It’s hard to believe all of you Term Sheet readers have been stuck with me for a whole year now. How little did I know when I started writing about the private markets for this newsletter what we were all in for.
Valuations fell to pieces. FTX blew up, and Sam Bankman-Fried is in custody. Kewsong Lee abruptly resigned from the Carlyle Group. Russia invaded Ukraine. Elizabeth Holmes was found guilty of fraud, then later sentenced to prison. A16z wrote its biggest first-time check to Adam Neumann’s new startup. I had nearly forgotten there was even a Trump SPAC.
There have also been major developments in areas like hydrogen technology and drone regulation. People are getting together again after a long bout of COVID-induced isolation. Minority founders are getting more attention. And startup founders are opening up about their own personal struggles.
As I’ve been parsing through all the predictions you have been sending in (wow, these are interesting, but please no more!), I thought it might be fun to circle back to the unexpected turns and tumult of this year. I, incredibly, started writing about the private markets at their very peak—and have had a front-row seat since, as many companies started falling to pieces.
And so, if I may, for this calendar year’s final edition, I’ll take a look back at the dealmaking world of 2022, as documented day after day in the Term Sheet newsletter. We haven’t covered everything (I think there’s some saying about picking your battles)—but we sure have covered a lot. If this year had been a play, here’s the highlight reel, in not-so-exact chronological order:
Scene 1—Startup employees exit stage right after being laid off via Zoom
The signs of an impending downturn were simmering at the end of 2021, but by the spring of this year, the party was over. Enter Sequoia’s new memo. New layoffs right and left. Instacart cut its valuation. Klarna cut its valuation. A whole lot of companies cut their valuations. Etc. Etc. You all continued to share your thoughts throughout the process as the data soured. Here are the dos and don’ts for early-stage fundraising in 2023.
Scene 2—Ukrainian startup founders, employees, and angel investors become heroes
There were more than 100 startups with primary or secondary offices in Ukraine when Russia invaded in February—leaving thousands of employees in the middle of a war zone. Some founders turned their attention to moving employees or their families to safety. And a group of European angel investors immediately got to work bussing people to safety.
Meanwhile, the Russian invasion has underscored the connection of Russian oligarchs and other controversial foreign money to the U.S. private markets.
Scene 3—Elon Musk stops tweeting for five minutes in order to buy Twitter, then gets right back to it.
With the help of a Saudi prince and a handful of VCs (some of whom may have done little due diligence), Elon Musk took Twitter private, marking the third-largest technology acquisition ever, after much ongoing back-and-forth (and litigation) on the matter. Big banks, like Morgan Stanley, took a significant bet on him to make it happen.
Scene 4—Trump briefly enters center stage, stares at the audience, then exits stage left
Remember how Trump has a SPAC? Here were the major revelations when Trump Media & Technology Group first filed. In general, SPACs really lost their edge this year, largely owing to things like poorly performing markets; retail investors losing interest; new proposed regulation; and, very importantly, redemption rates.
Since we’re talking about going public, the IPO markets have essentially been closed this year, with a few exceptions. One notable exception was the Porsche IPO, which was a full-circle breakup story of two companies that dropped billions trying to unite over a decade ago. Speaking of Porsche, it also started testing out a new venture strategy.
Scene 5—The stage blows up, and the audience suddenly realizes the structure was being used as collateral for loans of crypto tokens they didn’t realize they owned.
Here is what the hell happened with crypto lenders. Here is how everyday people have been impacted. Here are details about the big FTX blowup and how Stanford Law School has gotten thrown in the middle. Here and here and here are some examples of the contagion. Here are people trying to reassure everyone that things will be okay. Here are ways VC may change after the crypto blowup and where VC investors are putting their money now.
