Can PE leave behind its worst impulses?

Plus: Quantum computing heats up, IoT exit value soars, one-click shopping gains ground & more
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The Weekend Pitch
September 19, 2021
Presented by Deloitte
Sen. Elizabeth Warren, shown at the US Capitol on March 1, has been a vocal critic of the private equity industry.
(Chip Somodevilla/Getty Images)
Hello and welcome back to The Weekend Pitch. Adam Lewis here. I should start off by noting that when you read this, I'll no longer be a PitchBook employee. Indeed, Friday was my last day after five excellent years covering the private markets. And I'll be darned if I'm going to waste one last chance to poke the private equity bear before riding off into the sunset. Got an opinion about my story? Hit me up on Twitter at @AdamLewisPI.
 

Private equity's future hinges on ditching worst impulses

Over the past five years, I have watched private equity firms destroy Toys R Us, cause irreparable damage to the US newspaper industry and profit off hitting the most vulnerable with surprise bills after a trip to the emergency room.

During that same period, I have watched firms pour billions of dollars into tech and ESG, provide rescue financing for struggling companies during the pandemic, and become minority owners in sports franchises within the MLB, NBA and other leagues.

Indeed, PE firms can be a vehicle for economic growth or the grim reaper for an already struggling company. And they've become a flashpoint politically, with industry critics such as Sen. Elizabeth Warren calling for reform while others insist they create jobs.

I still go back and forth at times about whether PE dealmakers provide portfolio companies with the financial expertise they claim to. Was Warren Buffett right when he called out PE executives for juicing returns? Should we really believe that passively investing in an index fund yields better returns for pensions than devoting capital to the private equity asset class?

If either is true, why haven't pensions, endowments and other institutional investors taken their money elsewhere? After all, PE dry powder has reached a global all-time high of roughly $1.3 trillion, according to PitchBook data.

Here's what I know: A number of PE shops have largely shifted away from the leveraged buyout model made famous by KKR in the 1989 book "Barbarians at the Gate." Blackstone has become a real estate juggernaut. Apollo Global Management has become an insurance giant through its merger with Athene. The Carlyle Group is arguably best known more recently for backing Supreme, a trendy clothing line among millennials that it sold last year.
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A message from Deloitte
As the world digitizes, business software booms
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Business software companies in the expansion-stage ecosystem have seen an intense acceleration in demand for their products and services over the past 18 months. At the same time, unprecedented sums of capital flowed into their sector from investors ranging from sovereign wealth funds to venture firms.

However, with rapid growth comes significant challenges. The latest edition in Deloitte's Road to Next series breaks down how companies are grappling with these changes, including:
  • Key findings from analysis of investment trends
  • Recent regulatory changes with significant tax implications
  • Which tech stack segments are enjoying the most growth, and attendant hybrid workflow considerations
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Quote/Unquote

(ALFRED PASIEKA/Getty Images)
"Each next turn of quantum advantage is going to last longer, but I don't see this big bang moment where all of a sudden only a quantum computer can design drugs."

Matt Ocko, a managing partner and co-founder of venture capital firm DCVC, which is an investor in quantum computing startup Rigetti.

Scientists and engineers may still be years away from developing quantum hardware that would significantly outperform traditional computers. But that's not stopping venture investors from pouring a record amount of funding into the quantum computing space this year.

Datapoints

Global exit value for VC-backed internet-of-things startups reached $30.4 billion in H1, more than double the figure for all of 2020, according to PitchBook data.

Notable IPOs in H1 included smart home tech provider Tuya Smart, which set a record for pure-play IoT VC exit value with its $10.8 billion debut in March. IoT-adjacent exits of information security companies like SentinelOne and Auth0 also added to H1's record total. Read more about the latest in the IoT industry in our recent Emerging Tech Research.

Deal Flow

(zf L/Getty Images)
To harness the full potential of the cloud, companies are increasingly turning to DevOps startups for digital products and tools to help them build, operate and maintain software and IT infrastructure.
  • Cloudtech and DevOps startups secured $4 billion in the second quarter of 2021, according to PitchBook data, representing a quarter-over-quarter increase of 14.6%. That number includes a $1 billion Series C for MessageBird, the Dutch provider of a cloud communication platform.

  • Our analysts estimate the market size of DevOps software to be in the range of $88 billion and growing in the high single digits rate.

  • Why are enterprises investing more aggressively in DevOps? Find out in our recent Emerging Tech Research update.

Did you know ...

