TheChek News Flow

After two crazy weeks where we saw 18 raises of $100 million or more, this week saw a slight slowdown but was still relatively strong when it came to big-dollar deals. Five companies raised nine-figure rounds, but none hit $250 million. The quintet that did raise big were from three of the usual sectors — biotech, energy and AI — however one was from a sector we don’t normally see — a vertical farming agtech startup.

We’ll see if things speed back up as the Ides of March approaches.

1. Fervo Energy, $244M, energy: A big energy funding round from Houston leads the way this week. Fervo Energy, a geothermal developer, locked up a big $244 million round led by shale oil and gas firm Devon Energy Corp. The new cash will support Fervo’s new drilling operations in Utah — which will begin delivering clean electricity to the grid in 2026. Founded in 2017, the company has raised $431 million, per Crunchbase.

2. Glean, $200M, artificial intelligence: Despite some predictions about a slowdown in AI investing, investors are showing the same insatiable appetite for the sector they showed last year. AI-enhanced work assistant and enterprise search startup Glean became the latest to hit it big, locking up a more than $200 million Series D at a $2.2 billion valuation in a round led by Kleiner Perkins and Lightspeed Venture Partners. The Palo Alto, California-based startup hit unicorn status in May 2022 after raising a $100 million Series C led by Sequoia Capital. Glean’s generative AI search tool connects with enterprise companies’ applications and databases, while also offering conversational AI assistants to help employees work. The startup has nearly quadrupled its annual recurring revenue in the past year. Founded in 2019, Glean says it has raised $360 million.

3. FogPharma, $145M, biotech: It sure feels like this will be a big year for biotech startups, as a few make this list every week. This week it was FogPharma which closed a $145 million Series E led by Nextech Invest. The clinical-stage biopharmaceutical startup developing a new class of therapies for intracellular targets, understood to be significant drivers of disease. Founded in 2015, the company has raised $530 million, per Crunchbase.

4. Oishii Farm, $134M, agtech: U.S.-based vertical farming seemed to explode a year or two ago and then got relatively quiet. However, it’s back this month as New Jersey-based Oishii raised a $134 million Series B led by Japanese telecom giant NTT. The firm, known for selling high-priced strawberries to high-profile New York restaurants, will use the cash for a massive indoor farm under construction in New Jersey. Founded in 2017, the company has raised $184 million, per Crunchbase.

5. Alamar Biosciences, $128M, biotech: Alamar Biosciences is next in a big week for biotech. The firm nabbed a $100 million Series C led by Sands Capital. The Fremont, California-based startup says it also plans to close on an additional $28 million within the next 30 days. The company studies proteins to enable early detection of disease. Founded in 2018, Alamar has raised $250 million, per the company.

6. Kenai Therapeutics, $82M, biotech: San Diego-based Kenai Therapeutics locked up yet another big biotech round — this one an $82 million Series A co-led by Alaska Permanent Fund Corp., Cure Ventures and The Column Group. The biotechnology startup is focused on induced pluripotent stem cell technology to cell therapies for neurological disorders. Founded in 2022, the company has raised a total of $89 million, per Crunchbase.

7. Intenseye, $64M, artificial intelligence: New York-based Intenseye, which uses a computer vision AI platform to help with workplace safety, secured a $64 million Series B funding led by Lightspeed Venture Partners. Founded in 2018, the company has raised $93 million, per Crunchbase.

8. (tied) B.well Connected Health, $40M, healthcare: Baltimore-based B.well Connected Health, which offers unified healthcare platforms to providers, locked up a $40 million Series C led by Leavitt Equity Partners. Founded in 2015, the company has raised nearly $99 million, per Crunchbase.

8. (tied) Passes, $40M, apps: Miami-based Passes, a fan engagement platform, raised a $40 million Series A led by Bond Capital. Founded in 2022, the company has raised $57 million, per Crunchbase.

10. Inkitt, $37M, publishing: San Francisco-based self-publishing startup Inkitt raised a $37 million round led by Khosla Ventures. Founded in 2014, the company has raised $117 million, per Crunchbase.

