Good morning! Fortune reporter Luisa Beltran here filling in for Allie.
The most important IPO this week isn’t Reddit, the social media company that counts Sam Altman as an investor. Instead, Astera Labs could be the company to help bust open the market for new issues.
Reddit and Astera will provide the year’s first real test of investor appetites for IPOs. In 2021, 397 companies went public using a traditional IPO, a record. But many of those IPOs performed badly in the aftermarket. About 82% are still trading below their IPO price, according to Matt Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research that manages two IPO-focused ETFs (NYSE: IPO, IPOS).
That subpar performance has caused new issues to slow substantially. In the fall, four well-known companies—Arm Holdings, Instacart, Klaviyo, and Birkenstock—went public and all four got off to a rough start. Arm has emerged as the big winner with shares soaring this year. Arm’s stock closed Tuesday at $124.59, more than double its $51 IPO price.
But Kennedy believes the IPO market is warming up. “We’re off to a slower start compared to a normal year, but compared to this point last year, U.S. IPO proceeds are up 169% (before Astera and Reddit). Deal count is up 15%. I do think we’ll more or less normalize by the summer,” Kennedy told Fortune.
This week is important because Reddit and Astera are the first major tech IPOs of this year, Kennedy said. Reddit may be more well-known, but Astera has the advantage. Astera develops semiconductor-based connectivity solutions with the aim of enabling the “mainstreaming” of AI and machine learning in the cloud. Astera boosted the size and price of its IPO on Monday: The company offered 19.8 million shares at $32 to $34, up from the 17.8 million shares it had planned to sell at $27 to $30. Such increases typically signal high demand from investors.
Astera, which priced its deal late Tuesday, ended up raising $712.8 million after selling 19.8 million shares at $36, $2 above its projected range. It will trade Wednesday on the Nasdaq under the ticker ALAB.
Reddit, meanwhile, is a social media company that lets its registered users submit posts, links, images, and videos that other members vote “up” or “down.” Reddit has raised more than $1.3 billion in funding, from investors like Sequoia Capital, Andreessen Horowitz, and Sam Altman, the CEO of OpenAI. Reddit is selling 22 million shares at a $31 to $34 price range, according to a regulatory filing. The company plans to price its IPO on Wednesday and trade Thursday. Read my story here on who is getting rich off the Reddit IPO.
Both Reddit and Astera posted several quarters of losses and then swung to a profit in Q4. Reddit is going public at six times trailing sales, while Astera is more than 40 times, Kennedy said. “That tells you something about the value investors place on Astera’s expected growth,” he said.
Talk to you tomorrow,
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
- Engrail Therapeutics, a San Diego-based company developing neuroscience therapies for anxiety disorders, depression, posttraumatic stress disorder, and other neurodegenerative diseases, raised $157 million in Series B funding. F-Prime Capital, Forbion, and Norwest Venture Partners led the round and were joined by RiverVest Venture Partners, Red Tree Venture Capital, and others.
- Hippocratic AI, a Palo Alto, Calif.-based developer of generative AI nurses and other health care applications, raised $53 million in Series A funding. Premji Invest and General Catalyst led the round and were joined by SV Angel, Memorial Hermann Health System, and existing investors.
- Carlsmed, a Carlsbad, Calif.-based provider of personalized surgery technology, raised $52.5 million in Series C funding. B Capital and U.S. Venture Partners led the round and were joined by The Vertical Group.
- Ultrahuman, a Bangalore, India-based developer of wearable health monitoring technology, raised $25 million in Series B funding from Blume Ventures, Steadview Capital, Nexus Venture Partners, Alpha Wave, and Deepinder Goyal.
- Ingrid, a Stockholm, Sweden-based delivery tracking tool for ecommerce businesses, raised €21 million ($22.8 million) in funding. Verdane led the round and was joined by Schibsted Ventures.
