joined by Factorial Capital and others. 

PRIVATE EQUITY

- Clearlake Capital, Charlesbank Capital, and Fortress Investment recapitalized Learfield, a Plano, Texas-based company that manages multimedia and sponsorship rights for college sports, for $600 million in debt and $150 million in equity. 

- BGB Group, backed by TPG, acquired Kx Advisors, a Washington, D.C.-based management consulting firm for pharmaceutical, biotech, and medical technology companies. Financial terms were not disclosed. 

- SK Capital acquired a majority stake in Ecopol, a Chiesina Uzzanese, Italy-based producer of water-soluble and biodegradable packaging products. Financial terms were not disclosed.

EXITS

- Ardian acquired ICQ Holding, a Rome, Italy-based portfolio of renewable energy assets, from Italian Renewable Resources. Financial terms were not disclosed. 

- Francisco Partners and H.I.G. Capital acquired RBmedia, a Landover, M.D.-based audiobook publisher, from KKR. Financial terms were not disclosed.

- GI Partners agreed to acquire ASK4, a Sheffield, U.K.-based telecommunication and internet services provider for multi-tenant buildings in Europe, from Bowmark Capital. Financial terms were not disclosed. 

OTHER

- Justworks agreed to acquire Via, a Palo Alto, Calif.-based global payment and employment platform. Financial terms were not disclosed. 

FUNDS + FUNDS OF FUNDS

- Cervin Ventures, a Palo Alto, Calif.-based venture capital firm, raised $162 million for its fifth fund focused on software, data and AI, and cybersecurity startups.

- Verdane, an Oslo, Norway-based private equity fund, raised €1.1 billion ($1.17 million) for its 11th fund focused on companies that are digitizing and decarbonizing the economy. 

PEOPLE

- Cervin Ventures, a Palo Alto, Calif.-based venture capital firm, hired Scott Brown as partner, head of platform. Formerly, he was with Hum Capital.

- Norwest, a Menlo Park, Calif.-based private equity firm, promoted Gabe Stauber to vice president. Formerly, he was with Vaquero Capital.

- OceanSound Partners, a New York City-based private equity firm, hired Sam Todd as vice president, Caroline Weakland as senior associate, Alexander Giolito as an associate, Richard Hagestad as an associate, he was formerly with the Aerospace and Defense Group, Nicholas Iserloth as an associate, and Isha Kothari as an associate.

- Unusual Ventures, a Menlo Park, Calif.-based venture capital firm, hired Ryan Wexler as a vice president. Formerly, he was with Dell Technologies Capital.