Despite all the big rounds in the U.S., the biggest came from China.

In leaked recording, German generals discuss how Kyiv could use sophisticated Taurus missiles to destroy Russia’s bridge to Crimea

BERLIN—Germany’s air force commander gathered his top officers for a secret meeting last month to discuss the possible delivery of his country’s most powerful guided missiles to Ukraine.

The long-range weapons could be used to destroy the Kerch Bridge, which links Russia to the occupied Ukrainian peninsula of Crimea, the German officers said.

What they didn’t know: Russian spies recorded their conversation, which revealed classified details about Western involvement in Ukraine. A 38-minute audio tape of the discussion was posted online late Friday by the head of Russian state-run broadcaster RT.

Senior German officials confirmed the authenticity of the recording to The Wall Street Journal and said the meeting took place on the commercial platform WebEx, an online conferencing tool, which isn’t encrypted to the armed forces’ standard for confidential communication. One officer dialed in with his cellphone from a Singapore hotel room.

The meeting focused on how Germany might organize delivery and operation of Taurus long-range cruise missiles should they be sent to Ukraine. German leader Olaf Scholz has declined to send the Taurus despite pleas from Kyiv and pressure within his own government.

Also in the recording were officials saying that Britain, France and the U.S. keep troops in Ukraine to help operate sophisticated Western weapons systems, something those countries have denied.

The leak delivered a propaganda win for the Kremlin, sparked a furor in Germany and could strain relationships with Germany’s North Atlantic Treaty Organization allies.

It was also the latest in a string of incidents highlighting German vulnerability to Russian spying. A senior officer in Germany’s BND foreign intelligence service was recently arrested on allegations that he was spying for Moscow.

Officials familiar with the German investigation of the audiotape leak said that WebEx is widely used by the military and other sensitive departments in the German government. “This should be a wake-up call,” one senior official said.

Last week, Scholz said Taurus missiles can’t be given to Kyiv because they would require German troops to help operate them. Officers in the leaked call, however, discussed how Ukrainians could be trained to use the system on their own.

Scholz has long been under international and domestic pressure to deliver the weapon. Britain at one point offered to take over and deliver the system in order to help the chancellor maintain his policy that Germany must not directly be drawn into military operations.

The leak now makes it less likely that Germany will deliver the weapon, politicians and analysts said.

Following the leaks, Russian officials attacked Germany for discussing detailed attacks on Russian targets and threatened with retaliation should Berlin become part of the war effort.

The leak was very serious and would be investigated “very meticulously, very intensively and very quickly,” Scholz told reporters during a visit to the Vatican on Saturday.

On Sunday, Defense Minister Boris Pistorius said he had launched an investigation into what he called a hybrid attack by Russia aimed at spreading disinformation. WebEx was suitable for communications below a certain confidentiality level, he said, and the investigation would establish whether the officers breached that protocol.

Pistorius said that Russian President Vladimir Putin’s propaganda machine was using the leak to falsely claim that Germany was getting directly involved in the war.

“This is designed to divide us and undermine our determination… we mustn’t play into Putin’s hands,” he said.

In the recording, Germany’s air force chief, Gen. Ingo Gerhartz, tasked top aides with preparing a presentation for the defense minister on how Germany could deliver the Taurus to Ukraine—and how Kyiv could use it to destroy targets including ammunition depots and the Kerch Bridge.

Ukraine operates similar Western missiles—the British Storm Shadow and France’s SCALP. Kyiv has used them to hit the bridge before but failed to do lasting damage. Experts say the more powerful and further-reaching Taurus, a German-Swedish air-launched missile, could knock down the bridge.

German officers in the recording indicated that they had analyzed in great detail how to attack that key piece of infrastructure, and said it would take 10 to 20 Taurus missiles to evade Russian air defenses and destroy the bridge.

“There is no real reason to say we can’t do this; it only depends on the political red lines,” Gen. Gerhartz is heard saying.

Germany has a stockpile of around 600 Taurus missiles, of which some 500 are believed to be operational. Gen. Gerhartz is heard saying that Germany could afford to supply 100 missiles to Ukraine, delivered in two tranches.

