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| The Daily Pitch |
| VC, PE and M&A |
| Your edge on global private capital markets |
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| Good morning. In today's Daily Pitch, we look at the dramatic flow of state-backed capital into AI, the impending split of Keurig Dr Pepper and one firm's answer to the consolidation of healthcare specialist funds. |
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| US gets most benefits from sovereign wealth funds' AI investments |
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By Jacob Robbins, Technology Reporter
Sovereign wealth funds are investing unprecedented levels of capital in AI companies worldwide, with over 90% of funding with their participation going to US startups, according to our latest analyst note.
This flow of capital is a "dramatic reordering" with implications beyond capital flowing into the venture ecosystem, said Dimitri Zabelin, a senior AI analyst at PitchBook and the author of the research, Sovereign AI: The Trillion-Dollar Frontier.
"When it comes to AI, the US is leading in software and hardware," Zabelin said. "The US is setting the policy standard, telling countries like China you can't have access to X, Y and Z. Whoever sets the standard, that's who gets the most attention."
From January through August, sovereign wealth funds participated in AI venture deals worth $46.4 billion overall, with $43.3 billion (over 93%) of this funding going to US startups, according to PitchBook data.
The sheer volume of capital has also dramatically increased, with sovereign wealth vehicles participating in total funding for US AI startups that's nearly twice as much as last year. |
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"What you're seeing is another faucet of capital turn, and all the money pours out, being driven by a sense of urgency to not fall behind technologically," Zabelin said.
This is particularly true for Middle Eastern countries, which are being driven by economic necessity, he added.
"It's all part of a diversification strategy, but also it's part of a financial return strategy as well," he said. "They see tremendous value in AI and how it can be leveraged for them."
Just last week, AI data center startup Crusoe announced a new $1.4 billion funding round at a $10 billion valuation led by Mubadala Capital, an Abu Dhabi-based sovereign wealth fund. The sovereign wealth vehicles of Oman and Qatar both invested in xAI's $6.6 Series C in December.
"There's this broader global shift of having the public sector being involved in private market activity," Zabelin said. "Really, at its core, though, it's the latest and biggest change in global capitalism because of the heavy state involvement." |
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| A message from Grant Thornton Stax |
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| Changing the game: Emerging investment opportunities in youth sports |
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A combination of professionalization and digital transformation is creating powerful new revenue streams within youth sports. More families are beginning to view spending on youth sports as an essential investment to advance their children’s experience, while software companies are striving to standardize the ecosystem for athletes and introduce more complex monetization.
For investors, this evolution represents not just a maturing market, but a chance to back the infrastructure that will power the future of youth athletics. Companies and investors such as DICK’S Sporting Goods are providing significant capital in an effort to help define the infrastructure of the next generation of sports.
Read how capital investment is reshaping youth sports into a structured, high-growth industry. |
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• BroadOak Capital Partners has collected $200 million in permanent capital, which will enable the life sciences manager to invest without the constraints imposed by the closed-end fundraising cycle. Read more
• Just out: Our Q3 valuations data for public companies in the fintech and payments sector. Get our analysts' report today
• CVC Capital Partners is selling a majority stake in German betting group Tipico to France’s Banijay Group at a valuation of €4.6 billion (about $5.4 billion). The deal reflects improving European exit conditions and CVC’s ongoing focus on sports, media and gaming. Read more |
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| KKR, Apollo finance Keurig Dr Pepper's split |
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By Jessica Hamlin, Senior Funds Columnist
The company that owns coffee maker Keurig, Dr Pepper, and a host of America's favorite drinks is splitting in two, with help from private capital titans. The deal draws a line under a period of uncertainty for Nasdaq-listed Keurig Dr Pepper, after an acquisition announcement over the summer tanked its share price and drew the attention of activist investor Starboard Value.
KKR and Apollo Global Management are set to co-lead a $7 billion debt investment in KDP to help finance its pending $18 billion acquisition of JDE Peet's, a Dutch coffee and tea maker, which was first announced in August. KDP will eventually split its beverage and coffee businesses into two publicly traded companies, effectively unwinding the 2018 merger between Keurig and beverage producer Dr Pepper. |
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The coffee portion of KDP has been a drag on the company's overall performance over the past few years due to shrinking sales, as the cost of coffee beans increased and purchases of its K-Cup pod declined. Net sales for the company's US coffee business declined 5.4% in 2023 and 2.6% in 2024.
During the same period, sales of KDP's US refreshment beverages business, including brands such as Dr Pepper, Polar, Evian and Vita C, grew by 9.1% and 10.3%.
The Aug. 25 announcement of KDP's tender offer for JDE Peet shook the confidence of investors, who were concerned about the company increasing its exposure to the coffee market and the debt being proposed for use in the transaction.
KDP said it would fund the transaction with a combination of senior unsecured and junior subordinated debt and cash, which would bring its projected net debt to $38 billion. On the day the deal was announced, shares of KDP were down 11% at market close.
Apollo and KKR will act as a "white knight" in the deal announced Monday, with the joint capital injection alleviating activist investor concerns by bringing KDP's leverage down to $31 billion.
The company's stock jumped more than 7.6% Monday, as of market close. |
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Smart reads that caught our eye.
• The US is funneling more money into the domestic rare earth minerals industry. Both private investors and government agencies are investing in the sector as the US tries to build a manufacturing landscape that is less reliant on China. [The Wall Street Journal]
• Governance of crypto is causing a dilemma. With the borderless, flexible nature of crypto assets, how does the US plan to regulate those participating in these markets? [Financial Times]
• Despite high accident rates now, autonomous cars could be 10x safer than human drivers in the near future. China-based WeRide's CEO is confident that today's self-driving accident rates are just a part of any technology's evolutionary process. [ | | | | | | | |
