Tether's new pastime | PitchBook News Summary

1. Key Themes

Theme 1: VC Secondaries Are Becoming a Legitimate Exit Channel

The secondaries market has scaled so dramatically that it is now comparable to traditional VC exit paths like IPOs and M&A.

"Annual value in the US venture secondary market topped $106 billion in 2025—bringing secondaries closer than ever to the scale of traditional exits like IPOs and M&A."

Institutional consolidation is accelerating alongside this growth, with large PE firms racing to acquire independent secondaries platforms before they disappear.

"Charlesbank Capital Partners bought a minority stake in Overbay Capital Partners, a Toronto-based secondaries investor and one of the few remaining independent outfits in a market that asset managers have been racing to gain access to."

Theme 2: AI Infrastructure Is Reshaping "Boring" Sectors — Especially Construction

The data center buildout is not just a tech story. It is driving PE deal activity in construction and engineering at a rate not previously seen, with Q4 2025 deal count up 64.6% year-over-year.

"A race to build data centers is fueling PE deals in construction and engineering, with Q4 deal count rising 64.6% year-over-year. Electrification, plumbing and cement specialists are also attracting capital."

Theme 3: The Mid-Market M&A Freeze — Corporate Buyers Are Sitting Out

Strategic acquirers pulled back sharply from the US middle market in 2025, even as the broader M&A market improved. The drop is particularly significant given that high stock prices historically correlate with acquisitiveness.

"Corporate acquirers backed away from the US middle market last year, accounting for the lowest proportion of total PE exit value in the segment since 2019."

"There were 370 exits of middle-market companies to strategic buyers in 2025, totaling $42.2 billion in deal value. This represents year-over-year declines of 28.8% in deal count and 33.9% in deal value."

The valuation gap is severe and structural, not just cyclical:

"At least 56% of companies that came to market with an enterprise value between $100 million and $1 billion over the last three years did not sell, largely due to a valuation disconnect between buyers and sellers."

Theme 4: Crypto Capital Is Flowing Into Non-Crypto Assets

Tether, flush with over $10 billion in 2025 profits, is deploying its stablecoin profits into a wide-ranging venture portfolio — from smart mattresses to humanoid robotics to Italian football clubs — using investment as a tool to draw more commerce toward USDT.

"Investing off its own balance sheet, the bet is that the firm's checks will pull more commerce and partners toward its stablecoin, USDT, according to two industry insiders and one person familiar with the company's strategy."

"Tether has more money than it knows what to do with." — crypto industry investor

Theme 5: Nuclear Fission Hits a Record Investment Year

VC investment in nuclear fission technologies more than doubled the previous record in 2025, signaling a major structural shift in energy investment priorities.

"In 2025, VC investment in nuclear fission technologies reached a record $3.6 billion in deal value, which is more than double the next largest year—2022's $1.6 billion."

2. Contrarian Perspectives

Contrarian Take 1: Corporate Buyers Stayed Cold Despite Ideal Conditions

The conventional assumption is that high stock prices fuel M&A appetite. In 2025, that relationship broke down entirely in the middle market — despite stocks remaining elevated, strategic buyers pulled back to a six-year low.

"This is despite stock prices remaining relatively high through 2025, creating conditions where listed corporations tend to be more acquisitive."

Bain & Co. attributed this to a sequence of macro shocks — Ukraine, inflation, tariff volatility — that trained corporate boards toward caution even as financial conditions improved. The implication for sellers: market recovery does not automatically unlock strategic exits.

Contrarian Take 2: Tether Is More Profitable Than Any AI Company

Despite widespread skepticism about crypto business models and a ratings downgrade from S&P Global, Tether generated $10B+ in profit in 2025 — outperforming the entire AI sector on this metric.

"I know everyone is all hyped about AI, but I don't know any AI company that made that much of a profit last year." — crypto investor

This is notable because Tether simultaneously faces real reserve risk: "S&P Global Ratings downgraded to 'weak' Tether's ability to maintain its 1:1 USDT backing in late 2025, citing volatility in its bitcoin reserves." The company is highly profitable but structurally fragile.

Contrarian Take 3: Mega-Deal Rebound Masks Mid-Market Stress

The headline M&A number looks strong — $4.93 trillion globally in 2025 — but it is heavily skewed toward large deals in a way that obscures dysfunction lower in the market.

"Dealmakers clinched $4.93 trillion in M&A globally last year, with about 57% of the total stemming from deals valued at $1 billion or more—the highest share since 2015."

For investors and operators in the $100M–$1B range, the market is more broken than the top-line number suggests.

3. Companies Identified

Tether

Description: Stablecoin issuer; operator of USDT, the world's largest stablecoin by circulating supply ($180B+)
Why Mentioned: Emerging as an unconventional corporate VC, deploying $20B+ investment portfolio across diverse sectors as a strategy to expand USDT adoption
Quote: "Tether is going beyond the usual corporate VC playbook, and instead seems to be putting its piles of cash to work in creative ways amid the currently depressed cryptocurrency markets."

Axiom

Description: AI startup developing software trained on mathematical proofs for AI-generated code verification
Why Mentioned: Raised $200M Series A at a $1.6B valuation led by Menlo Ventures — a marquee early-stage deal signaling strong investor appetite for AI safety/verification infrastructure
Quote: "Axiom…secured a $200 million Series A at a $1.6 billion valuation led by Menlo Ventures."