He added that Britain and France were putting pressure on Germany to deliver cruise missiles because they themselves had depleted their stockpiles.

On the leaked call, Gen. Gerhartz said there was no point giving more than 100 missiles to Ukraine because the weapon can’t make any significant impact on the battlefield since Ukraine is running short of troops to gain or even hold territory.

Destroying the bridge linking Russia to Crimea would be strategically and politically important but Ukraine would likely be unable to follow up with a ground offensive, he said.

“This will not change the course of the war, we must be clear about that,” Gen. Gerhartz is heard saying.

Taurus missiles fly low to evade radar and use GPS, satellite imaging as well as artificial intelligence-enabled infrared cameras to observe the terrain and navigate to a target without contact with an operator.

According to the leaked conversation, Ukraine would need six hours to launch a missile after receiving intelligence on a new target if its personnel were properly trained and had access to all needed data.

Germany’s air force has modeled the terrain around the battlefield for the weapon system and could easily help Ukrainian troops evade aerial defenses around key targets including the Kerch Bridge, officers said in the conversation.

That topographical data is described as “for German eyes only” and sharing it could breach the limits imposed by the German government on its involvement in the conflict, one officer is heard saying.

Training Ukrainian operators would take between two weeks and four months depending on the level of precision and the complexity of the task they would be facing, officers taking part in the recorded conversation said.

Gen. Gerhartz, the only NATO air chief who personally pilots jet fighters, can be heard saying that the chancellor insisted that any delivered missile should be operated without any participation of Berlin’s armed forces.

One participating general is heard saying the missiles could relatively easily be fitted onto Ukraine’s Su-24 jets, which are already equipped to deploy Storm Shadow missiles. They could also easily be fitted onto F-16s that Ukraine is expected to receive from NATO this year.

U.S. military personnel in Ukraine could aid local troops in handling the Taurus, Gen. Gerhartz is heard saying. “Many people with American accents run around in civilian clothes” in Ukraine, he is heard saying.

A spokeswoman for the Russian Foreign Ministry said in a statement that Moscow had demanded immediate answers from Berlin.

“Our historic adversaries, the Germans, have once again turned into our archenemies,” Russia’s former President and Prime Minister Dmitry Medvedev, now vice-chair of the Russian Security Council, posted on social media.

Jeremy Hunt warns of ‘long path’ ahead to cut UK tax burden

Chancellor eyes reduction in national insurance or income tax in Wednesday’s Budget as he struggles with tight fiscal situation

Chancellor Jeremy Hunt has warned ahead of Wednesday’s Budget that there is “a long path” ahead to cut Britain’s tax burden, as he admitted that recent official fiscal forecasts had made his task harder.

Hunt, who has tried to scrape together enough money to fund significant personal tax cuts on March 6, said on Sunday: “We’ve always said we would only cut taxes in a way that’s responsible and prudent.”

The chancellor has been talking down expectations of big tax cuts in recent weeks, but Tory MPs still hope that he will surprise on the upside, possibly matching the 2p cut in national insurance rates he announced in his Autumn Statement.

Hunt’s allies have indicated the chancellor would like to cut national insurance or income tax rates by 2p in the Budget, but have warned that the tight fiscal situation rendered that extremely difficult.

Each 1p cut in employee national insurance rates costs £5bn, while a 1p cut in the 20p basic income tax rate costs £7bn. An NI cut is seen as a more pro-growth measure as it would only benefit workers.

“We’ve always said we would only cut taxes in a way that’s responsible and prudent,” Hunt told the BBC’s Laura Kuenssberg. “The most un-Conservative thing I could do would be to cut taxes by increasing borrowing.”

Hunt said he would do “the right thing in the long-term interests of the country”, including investing hundreds of millions of pounds to boost productivity in areas such as the NHS and the police.

To raise funds for headline-grabbing tax cuts, Hunt has looked at stealing Labour’s policy of scaling back or axing the “non dom” tax regime, raising between £2bn and £3bn a year. He declined to rule out such a move on Sunday.

Extending the windfall tax on oil and gas companies, another Labour policy, would raise more than £10bn over five years, according to the opposition party.