(artisteer/Getty Images)
... That Amazon patented the one-click checkout process back in 1997? The patent expired in 2017, opening the door to a new cohort of fintech startups such as Bolt, Fast and PeachPay, which offer faster checkout options.

Our analysts believe that in a world where speed and convenience are increasingly important, there are several areas of opportunity across virtual and in-store checkout processes, one-click payment solutions and renewal features.

To learn more about how fintech startups are capitalizing on specific markets as digitization continues to accelerate, check out our latest Emerging Tech Research report on the subject.
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Recommended reads

How the pioneering work of Ingrid Daubechies, the "godmother of the digital image," made our electronic world possible. [The New York Times]

Mark Cuban's latest bet is on a pharmaceutical company that plans to make medications more affordable. But he's not in it for the money. [Texas Monthly]

Some 20 years ago, hedge fund investors made a failed investment in coal mining in Appalachia. It was the workers and the environment that ultimately paid the price. [The Guardian]

Facebook tried to make its platform a healthier place. Instead, the opposite happened. [The Wall Street Journal]

Utilities throughout the US are working to upgrade rooftop power infrastructure. But an outdated grid has resulted in an economic divide when it comes to solar energy. [Wired]

A look at the brutal realities of what it's like to work in a supply chain industry that's been battered by a pandemic, a labor shortage and increased demand. [Bloomberg]
This edition of The Weekend Pitch was written by Adam Lewis and Priyamvada Mathur. It was edited by Alexander Davis, Angela Sams and Sam Steele.

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September 19, 2021 | View Online | Sign Up
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Kate Dehler

IN THIS ISSUE

How to ask for PTO

Does Kat Cole own any NFTs?

We can't resist a McMansion

 
 

Editor's Note

 
 

Good morning. I promise this wasn't planned (because we aren't that organized), but this Sunday Edition turned out to be a love letter to the city of Atlanta, home to our Icebreakers guest Kat Cole, the subject of our news analysis section, and featured in our Open House listing.

If you don't live there, perhaps your experience of Atlanta is limited to sprinting halfway across the airport to catch a connecting flight on Delta. 

But outside the airport walls, Atlanta has been a remarkable success story. My urban studies professor loved to point out that in 1950, Atlanta and Birmingham, AL, had roughly the same population. That's...not even remotely the case now, with Atlanta exploding in size and becoming one of the most dynamic cities in the US.

So I hope you enjoy our first-ever "loosely themed" Sunday Edition. What city should we feature next? I'm taking requests.*

—Neal Freyman

*Sorry Matty, Lincoln, Nebraska, isn't on the shortlist.

 

CULTURE

 

Stock Watch

Stock watch: September 19

     
 

Q&A

 

Icebreakers With...Kat Cole, General Business All-Star

Kat Cole headshot

Brigade Publicity

If Kat Cole wasn't on the next all-civilian space flight, it would actually surprise us—she's always looking for the next big thing. At Hooters, she climbed the ranks from part-time hostess to company executive. Then, she joined Focus Brands, the parent company of Cinnabon, Auntie Anne's, and other chains, where she became President and COO. 

These days, you can find her serving on many corporate and nonprofit boards, advising young business leaders, and discussing leadership on the Leadership Lab on Clubhouse.

We talked to Kat about everything except Atlanta, which she calls home.

Do you own any NFTs?

Of course. 

And what attracted you to the space? 

I fell in love with the energy and the opportunity. As a brand person, my brain immediately went to: Holy moly, this is really going to expand the ecosystem of IP and redefine the definition of a brand. And so my business brain, my branding brain, was really energized by the emergence of NFTs. Then I got connected in a human sense because we were having these conversations in rooms in Clubhouse. 

You were at Hooters for 15 years and then Focus Brands for 10 years. That's longer than most young people expect to stay at a company. Are they too quick to rush to new jobs? 

No, I don't think they're too quick. What I think people might miss about my two long stints at the same parent enterprise is I was in super high-growth companies, and so really I was running multiple different companies—I just didn't have to leave the entity to do it. At Hooters, I was a hostess for six months, then I turned 18 and was a Hooters girl for another year, and even in that first year I started opening franchises. Then six months later when I was 20, I took a job at the corporate office. Two years later, I became director and oversaw a different department.

So there are benefits if you're with a high-growth company. And that's one of the things I always share with my story, when people are like, "Wow your career is so crazy and you got so many opportunities so young!" Yes, I learned over time to be a really thoughtful, caring, and driven leader, but you cannot remove a high-growth company from that equation. Like, I just got opportunities earlier than most people would.