Scene 6—Stephen King delivers a soliloquy on the rubble of said stage
After what became an incredibly dramatic DOJ case, about books no less, Penguin Random House was told it couldn’t scoop up one of its largest rivals, making Stephen King, who testified during the back-and-forth, very glad. On the failed deals front, Frontier’s intended deal to scoop up Spirit Airlines also never went through, after JetBlue flew in.
A bright spot in M&A for dealmakers this year was Adobe’s $20 billion acquisition of Figma. Two of Dylan Field’s earliest VC backers detailed how it all played out.
Scene 7—VCs indicate they don’t mind long layovers at the Chicago airport
It would be a big stretch to say that cities like Montgomery, Fort Worth, Memphis, or Tulsa will become the next “Silicon Valley,” but it’s been interesting to follow the amount of capital starting to pour into other parts of the U.S. that have historically received little attention, showcasing how great ideas (and great founders) can come from anywhere, even if it’s harder to hire people outside major metro areas.
On the flip side, many believe that Roe v. Wade being overturned has threatened some of the appeal of running a company out of red states in particular. Many startup CEOs opened up about their own abortion stories.
Scene 8—A woman in a turtleneck and a man in a T-shirt with disheveled hair murmur repeatedly it was all a mistake
It’s clear that startup CEOs were held responsible for their actions this year. Elizabeth Holmes was convicted of fraud at the beginning of 2022 (her early investor Tim Draper told me she never lied to him), and the whole affair inspired a Hulu series. Interestingly, many VCs didn’t think Theranos was an outlier. EV company Nikola founder Trevor Milton was convicted of fraud. Sam Bankman-Fried was arrested earlier this week and has been charged by the SEC, CFTC, and the U.S. Attorney’s Office for the Southern District of New York.
Plenty of startup founders have lost the trust of the public, even if they were never accused of anything by prosecutors. One example: Adam Neumann. Despite resigning as WeWork’s CEO, costing thousands of employees their jobs, being sued by his investors, and becoming the subject of a documentary, books, and an Apple TV series, Neumann has been investing in startups and went on to launch a new one focused on co-living, backed by a16z.
Scene 9—Audience members rise to go home and watch a soap opera they follow
The drama among Apollo Global Management cofounders emerged in ongoing litigation against co-founder Leon Black. Two women have sued Black for alleged rape. (Black denies allegations against him and his lawyer told Fortune the allegations are “part of a scheme to extort money from Mr. Black by threatening to destroy his reputation.”)
Speaking of major private equity firms, Kewsong Lee suddenly resigned from the Carlyle Group earlier this year, leaving the private equity firm at square one. Here’s who may be in the running for the top job.
Scene 10—Credits displayed on a small screen
Behind the scenes, this newsletter itself has evolved a lot in 2022 (and even won an EPPY award for Best Business and Finance Blog!). We brought on Jackson Fordyce to put together the deals section; Fortune’s long-standing editor Lee Clifford has started editing this newsletter; Jack Long began shipping it out under the direction of Ashley Sylla; and Anne Sraders agreed to help co-write (Hi, Anne!). I also want to thank Ian Foley for crafting up our brilliant monthly cartoon and Lucy Brewster and Kevin Kelleher for filling in while I've needed an extra hand.
Please note… Term Sheet will be on holiday starting this Monday, Dec. 19, until Jan. 4. In the meantime, our team will be hard at work putting together our annual special edition of the Crystal Ball, where the best and the brightest of our readers predict what 2023 will hold. That will be our first issue of 2023.
As we part ways for now… Thank you for your continued interest in the stories and deals we work hard to deliver to your inbox each day. Thank you for sending it to your friends, your coworkers, and your butcher. Thank you for choosing to subscribe to Fortune, for reading what we have to say, for (kindly) sharing your thoughts about what we could have done better. After what has been, and continues to be, a hectic and exciting year, I hope you can muster a minute, an hour, a week, to reflect, to recover, to hope, and—naturally—to get ready for all the magic the Term Sheet team has in store for 2023.
See you in the New Year, and happy holidays!
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.