Hunt has also been looking at scaling back public spending assumptions in the next parliament, even though that would leave him exposed to claims by economists and Labour that he is pencilling in more austerity.

The Financial Times reported last month that Treasury officials were considering reducing projected departmental spending rises after 2025 from 1 per cent to 0.75 per cent a year, releasing £5bn to £6bn for tax cuts.

Other smaller tax-raising measures are expected. The chancellor is likely to raise £300mn from abolishing the furnished holiday lets regime, a move first reported by The Sunday Times.

The move is supported by many Tory MPs, who believe it will slow down the trend of residential landlords switching to holiday lets.

Hunt confirmed that recent forecasts from the Office for Budget Responsibility had “moved against us”, reducing the amount of headroom he has against his self-imposed borrowing rules.

The chancellor told The Sunday Telegraph: “We don’t have as much of a positive outlook as we had at the end of the Autumn Statement.”

At the time of that fiscal event last November, the OBR said Hunt had retained a £13bn cushion against his fiscal rule, which says debt must be falling as a share of GDP year-on-year in five years’ time.

The chancellor’s aides have indicated Hunt could cut that cushion to £6bn next Wednesday, the lowest fiscal buffer since the OBR was created in 2010.

Asked about the prospects for reducing the overall tax burden, currently the highest for 70 years, he said: “I’m going to be honest with people on Wednesday that it’s going to be a long path to bring it down.”

Hunt’s Budget message to voters will be that the Conservative government’s plan is working and that inflation is falling and growth is starting to return after the economy dipped into recession at the end of 2023.

He suggested voters should show patience over tax cuts and give the Tories more time to deliver them. “Margaret Thatcher, who was the prime minister who inspired me to go into politics, brought taxes down over a decade,” he said.

Market Questions is the FT’s guide to the week ahead

The more hawkish policymakers at the European Central Bank are expected to toughen their resistance to calls for imminent interest rate cuts at its meeting next week after eurozone inflation proved stickier than expected last month.

The ECB is set to leave rates on hold and continue to say that it needs more evidence that wage growth is slowing before it is ready to discuss a potential easing of monetary policy.

Several analysts pushed back their forecasts of when the ECB is likely to start cutting rates from April to June after data released on Friday showed eurozone inflation slowed less than expected in February. 

Growth in consumer prices slowed from 2.8 per cent in January to 2.6 per cent in February. But there were signs that rapid wage growth is keeping services sector inflation stickier than expected after it slowed only slightly to 3.9 per cent.

Krishna Guha, vice-chair of US investment bank Evercore-ISI, said “stubborn” services inflation in Europe meant the “majority of the ECB governing council will probably interpret this as a sign that domestically generated inflation is not on a sustained downward trend”.

Eurozone wages rose more than 5 per cent last year and further strong rises are expected this year, as workers look for their pay to catch up with the recent surge in the cost of living.

Holger Schmieding, chief economist at German investment bank Berenberg, said this was likely to encourage the ECB to take a “cautious approach — as it would not want to undo its progress in the fight against inflation on the home stretch towards the target”, making it unlikely rates would be cut before June. Martin Arnold

Did US hiring slow in February? 

The US is expected to have added fewer jobs in February after a much higher than expected figure in January, but that is unlikely to be enough to persuade the Federal Reserve to cut interest rates early.

The labour department is forecast to report on Friday that the US added 190,000 jobs last month, down from the 353,000 added in January, according to economists polled by Reuters. The unemployment rate is expected to remain at 3.7 per cent.

The expected slowdown is being seen as an indication of just how high January’s figures were. The number of jobs added was nearly double economists’ expectations, and was viewed by market participants as being exaggerated by seasonal factors, even after the seasonal adjustments the labour department makes to the data. 

Analysts at Citi wrote that they were expecting a lower figure than the consensus for February, although they do not see extensive weakness in the labour market.

“Initial jobless claims have stayed at low levels, pointing to no widespread lay-offs occurring, while higher continuing claims suggest the duration of unemployment remains longer,” they wrote. “We are expecting 145,000 for payrolls in February but would not be surprised with a lower figure as seasonally adjusted strength in January will not repeat.”

