TheChek News Flow

Not many big rounds were announced this week, likely because everyone knew Silicon Valley Bank would dominate the headlines. Nevertheless, AI remained big.

Ever since January’s news of Microsoft’s massive $10 billion investment into OpenAI — creator of ChatGPT — the AI craze has been on among investors. Even SVB’s collapse couldn’t stop it this week. Last week, San Francisco-based AI startup Anthropic led the way with a $300 million round. This week it’s another San Francisco-based AI company coming in near the top. Investors seem to have blinders on for AI startups right now, so don’t bet against another big raise next week.

1. Stripe, $6.5B, fintech: The biggest round of the week went to payments giant Stripe, but it is not the typical huge, late-stage growth round. The South San Francisco-based company raised a $6.5 billion Series I at a $50 billion valuation. The valuation is a significant drop, as the company was valued at $95 billion in March 2021, and earlier this year it was reported this round would be at a $60 billion valuation. The company will use the new cash to provide liquidity to current and former employees and help offset a tax bill that will come due when it modifies employees’ stock grants that are set to expire (which we’ve talked about before). No lead investor was announced, but firms such as Andreessen Horowitz, Founders Fund and General Catalyst participated.

2. Rippling, $500M, human resources: San Francisco-based HR management company Rippling was caught up in the collapse of SVB, its primary banking partner. It faced 50,000 employees across its customer base at risk of not getting paid in its Friday pay run. The company stepped in with $130 million of its own capital to support those customers. To meet payroll the following week, Parker Conrad, Rippling’s CEO, reached out to existing investor Neil Mehta at Greenoaks, which led and closed a $500 million Series E funding that valued the company at $11.25 billion, the same valuation as its May 2022 Series D funding.

3. Adept AI, $350M, artificial intelligence: Adept AI announced its $350 million raise even in the midst of the Silicon Valley Bank news. It was reported the new financing — led by General Catalyst and Spark Capital — gives the startup a post-money valuation of at least $1 billion. Spark Capital also reportedly led Anthropic’s round last week. Adept is developing AI models that don’t just respond to text commands — like a chatbot — but actually turn that command into actions. In theory, the company’s generative AI could help users do tasks from browsing the internet to navigating enterprise software tools. The company had previously raised a $65 million Series A. Nothing seems to be able to stop generative AI startups from raising large amounts of cash.

4. Element8, $200M, telecommunications: About a quarter of the U.S. does not have home broadband internet connections — with rural and minority communities seeing even lower rates of adoption, according to the latest Pew Research Center data. Dallas-based Element8, an internet service provider, is looking to change that and raised a $200 million strategic investment from Digital Alpha to help with that effort. E8 also announced it has acquired Oklahoma City-based high-speed internet provider AtLink Services for an undisclosed sum to make it a pretty busy week. Founded in 2015, this is the company’s first outside funding, per Crunchbase.

5. Mediar Therapeutics, $85M, biotech: Cambridge, Massachusetts-based Mediar Therapeutics closed a $105 million financing, including a recent $85 million Series A round co-led by Novartis Venture Fund and Sofinnova Partners. What was especially noticeable, however, was it also involved a lot of big names in the pharmaceutical world — including Pfizer Ventures, Bristol Myers Squibb and Eli Lilly. The startup is developing therapies for fibrotic disease, which is caused by chronic inflammatory disease and can lead to the shutdown of organs. Founded in 2019, the company has now raised nearly $117 million, per Crunchbase.

6. Nimble Robotics, $65M, robotics: Everybody orders things online, and everyone wants that important order for a stuffed animal, candlesticks or mango slicer fulfilled as quickly as possible. If it’s by a human or robot, it really doesn’t matter. San Francisco-based startup Nimble has created a fully autonomous logistics and robotics platform that helps warehouses deliver everything as fast as possible. This week Nimble locked up a $65 million Series B led by Cedar Pine, bringing its total capital raised to $115 million, per the company. According to the company, its robotic fulfillment systems will pick, pack and ship orders while also shrinking warehouse size by up to 75%. At least until we start ordering more stuff.

