It’s ugly out there for consumer companies.
Sneaker company Allbirds, which raised over $300 million before its 2021 initial public offering, has seen its stock shed 98% of its value. Peloton has reportedly been entertaining private equity buyers, possibly to sell its at-home exercise business for parts. And, most recently, athleisure bull and former Outdoor Voices CEO Tyler Haney has pivoted her consumer marketplace business TYB into a massive multiplayer online role-play game.
Despite these indications that venture capitalists may generate fatter returns from investing in, say, artificial intelligence, Forerunner Ventures says it has evidence suggesting the opposite—that consumer startups can generate returns on an equal playing field with enterprise data companies.
“Some of the challenges that the market generally expresses around consumer are legit,” Forerunner founding partner Kirsten Green told Fortune in a recent interview at her San Francisco office. “That’s probably the reason why there are fewer companies getting started in that space. But if you do have a beat on that space, you have a point-of-view on what good can look like. The opportunities and chance of being successful are just as high as another category.”
Forerunner analyzed over 12,000 venture-backed companies that raised Series B rounds since 2010. It categorized 7,800 of this group as either enterprise or consumer.
According to Forerunner (which, it should be noted, is a big investor in consumer startups), consumer companies are a touch more likely to go public than enterprise companies when both raise Series B rounds. They’re just as likely to trade at 10 times revenue at the time of an initial public offering than enterprise ones. (The firm, however, did not provide guidance on how consumer firms perform post-IPO.)
The Rule of 40—the enterprise software-focused metric that celebrates startups whose revenue growth rate and profit margins total 40% or more—can even be applied here. For consumer companies in the dataset that met the Rule of 40 standard, 62% of those consumer startups went public (as compared to 44% of enterprise companies), reports Forerunner.
Forerunner’s report is likely to provide welcome talking points to those who say the death of the consumer sector is overblown, a group that includes YC CEO Gary Tan.
“The negative connotation, and the press about consumer, is actually making it seem way worse than it is,” said Rachel Hirsch, founder and general partner at Wellness Growth Ventures, which invests in consumer companies like tinned fish juggernaut Fishwife and Katy Perry-founded beverage maker De Soi. “To some degree, it’s just a landscape of opportunity.”
That said, it’s important to understand how Forerunner is defining consumer, since it may be counterintuitive: The firm says consumer includes companies whose revenue relies on consumers, whether that’s consumers paying directly or if that business relies on consumer behavior and engagement. Under this definition, the category includes companies like Shopify, Toast, and Oscar. To explain this untraditional categorization, Forerunner says that consumer companies have historically “been tough to quantify” and that companies like Shopify and Toast make the bulk of their revenues from processing consumer payments.
“I think that when people say consumer, they’ll think of Away or Glossier…but that’s a very narrow perspective on what those companies are and even what that category is,” said Green. “The whole world is continuing to blend, blend, blend.”
Read the full report here and draw your own conclusions as to whether consumer startups are an underappreciated opportunity or unwanted, out-of-season merchandise.
Elsewhere…Mistral AI has raised €600 million (about $643 million) in its Series B, led by General Catalyst. It’s a quick turnaround: The Paris-based AI darling closed its Series A round back in December.
See you tomorrow,
Allie Garfinkle and Alexandra Sternlicht
Twitter: @agarfinks and @iamsternlicht
Email: alexandra.garfinkle@fortune.com and alexandra.sternlicht@fortune.com
Submit a deal for the Term Sheet newsletter here.
Joe Abrams curated the deals section of today’s newsletter.
VENTURE DEALS
- Apex, a Los Angeles-based spacecraft manufacturing company, raised $95 million in Series B funding. XYZ Ventures and CRV led the round and were joined by Upfront, 8VC, Toyota Ventures, Point72 Ventures, and others.
- Cyberhaven, a San Jose, Calif.-based data risk detection and response company, raised $88 million in Series C funding. Adams Street Partners and Khosla Ventures led the round and were joined by existing investors Redpoint Ventures, Costanoa Ventures, and others.
- Battery Smart, a New Delhi, India-based battery swapping network for electric two- and three-wheelers, raised $65 million in Series B funding. LeapFrog Investments led the round and was joined by MUFG Bank, Panasonic, Ecosystem Integrity Fund, Blume Ventures, and British International Investment.
