Week of May 27th, 2024

Welcome to AI8’s weekly newsletter, your ultimate source for curated insights and updates from the dynamic world of venture capital!

We’ve scoured the vast landscape of the web to bring you a comprehensive roundup of the industry’s top news articles, all in one convenient place. We keep you ahead of the game and in the know about all things related to the vibrant world of investments

STARTUPS

ROUNDS AND UNICORNS

The Week’s Biggest Funding Rounds: Scale AI’s Massive $1B Deal Leads Slower Week (Crunchbase, 5 minute read)

Scale AI (AI): the company specializes in creating large language models and fine-tuning data sets. They raised $1 billion in a round led by Accel, valuing the data labeling and evaluation startup at $13.8 billion
AltruBio (biotech): secured $225 million in a Series B round led by BVF Partners. The San Francisco-based biotech startup is developing therapeutics for ulcerative colitis and other immunological diseases
Farcaster (blockchain): raised $150 million in a round led by Paradigm. This Web3 social media platform aims to grow its user base and add developer tools
Suno (AI): raised $125 million in a round led by Lightspeed Venture Partners, Nat Friedman, Daniel Gross, Matrix, and Founder Collective. The Cambridge-ba
Progentos Therapeutics (biotech): Closed a $65 million Series A led by Forbion Capital Partners. The biotech company is focused on regenerating myelin and restoring function for multiple sclerosis patients

Lack of exits, lower VC valuations are driving a late-stage lull (Carta, 4 minute read)

In Q1, companies on Carta completed just 23 Series D rounds and 16 rounds at Series E or later, making it the second-lowest quarterly total since 2019, only ahead of Q1 2023. Late-stage deal activity hinted at a possible recovery in mid-2023, but the slump has continued:

The median size of Series D rounds fell from $49 million in Q4 2023 to $22 million in Q1 2024, while Series E+ rounds dropped from $59 million to $45 million
The median valuation for Series D rounds plummeted from $1.07 billion in Q3’21 to $212.1 million in Q1’24, and Series E+ valuations have seen some recovery, but remain well below their recent highs

INDUSTRY

Health And Biotech Startups Now Get The Majority Of US Series A Funding (Crunchbase, 5 minute read)

So far in 2024, biotech and health companies have pulled in around $5.6 billion across 110 Series A rounds, accounting for 53% of all funding at the Series A stage

Despite not increasing their share of the total number of rounds, six of the ten biggest rounds in 2024 went to biotech firms
38 venture deals of $100 million or more this year were in these industries, the highest among all sectors
In contrast, the tech sector is seeing a reduced share of Series A funding, with much of the remaining capital going to generative AI startups

The State Of Saas: After A Positive Start To 2024, Founders Can Find Success In A Reset Market (Crunchabase, 7 minute read)

In 2023, SaaS businesses grew, but at a slower rate compared to the pandemic years, facing challenges like lower revenue growth and reduced enterprise software spending. However, there are signs of recovery:

B2C software saw a resurgence with a 6.3% CAGR in Q1, double the growth in Q4 2023, driven by increased new sales and a significant rise in subscription upgrades
New sales for B2B SaaS companies improved by 20% from December 2023. B2B churn rates fell to an 18-month low, improving by 14% since December

Crypto framework passes House with strong bipartisan backing (Carta, 7 minute read)

The House has passed the Financial Innovation and Technology for the 21st Century (FIT21) Act, a bill that designates regulatory authority between the SEC and the Commodity Futures Trading Commission (CFTC), with the latter overseeing digital commodities on decentralized blockchains

The bill also empowers the CFTC to regulate spot markets and establish rules for crypto intermediaries and fundraising through digital asset sales
There’s also bipartisan interest in regulating digital assets and enhances the prospects for future legislative action, including a potential stablecoin framework

The risks of letting your LPs ride shotgun (Pitchbook, 5 minute read)

Institutional investors, including large public pension plans, are increasingly interested in venture capital exposure, particularly if co-investing rights are included

Co-investing allows LPs to invest alongside GPs directly into specific companies or technologies through sidecar vehicles, which can enhance portfolio performance more than marginal fee savings could
Emerging venture managers often offer co-investing rights without fees or carried interest to attract LPs. However, this trend creates challenges for GPs, especially if LPs prioritize direct investments over fund commitments, potentially misaligning incentives and limiting GPs' flexibility
Experts advise caution as LPs’ interest in co-investments might indicate a lack of confidence in the manager's overall strategy, focusing instead on accessing lucrative deal flow

INDUSTRY WORLDWIDE

How venture capital is investing in AI in the top five global economies — and shaping the AI ecosystem (World Economic Forum, 7 minute read)

The world's top five economies — the US, China, Japan, India, and Germany — are each developing unique AI ecosystems, influenced by distinct economic factors, national priorities, and future visions