7. Switch Therapeutics, $52M, biotech: South San Francisco-based Switch Therapeutics, which is developing new ways to use RNA science to treat diseases, launched this week with a $52 million Series A co-led by Insight Partners and UCB Ventures.

8. Fairmatic, $46M, insurance: New York-based commercial auto insurance provider Fairmatic raised $46 million in new funding led by Battery Ventures. Founded in 2019, Fairmatic has raised $88 million to date, according to the company.

9. Clever Care, $42M, health care: Westminster, California-based health care company Clever Care closed a $42 million Series C led by GV. Founded in 2019, the company has raised nearly $140 million, per Crunchbase.

10. Zus Health, $40M, health care: Boston-based Zus Health, a shared health data platform closed a $40 million round from investors that included Maverick Ventures and Andreessen Horowitz Founded in 2020, the company has raised $74 million, according to Cruchbase.

When Porsche partnered with venture studio UP.Labs, the mission was to create six startups over three years all designed to solve the German automaker’s biggest problems and be compelling enough as a standalone business it that can attract other customers.

On Porsche’s list: software that helps manage and automate the performance of EVs. Pull Systems, the first startup borne out of the partnership, has developed a software product that the two companies say can solve it. Pull Systems, which was unveiled at SXSW 2023, also announced that it raised $5 million in a seed round led by UP.Partners.

“Cars are becoming a combination of software and a battery — and ultimately battery performance,” UP.Labs president Katelyn Foley said. “And OEMs need to really get to a place where they can understand both of those aspects in order to stay competitive, because the things that they’re really good at are actually the more commodity parts of the car.”

Pull Systems is a software as as service platform that provides performance management software to EV suppliers, manufacturers and operators. The product isn’t battery management software (BMS), which is technically responsible for collecting data about the battery and communicating with the battery management system. The startup’s software is a compliment, explained Henry Furman, former venture head of product at UP.Labs, now chief product officer of Pull Systems.

And it has already rolled out to Porsche Taycan vehicles that are on the road today.

The startup developed a library of machine learning models that can analyze and predict vehicle behavior such as driving and charging across the Porsche fleet. That kind of information, coupled with outside data like weather patterns and road conditions, can be used to predict and then inform the automaker or EV owners when a vehicle needs maintenance, when to deploy over-the-air software updates and even boost after-sales revenues.

The software tracks and collects data on each vehicle in the Porsche EV fleet, which can also help identify performance issues that might be solved with new firmware or determine the best second-life option for the battery as it reaches its end of life, Furman added.

Ultimately, the company wants the software to be automated using machine learning tools.

“Our real vision here, within the complexities of electrification, is that the cars are actually able to take on some of the management of their own propulsion system themselves,” Furman said. “We see a great opportunity for us to automate a lot of what is essentially the rules based kind of conclusions for these different software updates.”

For instance, the software might identify a weather front coming into a certain area and issue a software update that helps optimize the batteries, he explained.

That’s a compelling prospect for Porsche, a company that plans to expand its EV lineup beyond the Taycan over the next several years, including the Macan in 2024, the 718 in 2025, a Cayenne and a yet-to-be-named full-sized SUV.

Pull Systems plans to add several more carmakers to its service over the next year.

UP.Labs is not a venture firm, even though it emerged from, and operates in parallel with, UP.Partners. It’s not a corporate accelerator or incubator either, although it is building startups and working with corporations. The company, which launched during UP.Summit 2022 in Bentonville, Arkansas, is structured as a venture lab with a new kind of financial investment vehicle.

Porsche is its first corporate partner. Foley told TechCrunch that more corporate partnerships will be announced this year.