However, unless the unemployment rate rises significantly, it is unlikely that the figures will persuade the Fed to cut interest rates earlier or faster than their current forecasts. In their last so-called “dot plot”, officials indicated they expect to cut rates three times this year, probably starting in the second half. Kate Duguid

Will China’s services sector drag down markets?

China will set its annual growth target next week but further measures to stimulate its spluttering economy may hinge on the confidence felt by the country’s smaller companies.

Top Communist party cadres will gather in Beijing on Monday and Tuesday for the annual Two Sessions meeting, which sets the country’s annual growth target.

Analysts at Oxford Economics expect policymakers to aim for lower growth than last year’s target of “about 5 per cent”, arguing that a target range of between 4.5 to 5 per cent “could provide policymakers the space to calibrate [their] stimulus this year, while supporting high quality development”.

Investors have been hoping for supplementary policies from Beijing to boost the economy and markets. That decision may be swayed by the publication on Tuesday of the Caixin’s purchasing managers’ index, which covers the country’s services sector.

The PMI index, a privately operated poll of business confidence, is expected to come in at 52.4 for February, according to a median forecast from economists polled by Bloomberg. That would be well above the 50-point threshold that delineates growth from contraction.

The Caixin gauge is important because it is focused on smaller and medium-sized private companies — in contrast to the official PMI, which favours state-owned firms — and thus gives investors a key reading on the outlook for a sector responsible for roughly half of China’s annual economic activity.

Robust services growth is important due to the steady stream of lacklustre manufacturing PMI readings that have weighed on markets since China fully reopened from the pandemic in January 2023. Growth in businesses centred around domestic tourism, restaurants, and catering services has helped offset that weakness. William Sandlund

After hitting pandemic-era records, second-hand watch prices are sinking fast

Luxury executives gathered in Miami in January for LVMH’s annual watch fair, to inspect timepieces from Hublot’s bright green Big Bang model to TAG Heuer’s new creation encrusted with lab-grown diamonds.

But the glamorous setting masked a more uncertain outlook for a typically resilient sector, which is having to contend with a broader slowdown in luxury spending and the deflation of a pandemic-era boom that sent resale prices soaring.

Watches of Switzerland, the UK’s biggest seller of Rolex, Breitling and Cartier watches, issued a major profit warning in January after admitting it had underestimated the impact of a luxury slump, crashing its shares. Days later Swatch Group, the Swiss company that makes luxury brand Omega as well as its eponymous plastic watches, missed annual underlying profit forecasts and told analysts customers were prioritising lower-cost items in mainland China.

Arjen van de Vall, chief executive of UK-based Watchfinder, which buys and sells pre-owned luxury watches and is owned by Richemont, said a boom in demand for high-end watches during the pandemic was a “once-in-a-generation event” that had come to an end. It was “almost a hype that I would compare with cryptocurrencies, and to some extent whisky and luxury cars”, he said. 

The luxury watch market is made up of retailers such as Watches of Switzerland and Bucherer, which was bought by Rolex last year, as well as design houses such as Richemont and LVMH, which make and sell their own brands. The so-called holy trinity of Swiss watchmakers is made up of family-owned Audemars Piguet, Patek Philippe and Richemont-owned Vacheron Constantin, who sell via third parties as well as their own boutiques.

Armed with pandemic savings in a low interest rate environment, wealthy shoppers stuck at home snapped up new luxury watches quicker than the Swiss manufacturers could make them, driving up demand for second-hand timepieces and pushing prices to new highs, benefiting retailers and watchmakers alike.

In the 10 years from 2013 to 2022, watches outperformed other collectible assets such as jewellery, handbags, wine, art and furniture, growing in value at an average annual rate of 7 per cent — and by 27 per cent from 2020 to 2022, according to indices compiled by BCG.  

Timepieces such as Patek Philippe’s discontinued Nautilus 5711/1A in steel, costing less than $40,000 new before the crisis, were selling for more than $150,000 in the resale market during the pandemic according to John Reardon, former international head of watches at auction house Christie’s and founder of Collectability.