Rox AI

Description: Developer of autonomous AI agents for sales
Why Mentioned: Raised a new round at a $1.2B valuation led by General Catalyst, reflecting continued momentum in AI-powered sales automation
Quote: "Rox AI, the developer of autonomous AI agents for sales, raised a new round led by General Catalyst at a $1.2 billion valuation."

Sunday

Description: Startup developing autonomous robots for household chores
Why Mentioned: Raised a $165M Series B at $1.15B valuation led by Coatue; exemplifies growing investor conviction in consumer robotics
Quote: "Sunday, which offers autonomous robots for household chores, received a $165 million Series B led by Coatue at a $1.15 billion valuation."

Overbay Capital Partners

Description: Toronto-based independent VC secondaries investor
Why Mentioned: Acquired (minority stake) by Charlesbank Capital Partners; cited as "one of the few remaining independent outfits" as consolidation of the secondaries market accelerates
Quote: "One of the few remaining independent outfits in a market that asset managers have been racing to gain access to."

Eight Sleep

Description: Smart mattress company
Why Mentioned: Received investment from Tether as part of its AI healthtech platform strategy — an unusual pairing that illustrates Tether's eclectic investment approach

Airwallex

Description: Singapore/San Francisco-based cross-border payments company
Why Mentioned: Plans to invest ~$1.1 billion to expand across Europe, signaling aggressive geographic buildout
Quote: "Airwallex…plans to invest around $1.1 billion to expand across Europe."

Ramp

Description: New York-based fintech startup (spend management/corporate cards)
Why Mentioned: Acquiring Billhop, a Sweden-based payment platform, as part of European expansion

Earendil Labs

Description: AI drug discovery company backed by 5Y Capital
Why Mentioned: Considering a Hong Kong IPO that could raise up to $500M — a notable signal for the Asian IPO pipeline in AI biotech

Leo Pharma

Description: Denmark-based drugmaker backed by Nordic Capital
Why Mentioned: Has invited banks to pitch for IPO roles — another data point in a building IPO pipeline for PE-backed pharma

Tropic

Description: UK startup focused on gene-edited tropical crops
Why Mentioned: Raised $105M Series C led by Forbion and Corteva, highlighting continued investor interest in agri-biotech and food security technology

Gumloop

Description: AI workflow automation platform
Why Mentioned: Raised $50M Series B led by Benchmark — a signal of Benchmark's continued bet on horizontal AI infrastructure

Qualified Health

Description: AI healthcare evaluation startup
Why Mentioned: Raising $100M Series A from NEA and SignalFire — AI-native health evaluation is attracting top-tier VC

4. People Identified

Kyle Walters

Description: PE Analyst at PitchBook
Why Mentioned: Provided analysis on why corporate appetite for mid-market deals remained suppressed despite favorable macro conditions
Quote: "While risk appetite recovered somewhat among PE sponsors compared with 2024, corporates remained reluctant to do middle-market deals."

David Andrews

Description: CEO of Gryphon Investors, a mid-market PE firm
Why Mentioned: Provided stark data on the scale of the mid-market valuation disconnect
Quote: "At least 56% of companies that came to market with an enterprise value between $100 million and $1 billion over the last three years did not sell, largely due to a valuation disconnect between buyers and sellers."

5. Operating Insights

Insight 1: Founders Must Get Fundraising Mechanics Right Before the Pitch

The sponsored Fidelity Private Shares content points to a pattern that resonates broadly: fundraising failures are often execution failures, not vision failures.

"Most founders don't struggle with fundraising because of vision or ambition. They struggle because the mechanics are unclear, fragmented, and learned too late."

Tactical takeaway: Prioritize a clean cap table, a reusable investor update template, and pre-organized diligence materials before going to market — not during.

Insight 2: If You Are a Mid-Market Seller, Don't Wait for Corporate Buyers to Come Back

With strategic acquirers at a six-year low and over half of companies in the $100M–$1B range failing to sell in three years, sellers who count on a corporate exit as their primary path are taking on significant timing risk. PE sponsor-to-sponsor transactions and the growing secondaries market are the more reliable liquidity paths in the current environment.

"PitchBook's analysts expect corporate appetite for middle-market M&A deals to strengthen in 2026, as confidence trickles down from the larger end of the market." (Forward-looking — but not a guarantee.)

6. Overlooked Insights

Insight 1: Tether's USDT Reserve Risk Is Growing Even as Profits Surge

Buried beneath the VC narrative is a structural risk worth tracking: Tether's reserve backing was downgraded by S&P Global in late 2025 due to bitcoin volatility exposure — even as it holds a record $141 billion in US Treasuries. This creates an asymmetric risk profile: the company is operationally cash-generative, but a sharp crypto correction could destabilize the 1:1 peg underpinning $180B in circulating stablecoins.

"S&P Global Ratings downgraded to 'weak' Tether's ability to maintain its 1:1 USDT backing in late 2025, citing volatility in its bitcoin reserves."

Insight 2: AI Is Compressing Cognitive Diversity — A Risk for Knowledge Work Businesses

Briefly flagged via a USC research citation in the Side Letters section: LLM usage is eroding the variety of human thought and expression.

"AI is standardizing human expression, according to researchers at USC, who say the use of LLMs is wearing away at cognitive diversity."

For investors and operators building products or teams around AI-assisted knowledge work, this raises a long-term question about the differentiated value of human judgment — and whether businesses that rely heavily on AI-generated content or analysis are converging on homogeneous, lower-signal outputs.