“The way our model works is we identify large friction areas that touch big value pools, and it’s the confluence of those two things that has to be in place,” Foley said. “So it’s somebody acutely feels the problem and it touches a lot of money — and we won’t consider anything outside of those two areas.”

In the beginning, the firm dissects the corporation to find all problems. UP.Labs identified 217 over at Porsche and whittled them down to a set of problems and accompanying ideas that would solve them. An investment committee that includes UP.Labs, Porsche and UP.Partners, narrows them down to the final pair that the team will start incubating.

Under the three-year agreement with Porsche, UP.Labs will establish six companies, or two a year, with new business models focused on the automaker’s core activities such as predictive maintenance, supply chain transparency or digital retail, according to Lutz Meschke, deputy chairman and member of the Porsche AG executive board on finance and IT.

Score one for Iran. A big one.

The Islamic Republic and archenemy Saudi Arabia stunned the diplomatic world on March 10 by agreeing to restore diplomatic ties after seven years of estrangement.

U.S. media spun this as a coup for China, which mediated the accord, at Washington’s expense. The real winner is Tehran. “This is a great step forward for the Iranian position in the Middle East,” says Simon Henderson, director of Gulf and energy policy at the Washington Institute. “They change from the hated one to the respected one.”

Six months ago, Ali Khamenei’s theocratic regime looked to be on the ropes. Young protesters swarmed the streets. Saudi Arabia and other Sunni Muslim neighbors were inching toward an alliance with Israel, threatening Shia Iran with a security vise.

Tehran holds a trump card, though, in the armed proxies it supports across the Middle East. Key to the current situation are the Houthi “rebels” in Yemen, who have bested the Saudi-backed government in an eight-year civil war. They have also hit the Saudi homeland with drone attacks on oil refineries and other infrastructure.

Saudi leader Mohammed bin Salman seems to have had enough. “The Saudis need to get out of Yemen, and the U.S. hasn’t been able to help them,” says Steven Cook, senior fellow for Middle East Studies at the Council on Foreign Relations.

China could mediate with Iran in a way the implacably hostile U.S. couldn’t. More concretely, Beijing’s involvement signals that it will keep buying Iranian oil in defiance of U.S. sanctions.

Iran is exporting more than one million barrels a day, most of it China-bound by covert channels, estimates Hunter Kornfeind, an oil market analyst at Rapidan Energy Group. That’s less than the two million barrels it shipped before Donald Trump’s 2018 “maximum pressure” campaign, but 50% more than it was selling a year ago. And plenty enough to keep Khamenei’s clerical elite and security forces well funded.

China is also the Saudis’ biggest oil customer, buying twice as much crude as the U.S. So its presence at the Middle East table is hardly shocking.

Riyadh and Tehran are still far from singing Kumbaya. The Houthis, who control Yemen’s capital and most of the population, have to agree to settle for that. “The Iranians have greater ability to spin up the Houthis than to spin them down,” says Jon Alterman, director of the Middle East Program at the Center for Strategic and International Studies.

But even a cold peace with the Saudi Kingdom could complicate the already complicated calculus around Iran’s (presumed) march toward nuclear weapons. A U.S. bid to revive a 2015 no-nukes-for-no-sanctions accord stalled last autumn when Khamenei’s people balked at Western nations’ inspection demands.

Consultant Rapidan still gives a new pact 25% chance of success. Meanwhile, both sides are in a glacially-paced game of chicken. Iran keeps enriching uranium toward weapons-grade levels, while the U.S. and Israel promise they will never allow actual deployment. “Iran’s is arguably the slowest nuclear program in history,” Washington Institute’s Henderson comments.

Hard-nosed geopolitical analysis shouldn’t negate the potential blessing of peace in Yemen. The war there has killed nearly 400,000 people, the United Nations estimates, most of them civilians felled by famine or disease.

But de facto victory for Iran shows the Islamic Republic endures in its fifth decade, and may become a front-page headache again soon.