But resale market prices for luxury watches have now fallen for seven straight quarters, having peaked in May 2022, according to Morgan Stanley and WatchCharts data. The second-hand value of Rolex, Patek Philippe and Audemars Piguet watches rose nearly 50 per cent on average between the first quarter of 2020 and the same period in 2022, according to Matthew Clarke, senior merchandising manager of watches at luxury resale retailer The Real Real. But by the fourth quarter of last year those values had slumped more than 20 per cent.

Luca Solca, a retail analyst at BernsteinAlliance, said: “The industry was taken by surprise and there was no inventory to satisfy demand . . . [but] the situation on that front is normalising.”

Sinking resale values are evidence of a slowing demand for watches, both new and second-hand, that is dividing fortunes. According to Nicolas Llinas, partner at BCG: “There is definitely a polarisation of players [in the marketplace]” he said, with aspirational customers pulling back on spending.

According to Citi analysts, the sector is now entering a “battle of the wrist”. The luxury watches category “continues to face volatile demand patterns, structural headwinds, and greater polarisation between brands”, the analysts said after a recent quarterly update from Cartier owner Richemont, where jewellery sales were up 12 per cent, outpacing watches’ increase of 3 per cent. 

Brian Duffy, chief executive of Watches of Switzerland, told analysts last month: “Inevitably, when markets are down, the higher end is stronger and takes a bigger percentage overall; the higher-end consumer is more unaffected by the cost of living . . . Stronger brands [are] taking a bigger share of the mix”.

Even Rolex, which dominates the market, appears to be impacted, however, as shoppers consider purchases more carefully. Although it does not publish any data on its prices, and declined to comment for this article, according to Morgan Stanley average price increases for a handful of Rolex models in the US (a key market) stalled this year for the first time since 2015.

Meanwhile, the price gap between Rolex’s second-hand and new models has narrowed significantly compared with the peak of March 2022, down to a 20 per cent resale premium on average today versus an estimated 90 per cent, according to Morgan Stanley.

The company is also seemingly taking a more conservative approach to the watches it makes. Watches of Switzerland, which derives more than half its revenue from Rolex, said in January it had received a greater number of steel watches rather than the more expensive steel and gold variety, hitting its average selling prices. 

Those dynamics come amid a wider slowdown in luxury demand that has spread from the US towards mainland China and Hong Kong — typically the biggest market for Swiss watch exports. 

Samuel Lee, honorary adviser of the Hong Kong-based industry body Federation of Hong Kong Watch Trades & Industries, said: “Both Hong Kong and mainland China’s economy are not doing very well. With a weak renminbi among other factors, consumers are more mindful of how they spend their money today.”

“Also the margin between retail and secondary market prices is narrowing . . . now with a lower expected value, people are becoming more cautious when making a purchase,” he said. “Many buyers are not really expecting an appreciation in the value but rather choosing the pieces that they really liked for their own use.”

Swatch told analysts last month that although demand was rebounding in Hong Kong, some consumers in mainland China were delaying expensive purchases amid an overall shift to lower and mid-priced watches, according to a BernsteinAlliance note.

Meanwhile, LVMH, which owns watch brands including TAG Heuer, Hublot and Zenith, reported watches and jewellery sales had risen 7 per cent organically year-on-year in 2023, compared with a 12 per cent increase the previous year, echoing a broader slump in demand.

But according to analysts, watches will remain resilient as a store of value. A recent McKinsey and Business of Fashion report forecast that jewellery and watches would gain a share of discretionary luxury spending over the next four years while “ready to wear” would falter, noting “hard goods are more likely to retain their value in an uncertain economic environment”.

Meanwhile, Nick Hayek, chief executive of Swatch, said a slowdown in prices for used watches was a healthy dynamic for the industry, marking the end of a speculative bubble.

“It’s not a decrease in demand for luxury. People will always love a brand that is authentic,” Hayek said. “The problem is when speculation kicks in . . . People just bought what they could get, thinking . . . you will always be able to sell it if needed and [get] a higher price.”

“This speculation has gone away . . . it’s good.”