US construction spending continues to buck broader economic headwinds (with sector-specific outlooks remaining largely unchanged from the tightening credit environment), providing built world founders with seemingly idiosyncratic funding. BuiltWorlds Venture Dashboard tracked 23 deals driving more than $385M in venture capital inflows into this investment niche over the past 2 weeks.
Built World startups managed to close deals across the development spectrum from a >$1M Pre-Seed round for a Finnish prefab housing play (Asumma) to a $65M Later-Stage investment in Placemakr, a hospitality management company (bringing its total funding to >$350M).
However, rapidly tightening US credit markets threaten sentiment and potentially access to mission-critical credit as US banks fasten down their lending hatches.
The rate-hike-incited deterioration of banks' fixed-income assets (as rates soar the market value of interest-paying securities plummets) has a growing number of built-world leaders concerned about access to operationally critical capital (construction credit lines largely) amid the early innings of the Industry 4.0 buildout – the construction of critical infrastructure improvements, hyperscaling data center, autonomous manufacturing facilities, chip fabrication plants, last-mile warehouses, net-zero builds, etc.
The US Federal Reserve released its first set of 2023 forward-looking economic projections last week alongside a 25 bps rate hike (pushing the Fed Funds rate to 4.75% - 5%). Fed Chair Jerome Powell's post-meeting comments were largely focused on "tightening credit conditions" (something he mentioned over 20 times in last week's press conference), which alluded to the possibility of a credit crunch (a risk-on economic climate where banks' willingness to lend dissipates) providing little in the way of market ease.
Jerome Powell walked back his early-March assertion that the Fed would need to reaccelerate their rate hike cycle, in the wake of recent bank failures this past week. Chair Powell's financial "stress test" put the nails in the coffin of several top US banks, that had been dealing with the deterioration of their unhedged fixed-income heavy balance sheets. Powell’s reacceleration announcement led to the bank run that took down SVB and led to Signature Bank’s collapse 48 hours later (which are both now fully insured by the FDIC under the “systemic risk exception”). It wasn’t long before Credit Suisse was absorbed by UBS in a distressed $3B buyout (3/19), while First Citizens stepped in to pick up some of the former SVB's heavily discounted pieces, buying $72B in assets for just $16.5B (a 78% price cut), leaving the FDIC with $90B worth of the former SVB left to unload.
The systemic inefficiencies of our global economy are being flushed out, but not without some heartbreaks. Luckily, the nascency and the mission-critical necessity to adopt labor/cost augmenting technologies will continue to provide financial support for the best-positioned built world innovations.
Top Deals of The Week
$65M | Later Stage | Hospitality Management
Placemakr partners with developers, property operators, and investors to curate a collection of apartment-like spaces in hand-picked neighborhoods. These buildings range from brand-new apartments as they’re leasing up to established apartments looking to maximize their value.
$22M | Series B | Reality Capture (Drones)
WingtraOne drone carries best-in-class sensors that collect survey-grade aerial data. This technologically-superior VTOL UAV is used by mapping professionals for applications that range from surveying and mining, to wildlife monitoring.
$8M | Seed | Procurement (SMB-focused)
StructShare is replacing the broken material purchasing management process with an easy-to-use digital platform designed for specialty trade contractors.
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