If you were starting a company, would you make it fully remote? 

Yes, I would make it fully remote, and I would put in some really killer and regular moments of in-person connection when it would be safe and possible. Probably every two months.

Is getting an MBA overrated or underrated? 

Right now, it's probably accurately rated. There is a healthy debate around it as there should be. But if you're going to do the work of being in a cohort-based anything, a cohort-based course, a cohort-based MBA, make something of it. Keep the crew together, be the person who has the dinners and the Zooms. The value is in the community and the connection, not purely in the content. 

You've seen how much automation has crept into the restaurant industry. Do you think your original position as a Hooters server will exist 10 years from now? 

In 10 years I believe that people will increasingly want a high-tech front end, meaning ordering experience, and a high-touch back end, because orders get screwed up and you change your mind and it's not what you wanted. And so the role of humans becomes more important in the service industry as automation comes into play.

My husband and I just went on a mini-vacation; it was so amazing to be served. Just to have someone recommend drinks and to laugh with them and ask about the area, yet there were a couple moments where we wanted a quick meal where we ordered ahead and just wanted to go pick up the food.

So I do believe we're going to see this separation between "fast" and "experience." Where fast is valued, more roles will be replaced with automation. And where experience is valued, there still might be some automation in a piece of the production but that human element is going to be increasingly cherished. And people are going to pay a premium for it. 

What has the better smell: Auntie Anne's or Cinnabon?

That is like asking me which of my children is my favorite. The aroma of Cinnabon makes my eyes roll back in my head. It's indulgent, and I am satisfied almost just from that aroma. But the aroma of Auntie Anne's makes me want to eat a pretzel, like, "Must. Eat. Pretzel." The Cinnabon aroma is a bit more magic, and intoxicating, and Auntie Anne's aroma is kind of like, "Take all my money." 

This interview has been edited and condensed for clarity.

     
 
Hilton

 

WORK LIFE

 

How to Ask for PTO

Make It Work logo

Each week, our workplace whisperer Shane Loughnane answers reader-submitted questions about work in 2021. Anything bothering you at work? Ask Shane here.

How do I ask for days off? I just started a new job and I feel guilty already asking for days off in the holiday season. We have an unlimited PTO policy. Will I be seen as not a hard worker or dependable?Andrea, VA

If soup, salad, and breadsticks have taught us anything, it's that unlimited is typically good news. But while endless paid time off has become an increasingly common way for companies to regulate (or not) how much shine your OOO message gets, it also has the potential to create a minefield for those of us left to navigate the open-ended policy. 

So let's clear the table (you know, for more breadsticks): Assuming your company implemented the policy with good intentions, they've empowered you to determine how much time off you can realistically take without compromising your work—and while I'd recommend a more modest approach until you get a feel for where that line is, I don't think a few days off during the holidays is an unreasonable place to start.

WRT the asking, my mother always insisted on doing so nicely—although, come to think of it, she never did get a day off. It's a good move to ask your manager if they have any preferences. Perhaps they'd appreciate you clearing dates with them before submitting to HR or blocking off your calendar. Still feeling anxious about the lack of parameters? Try asking about the minimum amount of PTO they would expect you to take. That way, you have an "approved" baseline to start from. 

Like your brunch beverage of choice, bottomless PTO can be a pretty sweet menu item if done right. Yet, research suggests that employees who are offered unlimited time off actually use fewer days on average than those with a fixed amount—that's a recipe for burnout. One thing that's not unlimited is your mental and physical health, so don't cheat yourself out of the time you need to properly recharge.

You Light Up My (Zoom) Life

Last week, we asked Brew readers to chip in with advice for Brandon, whose office lacks the natural light needed to look his best on Zoom. While ring lights won the day, Christina from Charlotte offered her own luminous perspective: 

"Be your own light! If your personality shines, there's no need for that ring light, people will immediately know it's you."

Have a question about work you want to ask Shane? Write in here. And coming soon...HR Brew. Be one of the first subscribers to our upcoming newsletter on all things human resources.

     
 

ANALYSIS

 

A Tech Hub Rises Among the Peach Orchards

USA, Georgia, Atlanta City, Down Town Skyline. (Photo by Jose-Fuste RAGA...

Jose Fuste Raga/Getty Images

Turns out, your city doesn't need a tweeting mayor, beaches, or a Will Smith song to be considered the next hot region for tech.

A recent string of deals has put Atlanta on the map as a growing power player in the US technology industry. 