In the US, a market-driven approach has led to $290 billion in AI investments over the past five years, primarily in autonomous vehicles, healthcare, and IT infrastructure
China, with its AI market projected to exceed $61 billion by 2025, has invested $120 billion, focusing on robotics, autonomous vehicles, and IT hardware under strategic plans like "Made in China 2025"
Globally, the AI landscape is shaped by trends such as data privacy, the need for AI talent, and ethical considerations to ensure responsible AI development

Ranked: The Top Startup Cities Around the World (Visual Capitalist, 5 minute read)

The global startup ecosystem is thriving, with cities like San Francisco, New York, Beijing, and Shanghai leading the pack. Overall, these cities reflect the richly connected networks of founders, venture capital firms, and tech talent driving global innovation

San Francisco dominates with $427.6 billion in capital raised over six years, hosting numerous tech giants and startups
New York City follows closely, raising $179.9 billion during the same period, with notable startups like Gemini and Hugging Face
Beijing, home to ByteDance, the parent company of TikTok, stands out as the top hub outside America with $161.2 billion raised

ECONOMIC SNAPSHOT

Visualizing America’s Average Retirement Savings, by Age (Visual Capitalist, 4 minute read)

The median retirement savings for Americans is a concerning $87,000, falling far short of what is considered necessary for a comfortable retirement, with the ideal savings target rising to $1.46 million

With older generations potentially living on just $10,000 annually in retirement, reliance on Social Security benefits is expected to increase, with projected public assistance costs reaching $1.4 trillion by 2040
Only 58% of Americans aged 55 to 64 have retirement accounts

IMPACT & CLIMATE RESILIENCE

Women-led funds hit hard by fundraising slowdown (Venture Capital Journal, 4 minute read)

Women-led funds started 2024 fundraising just $15.03 billion, a 40% decrease from Q4 2023. Up to May 2024, 40 women-led funds raised a combined $700 million

The low fundraising figure is a far cry from the $3.4 billion raised by these funds in 2023 and $3.25 billion in 2022, if the trend continues, women-led funds may raise just $2 billion this year
Just two funds accounted for nearly half of the total amount raised: Seven Seven Six ($187 million) and Renegade Partners ($128 million)

4 Years Since George Floyd's Murder, Which Companies Did More to Diversify Their Workforce? (Inc, 4 minute read)

Following George Floyd's tragic murder in 2020, Corporate America pledged to address systemic racism and support diversity, equity, and inclusion (DEI) goals. Windō, a London-based platform tracking sustainability data, investigated which companies fulfilled their promises:

Among over 500 global firms from Fortune 100 and London's FTSE 100, only 18, including Google, Microsoft, and BlackRock, demonstrated tangible progress in increasing black representation in their workforce
Despite the challenging political climate, nine companies, such as Cisco and Nike, publicly announced recent DEI targets, defying potential legal risks

IPO & EXITS

From Plaid to Figma, here are the startups that are likely — or definitely — not having IPOs this year (Techcrunch, 5 minute read)

Expectations for a robust IPO pipeline in 2024 have dimmed as we approach mid-year. Although the year saw some notable IPOs, many companies have signaled they won't go public this year:

Plaid: CEO Zach Perret stated the fintech company has no plans to IPO in 2024. Plaid's last valuation was $13.4 billion in 2021
Figma: Conducted a tender offer for shares, suggesting an IPO is not imminent
Stripe: Held a secondary sale valuing the company at $65 billion, likely aiming to build up its valuation before an IPO
Databricks: Raised $500 million last fall, indicating it may not IPO until market conditions improve, potentially in 2025
Canva: Co-founder Cliff Obrecht mentioned an IPO is at least 12 months away, possibly in 2026, but confirmed it would be in the U.S.

AI8 VENTURES HIGHLIGHT

AlphaInsights: Venture Capital Report 2023

Alpha Impact 8 Ventures is thrilled to share our latest insights into the dynamic world of investments with our 2023 Venture Capital Report, here’s an updated version with 2024 commentary that dives into the ever-evolving landscape of financial markets.

Just a few months ago, Michael Burry, the legendary fund manager who famously profited from shorting the US housing market in 2008, bet more than $1.6 billion on a Wall Street crash by shorting the S&P 500 and Nasdaq-100. Warren Buffett’s money pile reached record highs of $157 billion as Berkshire Hathaway disposed of a net $33 billion of stocks over the past three quarters. Is there something Buffett and Burry know that the rest of us don’t?

Read Full Report

Alpha Impact 8 Ventures is disrupting the industry, generating wealth, creating technology, providing access, leveling the play field, reducing systemic barriers, and building a resilient world.

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Happy reading,

AI8 Ventures’ Research & Investment Team

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