Shares of FanDuel parent Flutter Entertainment are beginning to find momentum after the company started exploring a U.S. listing—but it’s not too late to bet on the stock.

There’s no doubting FanDuel’s strength in the U.S. sports betting market. It reached a 50% share of the online sportsbook market in the fourth quarter, Flutter says, citing data from the 17 states the brand operates in.

Flutter’s full-year earnings reported earlier this month only served to accentuate that strength, flagging a record Super Bowl, adding 1.2 million new customers in the first two months of this year, making progress on an additional New York listing, and remaining on track for its U.S. business to turn profitable in 2023.

It’s a significant, but very achievable, milestone. The segment generated positive Ebitda in the second and fourth quarters, when excluding investment in state launches in Maryland and Ohio.

Despite that, the stock (ticker: FLTR.United Kingdom) initially fell after earnings. The move was indicative of a longstanding issue—investors underplaying the U.S. growth opportunity—on this occasion focusing on weakness in Australia.

The U.K. market may also be a factor. Citi analysts said earlier this month that the U.K. stock market currently trades at a record 40% discount to the U.S.

In addition to FanDuel, the sports betting and gaming company owns a number of brands, including Paddy Power, PokerStars, Betfair, and SportsBet, operating in more than 100 countries.

Flutter stock has climbed 24% so far this year, and has moved higher since its postearnings dip. Perhaps investors are starting to wake up to the bigger picture.

Susquehanna analyst Joe Stauff says a New York listing, which he assumes will happen in the fourth quarter of 2023, would be a “value-creating event,” which would reduce the 20% conglomerate discount it currently applies to the value of Flutter’s U.S. business. He has a Buy rating on the stock and a price target of £163 ($197), implying a 21% upside to its recent price of £135.

For context, the U.S. market size for Flutter over the next two years will be as large as the combined nine largest countries it currently competes in today, which includes the U.K., Australia, and Brazil, Stauff noted.

Analysts covering the stock, of which 80% rate it as a Buy, expect strong growth over the next few years. Flutter is expected to post revenue of £9.1 billion this year, and £10.2 billion in 2024, up from £7.7 billion last year. Earnings per share are also seen growing to £3.80 in 2023 and £5.69 the following year, up from £1.89 in 2022.

“With our combined U.S. business on track to deliver a positive Ebitda for the full year 2023 for the first time, the Group is currently at an earnings’ transformation point and we look forward to delivering future growth and progressing further against Flutter’s strategic priorities in the coming year,” Flutter CEO Peter Jackson said in a statement earlier this month.

There are other reasons to be positive. Flutter’s U.K. and international performance held up well in the fourth quarter, in the face of a challenging macroeconomic environment.

The stock also isn’t too expensive, trading at 24.7 times estimated 2024 earnings, lower than an average of around 34 times among a basket of competitors, according to FactSet data.

Stricter-than-anticipated U.K. gambling reforms, expected to be put forward later this year, present a risk to the stock but there’s many more reasons to consider a bet on the shares continuing higher.

Expectations of an unusually hot and dry summer, combined with the impact of the war in Ukraine, will probably send wheat prices surging by about 20% from current levels as early as April, experts say.

“Drought will return and hurt spring wheat, not only in the U.S. but also in other places,” says Shawn Hackett, president of Hackett Financial Advisors in Boca Raton, Fla. That, in turn, could lift prices.

Risk-tolerant traders should consider buying September-dated futures contracts for hard red spring wheat on the Minneapolis Grain Exchange. Alternatively, traders might consider buying the Teucrium Wheat (ticker: WEAT) exchange-traded fund, which tracks a basket of wheat futures. It tracks a different type of wheat, but the two typically move together.

Savvy investors may wish to wait a few weeks before executing any trades. Hackett sees the wheat market slumping into April and then forming a bottom from which prices will bounce into a significant rally.