The big one: Atlanta-based email marketing company Mailchimp was sold to Intuit, the maker of TurboTax, for $12 billion last week—the largest ever deal for a homegrown tech company. 

In other Atlanta tech deals last week... 

  • Goldman Sachs acquired GreenSky, a fintech platform focused on home improvement loans, for $2.2 billion.
  • Logistics startup Stord became a logistics unicorn after raising money at a valuation of $1.1 billion.

If Atlantans are a little reluctant to beat their chests, it's because the city was considered a rising star in tech several decades ago. In 1996, the city hosted the Summer Olympics, raising its profile around the globe. Local telecom and networking companies boomed with all the enthusiasm of the dot-com era. We all know how that turned out, though.

The renaissance

Following the dot-com bust, a new class of startups emerged, including familiar names Mailchimp, Kabbage (acquired by American Express), and Calendly. 

Now, Atlanta is in a strong position to make further gains. It has one of the busiest airports in the US, Hartsfield-Jackson, huge corporations including Home Depot and Delta Air Lines, leading research institutions like Georgia Tech, and perhaps most importantly, loads of computer science and engineering talent—especially Black talent.

  • The city is home to a cluster of Historically Black Colleges and Universities (HBCUs), including Clark Atlanta University, Morehouse College, and Spelman College. 
  • Roughly 36% of Atlanta's tech workforce is either Black or Hispanic, second only to San Antonio. 

Tech companies that have pledged to increase diversity in their workforces are eyeing Atlanta's Black engineering talent. Microsoft will hire 1,500 people at its new Atlanta office, Apple is partnering on a $50 million tech center, and Airbnb, explicitly citing the prevalence of Black talent in Atlanta, also plans to open a hub in the city.

Zoom out: While receiving $3.1 billion in venture funding in H1 2021, a record for the city, Atlanta is still a small fish in the tech pond (Silicon Valley, by comparison, attracted $48.9 billion in venture capital). Talented people are still leaving for better opportunities on the West Coast, and Atlanta faces growing competition from other Southeast cities, like Charlotte and Nashville. –NF

     
 
Bakkt

 

REAL ESTATE

 

Open House

Welcome to Open House, the only newsletter section that has an extensive tracking system for gaudy decor of Southern rich people. We'll give you a few facts about a listing and you try to guess the price.

6 bed, 6 bath home in Atlanta, Georgia

Zillow

By now you know we can't resist a McMansion. So let's head to Atlanta, GA, (love a themed newsletter) for today's early 2000s nightmare. The only thing scarier than this 7,368 square-foot home attempting to cosplay as a castle is its obsession with columns. Amenities include:

  • 6 beds, 6 baths
  • Giant tub
  • Lots of curved seating arrangements
  • Fancy staircase, perfect for descending

How much for what would never be considered "Southern Charm"? Scroll to the bottom of the newsletter to find out.

     
 

RECS

 

Just Click It

1. Why there's no such thing as the mind and nothing is mental. (Aeon)
2. The question Michael K. Williams asked before every season of The Wire. (New York Times)
3. Help! I couldn't stop writing fake Dear Prudence letters that got published. (Gawker)
4. An excerpt from a new biography on Peter Thiel. (Bloomberg Businessweek)
5. Where Americans live. (Flowing Data)
6. A conversation with Spotify CEO Daniel Ek. (Invest Like the Best)
7. The housing theory of everything. (Works in Progress)
8. How to "rewild" your attention. (Clive Thompson)
9. Video games' sensory revolution: How haptics reinvented the controller. (The Ringer)
10. The Alex Murdaugh murder investigations, explained. (Slate)

1.99 breakfast! Yeah, that got your attention. Wendy's new Bacon, Egg and Swiss and Sausage, Egg and Swiss croissants are buttery, flaky, and toasted to perfection—at the perfect price of $1.99. Get yours this morning.*

*This is sponsored advertising content

 

CONTEST

 

Meme Battle

Welcome back to Morning Brew's Meme Battle, where we crown a single memelord every Sunday.

Today's winner: Utkarsh Sahu in India

meme contest winner

This week's challenge: You can find the new meme template here for next Sunday. Once you're done making your meme, submit it at this link for consideration.

 

ANSWER

 

$1.1 million

 

✤ A Note From Wendy's

Limited time only.  U.S. price and participation may vary. Excludes Maple Bacon Chicken Croissant.  Not valid in a combo.  Check your local Wendy's for breakfast hours.

     

Written by Matty Merritt and Neal Freyman

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