- CyberSaint, a Boston, Mass.-based cyber risk management platform, raised $21 million in Series A funding. Riverside Acceleration Capita led the round and was joined by Sage Hill Investors, Audeo Capital, and BlueIO.
- Marco Financial, a Miami, Fla.-based trade finance platform for the U.S. and Latin America, raised $12 million in Series A funding. IDC Ventures led the round and was joined by IDB Lab, Barn Invest, SquareOne Capital, Arcadia Funds, Florida Funders, and others.
- Euno, a Sunnyvale, Calif.-based data governance platform, raised $6.3 million in seed funding. 10D led the round and was joined by INT3 and angel investors.
- Keyring Network, a London, U.K.-based provider of compliance tools for on chain transactions, raised $6 million in seed funding. gumi Cryptos Capital and Greenfield Capital led the round and was joined by Motier Ventures, Kima Ventures, UDHC Finance, Eberg Capital, and others.
- Winible, an Austin, Texas-based ecommerce platform for the sports betting industry, raised $6 million in seed funding. Inspired Capital led the round and was joined by others.
- Enapi, a Berlin, Germany-based broker for EV charging transactions, raised €2.5 million ($2.7 million) in pre-seed funding. Project A Ventures led the round and was joined by Seedcamp and HelloWorld.
- Arrow Risk Management, a London, U.K.-based underwriting platform, raised £2 million ($2.5 million) in funding from ACF Investors and others.
- Mobly, a Lehi, Utah-based developer of a mobile sales tool designed for in-person networking, raised $2.5 million in seed funding. Peterson Ventures led the round and was joined by VITALIZE Venture Capital, Peak Ventures, Tenzing Capital, Upstream Ventures, Service Provider Capital, and angel investors.
- Quilt, a San Francisco-based developer of AI models for presales and solution teams (like consultants and sales engineers), raised $2.5 million in seed funding. Sequoia led the round and was joined by angel investors.
PRIVATE EQUITY
- Databricks, backed by Vantage Legacy Capital, acquired Lilac AI, a Boston, Mass.-based AI tool for searching, quantifying, and editing data. Financial terms were not disclosed.
- JumpCloud, backed by General Atlantic and H.I.G. Capital, acquired Resmo, an Ankara, Turkey-based IT, SaaS, and cloud asset management platform. Financial terms were not disclosed.
- Trinity Hunt Partners acquired a majority stake in Coker Group, an Alpharetta, Ga.-based healthcare advisory firm. Financial terms were not disclosed.
EXITS
- Francisco Partners agreed to acquire Jama Software, a Portland, Ore. and Amsterdam, The Netherlands-based platform for managing and tracing the requirements during product development, from shareholders including Insight Partners and Madrona Ventures for $1.2 billion.
- Carlisle Companies Incorporated agreed to acquire MTL Holdings, a Waukesha, Wis.-based provider of prefabricated edge metal for commercial roofing systems, from GreyLion Partners for $410 million in cash.
- Masdar agreed to acquire a 50% stake in Terra-Gen Power Holdings, a San Diego-based producer of independent renewable energy power, from Energy Capital Partners. Financial terms were not disclosed.
OTHER
- FabFitFun acquired PupBox, a San Diego, Calif.-based monthly subscription box for dogs, from Petco. Financial terms were not disclosed.
- Yoshi Mobility acquired Mobile Auto Concepts, a San Francisco-based provider of mobile automotive services. Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
- B Capital, a Los Angeles-based venture capital firm, raised $750 million for its second opportunities fund focused on technology, health care, and climate tech companies.
- Autism Impact Fund, a New York City-based venture capital fund, raised $60 million for its first fund focused on companies that improve diagnoses, treatment, and support for people with Autism Spectrum Disorder.
PEOPLE
- Summit Partners, a Boston, Mass.-based private equity firm, promoted Yoon Lee to partner, Hanyin Cheng and Cody Lee to principal, and hired Ryan McDonald as a principal. Formerly, he was with Norwest Venture Partners.
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