Today we replace software with bright lights, AI infrastructure with boy bands, and Silicon Valley with Seoul.
We’re talking K-pop deals, so now’s a particularly good time to take a closer look at South Korea-based entertainment giant Hybe. Last week, Hybe America CEO Scooter Braun officially stepped down from his longtime career as manager of superstars like Justin Bieber, Ariana Grande, and Demi Lovato to focus full-time on Hybe going forward. (The news also reignited Braun’s long-running feud with Taylor Swift.)
Hybe’s story may not be a venture capital story, but it is a story of large-scale M&A and it has some interesting parallels with the VC industry.
The first thing to understand is that Hybe is a nest of Matryoshka dolls, made up of a pile of deals, and at the center of it all is the mega-successful boy band BTS.
For those who aren’t K-pop fans, here’s a quick summary of the band’s status: “As BTS gets older, they’ll become like the Rolling Stones,” says Yale University professor Grace Kao. “They might not be on the charts anymore, but people will always go to their shows. Think of Bruce Springsteen. He’s not on the charts anymore, but his shows are still sold out.”
In VC business terms, think of any unicorn startup founder with a biography to get a sense of BTS’ importance to the entertainment industry. And in the same way that a wildly successful startup transforms the fledgling VC firm that backed it into a venture industry titan, BTS changed the fortunes of a fledgling music company called Big Hit forever.
“BTS came out of a small company called Big Hit, but because BTS was so successful, their manager Bang Si Hyuk was basically able to build a huge company called Hive,” Kao said.
But because BTS’ success is so unusual, Hybe needed a plan beyond BTS. And that plan was M&A.
“Just a few years ago, 80% of Hive’s revenue came from BTS. Since 2019, Hive has acquired Pledis, Belift Labs and Source Music,” said Lim Soo-jin, a researcher at Daishin Securities. luck In an email inquiry, he said, “All of these groups have grown into top K-pop artists in Korea, so Hybe no longer needs to rely solely on BTS.”
But Hive’s most notable acquisition may be the one that puts the spotlight back on Brown: In 2021, Hive expanded into the U.S. with its purchase of Brown’s Ithaca Holdings for just over $1 billion.
“This is an investment to spread K-pop’s success in Asia to the US,” Lim said in an email. “The US is the world’s largest music market, so it has high future value. Profitability is not yet high, but we can expect synergies rather than just increased sales.”
“Brown’s involvement was expected to help promote the globalization of K-pop by leveraging his connections and experience to promote Hyve’s artists in the Western market,” Lim added.
Brown seems to represent the future of Hive at a time when the company needs to think about its future. With Brown spending all his time with Hive, he has a chance to be a bit of a hero, because life isn’t dynamite for Hive right now. (But BTS’s captivating performance of their 2020 hit “Dynamite” is.)
The company is “going through tougher times than ever,” Lim said. There are problems across the industry. First, Hyve’s stock price has fallen about 17% so far this year due to sluggish K-pop sales. These slump in sales have also affected competitors such as YG Entertainment, SM Entertainment and JYP Entertainment.
But Hive has its own issues: The company is embroiled in a dispute with its most talked-about subsidiary, Ador, which manages the fast-growing girl band New Jeans, and Lim says this has had a significant impact on public opinion of Hive. (It’s a pretty hot topic, with allegations of fraud and plagiarism at its heart.)
Still, if Hive can push forward, K-pop will likely remain a growing business for the foreseeable future. “We forecast that in 2023, direct revenue from K-pop companies will be roughly $5 billion,” Bernstein analyst Bo-kyung Seo said in an email, adding that he expects the market to “double overall by 2030.”
Of course, as with any startup, you need the right people to move forward. While Braun is poised to build a legacy in and for Hybe, there’s one key person who’s currently temporarily out of Hybe’s orbit: BTS is on hiatus until 2025 as seven members RM, Jin, Suga, J-Hope, Jimin, V and Jungkook work to complete their mandatory military service in South Korea.
In that sense, Silicon Valley and K-pop are very similar: When the key man (or boy band) is gone, a lot is uncertain.
See you on Monday.
Allie Garfinkle
twitter: Agarfinx
Email: Alexandra.garfinkle@fortune.com
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Joe Abrams curated the Deals section of today’s newsletter.
Venture Transactions
– ShiraThe Alameda, California-based battery materials company has raised $375 million in Series G funding. Existing investors Sutter Hill Ventures and Account Advice T. Rowe Price Associates led the round, with participation from existing investors Bessemer Venture Partners, coat, Perry Creek Capitalothers.