The past year has seen hard red spring wheat prices drop from highs around $9.40 a bushel to $8.28 recently, as concerns about supply disruption due to the Russia-Ukraine war dissipated. However, the weather this year could reverse much of the price drop.

“There are numerous reasons to suggest that 2023 will prove to be very hot in the core grain belt,” states a recent report from Hackett. The note cites two major factors that will probably produce a scorching summer: the current “grand solar minimum,” which means the count of spots on the sun’s surface dropped to historically low levels, and the Tonga undersea volcano eruption in January 2022, which catapulted 45 million metric tons of water vapor into the stratosphere.

Russia and Ukraine, respectively the top wheat exporter and the sixth largest, are unlikely to contribute as much grain as usual this year, says Sal Gilbertie, CEO of ETF company Teucrium. “At some point, Ukraine will run out,” he says. That’s due to a lack of farmworkers who are now needed to fight the Russian army—a shortage likely to cut the crop volume by 25%, experts say. Adding to the problem are delays in shipping the grain through the Back Sea and Bosporus, the result of Russia’s demands to check the cargo.

And Russia has farm problems of its own. Notably, there’s a lack of labor due to the mass military conscription, as well as a shortage of spare parts for agricultural vehicles because of the sanctions on the Kremlin. That means sowing or harvesting the crop will be tricky. There may even be problems in planting the spring crop, says Gilbertie. “Even if the growing season is good, they may not have room for the new crop,” he says, meaning that last year’s crop might need to be removed.

Relatively low wheat inventory will exacerbate the effects of the weather and the war. At the start of the 2022-23 season, global wheat inventories totaled 271 million metric tons, which represented just 34% of projected consumption, according to data from the U.S. Department of Agriculture. That’s down from 39% for the 2018-19 season. Such low stockpile levels will probably make price movements more volatile.

Not everyone is worried about this summer’s weather. “The weather will be better this year than the past few,” says Joe D’Aleo, a meteorologist at forecasting company Weatherbell. “Kansas is the big concern, but all of the forecasts say it should be wet in Kansas this summer.” In turn, that should mean a larger crop than seen recently.

This trade has some risks. Getting the timing accurate when making weather forecasts is tricky, and predicting how geopolitical tensions will flare up might be even harder. Still, given the overall situation in the wheat market, the suggested trade could well work out.

US investment giant denies it wants to acquire any part of Swiss bank

BlackRock has drawn up a rival bid for Credit Suisse that would trump a plan blessed by the Swiss central bank for UBS to acquire its struggling rival this weekend, four people with knowledge of the matter told the Financial Times.

The US investment giant has evaluated a number of options and talked to other potential investors, said people briefed about the matter. Among the options were bids for only portions of the business.

However, BlackRock on Saturday said it “is not participating in any plans to acquire all or any part of Credit Suisse, and has no interest in doing so”.

Larry Fink, co-founder and chief executive of $8.6tn money manager BlackRock, is driving the bid, according to people with knowledge of the matter. Fink used to work at First Boston, Credit Suisse’s investment banking business.

BlackRock has long been one of Credit Suisse’s biggest investment banking clients, particularly its fixed-income trading desk. A deal, especially for its US arm, would be an opportunistic way to bring trading capacity in-house, one of the people said.

Any agreement would face significant regulatory hurdles in Europe and the US.

The FT reported on Friday that the Swiss National Bank and regulator Finma are orchestrating negotiations between Credit Suisse and UBS in an attempt to shore up confidence in the country’s banking sector. The pair have explored a transaction that could result in a full or partial combination.

The talks came days after the central bank was forced to provide an emergency SFr50bn ($54bn) credit line to Credit Suisse.

However, this support failed to arrest a slide in the bank’s share price, which has fallen to record lows after its largest investor ruled out providing any more capital and its chair admitted that it was continuing to suffer an exodus of wealth management clients.

Credit Suisse declined to comment.