- Parity, a Toronto, Canada-based company that remotely controls and optimizes HVAC systems, raised $19 million in Series B funding from Idealist Capital.
- Astrocade AI, a San Francisco-based AI-powered platform for building and sharing games, raised $12 million in seed funding from AME Cloud Ventures, NVIDIA Ventures, Venture Reality Fund, and others.
- Ava Protocol, a San Francisco-based developer of web3 infrastructure designed for autonomous transactions and other cross-chain automation, raised $10 million in seed funding from Electric Capital, Taisu Ventures, Bloccelerate VC, BingX Exchange, Shima Capital, and others.
- Alida Biosciences, a San Diego, Calif.-based developer of tools for epigenetic research, raised $7.5 million in Series A funding. Genoa Ventures led the round and was joined by FusionX Ventures and Vertical Venture Partners.
- Arya, a San Francisco-based intimacy and sexual wellness platform for couples, raised $7.5 million in seed funding. Patron and Play Ventures led the round and were joined by At.inc/, Heracles Capital, and others.
- Brightwave, a New York City and Boulder, Colo.-based AI research assistant designed for financial analysis, raised $6 million in seed funding. Decibel Partners led the round and was joined by Point72 Ventures, Moonfire Ventures, and angel investors.
- Pyte, a Los Angeles, Calif.-based security platform for data collaboration, raised $5 million in funding. Myriad Venture Partners led the round and was joined by Innovation Endeavors, Liberty Mutual Strategic Ventures, Pillar VC, and others.
- Ship Angel, a New York City-based AI platform for international shippers, raised $5 million in funding. Glasswing Ventures and newark venture partners led the round and were joined by Bienville Capital, Socil Capital, and Plug and Play.
- Wild Common, a Jackson Hole, Wyo.-based creator of agave spirits, raised $5 million in Series A funding from HIPstr.
- Rivia, a Zürich, Switzerland-based developer of AI-powered data overview tools for biotech companies, raised €3 million ($3.2 million) in seed funding. Speedinvest led the round and was joined by Amino Collective and Nina Capital.
- Alō Index, a Connecticut-based platform designed to connect corporate travel buyers with hotels that match their ESG needs, raised $1.9 million in pre-seed funding. Impellent Ventures led the round and was joined by Techstars and angel investors.
- SaleSqueze, a Skofja Loka, Slovenia-based product sales platform, raised $1.5 million in seed funding. Underline Ventures led the round and was joined by Robin Capital, Fortech Investments, and angel investors.
PRIVATE EQUITY
- JENNMAR, a portfolio company of FalconPoint Partners, acquired G&R Gas Services, a Cedar Bluff, Va.-based provider of maintenance services to oil and gas customers. Financial terms were not disclosed.
- MiddleGround Capital acquired GMS Instruments, a Rotterdam, The Netherlands-based supplier of measurement, regulation and other instruments for the maritime and offshore industry. Financial terms were not disclosed.
- KKR acquired a minority stake in Quick Quack Car Wash, a Roseville, Calif.-based car wash operator. Financial terms were not disclosed.
EXITS
- ICG agreed to acquire DGS, a Rome, Italy-based company that designs, integrates, and maintains complex IT systems, from H.I.G. Capital. Financial terms were not disclosed.
- Stratus acquired Priority, a Sheboygan, Wis.-based provider of signage, lighting, and environment design for brands, from Rubelman Capital. Financial terms were not disclosed.
OTHER
- Yext (NYSE: YEXT) agreed to acquire Hearsay Systems, a San Francisco-based digital client engagement platform for financial services, for up to $220 million.
- Descartes Systems Group (NASDAQ: DSGX) acquired BoxTop Technologies, a Windsor, U.K.-based provider of shipment management software for logistics services providers, for $13 million.
IPOS
- Actuate Therapeutics, a Fort Worth, Texas-based developer of cancer therapeutics, plans to raise up to $56 million in an offering of 5.6 million shares priced between $8 and $10 on the Nasdaq. Bios Equity and Kairos Venture back the company.
FUNDS + FUNDS OF FUNDS
- High Alpha, an Indianapolis, Ind.-based venture capital firm, raised $125 million for its fourth fund focused on enterprise SaaS companies.