– claya New York City-based company that provides AI technology to automate sales and marketing processes, has raised $46 million in Series B funding. Meritech Capital Leading the round, Round 1 and Sequoia.
– OdasebaThe San Francisco-based enterprise data security platform for Salesforce has raised $54 million in Series C funding. Silver Lake Waterman led the round, with participation from existing investors F Prime, Eight Ways, Serena Capitaland new investors Eurazeo and Crescent Cove.
– e-ZincToronto, Canada-based developer of zinc-air batteries designed for sustainable, long-term energy storage has raised $31 million in Series A2 funding. The round was led by Evok Innovations. Mitsubishi Heavy Industries, Export Development Canada (EDC), Ultra Tech Capital Partnersand existing investors.
– InatelaThe Rijswijk, Netherlands-based maker of neuromorphic processors has raised $21 million in Series A funding. Invest, Invest NL, EIC Fund, MIG Capital, Matterwave Venturesand Delft Enterprise.
– Clear Storya San Francisco, California-based change order management platform for the construction industry, has raised $16 million in Series B funding. Careful Leading the round, Industry Ventures, Jackson Square Venturesbuilding ventures, GS Futuresand Cloud App Capital Partners.
– Magic School AIa Denver, Colorado-based AI platform designed specifically for educators, has raised $15 million in Series A funding. Bain Capital Ventures Led the round, with participation from AWS Adobe Ventures, Common Sense Mediaangel investors, etc.
– Authenticateda New York City-based permitting and permitting platform, has raised $12 million in funding. General Catalyst led the round, with participation from existing investors Workbench, Y Combinatorand Amplify Partners.
– Synth FlowBerlin, Germany-based AI voice assistant startup has raised $7.4 million in seed funding, led by Singular with participation from existing investors. Atlantic Lab others.
– Synthpopa Wellesley, Massachusetts-based AI platform aimed at automating healthcare workflows, has raised $5.6 million in seed funding. Peterson Ventures Leading the round, DEFY, Zelda Ventures, Think+Venturesand OVO Fund.
Unlisted stocks
– Vista Equity Partners Taken Model NThe San Mateo, Calif.-based revenue optimization and compliance platform for life sciences and technology companies has been taken private for approximately $1.25 billion.
– Brighton Park Capital Invested $112 million Port SwigerApplication security provider based in Knutsford, UK.
– Avenue Sports Foundation Acquired a minority stake City Picklea New York City-based network of pickleball clubs. Financial terms were not disclosed.
– Bernhard Capital Partners Acquired Brailsford & Dunlavyis a Washington, DC-based company that provides project and construction management services to educational institutions and others. Financial terms were not disclosed.
– Kian Capital Acquired majority stake Diamond LandscapingThe residential landscaping company is based in Sylmar, Calif. Financial terms were not disclosed.
– Swanderpace Capital Acquired majority stake Innova Foods Co., Ltd.an Edmonton, Alberta-based maker of private-label frozen foods. Financial terms were not disclosed.
– TPG agreed to acquire a majority stake AltimetricThe Southfield, Mich.-based digital business and product engineering services company did not disclose financial terms.
end
– Growth Curve Capital Acquired duetSan Francisco-based company provides revenue management software for the hospitality industry. Warburg Pincus Other financial terms were not disclosed.
Initial public offering
– Webtoon EntertainmentThe Los Angeles, California-based online comics platform raised $315 million in an initial public offering of 15 million shares on the Nasdaq at $21 a share. The company reported revenue of $1.3 billion for the year ending March 31, 2024.
– Tamboran SauceThe Barangaroo, Australia-based natural gas exploration and production company, which is developing natural gas resources in Australia’s Northern Territory, offered 3.1 million shares at $24 a share on the New York Stock Exchange, raising $75 million.
Funds + Fund of Funds
– General PartnershipThe San Francisco-based venture capital firm has raised $300 million for its second fund, which will focus on “sweat equity” investments, in which teams of recruiters, engineers and others work alongside founders.
– Iron Spring VenturesThe Austin, Texas-based venture capital firm has raised $100 million for its second fund, which will focus on manufacturing, construction and other industrial sectors.
people
– FaubionThe venture capital firm, based in Naarden, Netherlands; Munich, Germany; and Boston, Massachusetts, Josh Blum He joined the firm as a general partner. Dyne Therapeutics.
– G2 Venture PartnersThe Portola Valley, California-based venture capital firm Anne Fazioli KierI serve as Partner and Chief Operating Officer. Ubiquiti Network.
