Week of May 20th, 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: Uniquity Bio And Vercel Lead Another Huge Week (Crunchbase, 5 minute read)

Uniquity Bio (biotech): raised $300 million in funding led by Blackstone Life Sciences. The company focuses on clinical-stage drug development in immunology and inflammation
Vercel (developer platform): the company secured $250 million in a Series E funding round led by Accel, valuing the company at $3.25 billion. The company simplifies website migration to cloud infrastructure and counts
Sigma (analytics): raised $200 million in a Series D round co-led by Spark Capital and Avenir Growth Capital, reaching a valuation of $1.5 billion
Restaurant365 (accounting): provider of enterprise management software for restaurants, garnered $175 million in funding led by Iconiq Growth
The Bot Company (robotics): secured $150 million in seed funding from investors like Quiet Capital and Stripe's Patrick and John Collison. The startup aims to develop robots to assist with household chores

The 49-Year Unicorn Backlog (Crunchbase, 4 minute read)

The sluggish pace of IPOs and acquisitions in the US means it could take over 49 years for every American unicorn to achieve an exit. Over the past year, only 15 private, venture-backed companies valued at $1 billion or more have either gone public or been acquired

With 741 unicorns still in existence, maintaining this exit rate would result in a 49-year backlog
While historical trends suggest that exit activity may pick up, even the peak year of 2021 saw just 86 unicorn exits, far fewer than needed to clear the backlog
While IPOs have seen some success recently, acquisitions have not delivered many big unicorn exits in the past year

INDUSTRY

Crypto Report (Pitchbook, 15 minute read)

In Q1 2024, crypto fundraising surged as startups raised $2.4 billion across 518 deals, marking a significant increase of 40.3% in invested capital and 44.7% in deal volume compared to the previous quarter

Infrastructure startups dominated funding, with notable rounds secured by EigenLayer ($100.0 million Series B) and Zama ($73.0 million Series A)
Valuations across all stages increased compared to full-year 2023, with pre-seed/seed stage reaching a median pre-money valuation of $21.8 million, early stage at $72.0 million, and late stage at $51.1 million
Deal sizes also reflected valuation increases, with median figures of $2.7 million for pre-seed/seed stage, $5.0 million for early stage, and $5.8 million for late stage, compared to full-year 2023 figures

Hydrogen Energy Is Getting A Heavy Infusion Of VC Funding (Crunchbase, 4 minute read)

Startups focused on low-emission hydrogen technology are experiencing a surge in funding, with over $1 billion raised in the past four months alone, surpassing last year's total

Significant investments include Hysata's $110 million Series B and Koloma's $246 million Series B, among others
Overall, hydrogen energy startups have raised $3.66 billion in equity funding, with notable companies like Electric Hydrogen, HysetCo, Tree Energy Solutions, and ZeroAvia securing substantial investments

Startups shutting down (Peter Walker, 3 minute read)

In 2023, 543 startups using Carta's platform shut down, surpassing the 467 closures from the previous year. Notably, about half of the shutdowns occurred in companies that hadn't raised any venture capital, while the other half had at least one priced round in their history

Among those that had raised VC funding, 90% were Seed or Series A startups
34 startups that had raised a Series B or later also shut down and 87 startups that had raised at least $10 million closed, nearly double the total from the previous year
Overall, 2023 appears to be the most difficult year for startups in at least a decade: while the fundraising market may improve in the coming quarters, shutdowns are expected to continue at an elevated pace for the next 2-3 quarters

Eye On AI: Huge AI Valuation Jumps Are Here Again (Crunchbase, 5 minute read)

Valuations in the AI startup space are soaring once again, with recent funding rounds highlighting significant increases in company worth. Despite previous downturns, investors are heavily funding AI, demonstrating ongoing confidence in its potential

CoreWeave, an AI cloud infrastructure startup, secured a $1.1 billion round led by Coatue, valuing the company at $19 billion—almost three times its valuation from five months prior
These rapid valuation jumps raise questions about the lessons learned from past investment mistakes: when a startup can see a 10x jump in valuation in a year, or a 3x pop in about five months, it may make some quickly grab a calendar to see if this is 2020 or 2021

INDUSTRY WORLDWIDE

China consumption slows as retail sales and investment data disappoint (CNBC, 4 minute read)

China's recent economic data presents a mixed picture, with slower growth in retail sales but robust industrial activity. Retail sales increased by 2.3% in April, below expectations, while industrial production rose by 6.7%, surpassing forecasts. However, fixed asset investment and real estate investment showed weaker growth

Despite concerns about future income and caution in spending among consumers, improving employment and services consumption suggest potential for retail sales growth
China initiated a program to issue long-term bonds for strategic projects, expected to impact the economy in the coming years
China's GDP grew by 5.3% in Q1 compared to the previous year, surpassing expectations for a 4.6% increase

Comparing New and Current U.S. Tariffs on Chinese Imports (Visual Capitalist, 5 minute read)

The U.S. has announced new tariffs on Chinese imports totaling over $18 billion, aimed at countering what President Biden calls "China's unfair trade practices." The tariffs target specific sectors, including electric vehicles (EVs), semiconductors, solar cells, and medical-related products like syringes and needles

Tariffs on Chinese EVs have been raised to 100%, while critical minerals essential for battery and semiconductor manufacturing now face new tariffs
These actions fall under Section 301, a provision allowing the U.S. to address unfair trade practices
Section 301 tariffs were first imposed by former President Trump in 2018 and currently apply to over $300 billion worth of Chinese imports

ECONOMIC SNAPSHOT

As bad as you may think the economy is now, it’s nowhere near the 1970s (CNN, 3 minute read)

Many have diagnosed the US economy with stagflation. However, Federal Reserve Chair Jerome Powell dismisses this diagnosis, emphasizing that current conditions do not align with the stagflation of the 1970s. Instead, he suggests a less severe condition: slackflation

Slackflation, a term coined to describe sticky inflation alongside economic slack, denotes a situation where the economy isn't performing optimally, often evidenced by rising unemployment
Despite some signs of concern, such as a slowdown in job gains and an increase in first-time unemployment benefit applications, economists consider recent job gains solid
On the inflation front, while April's Consumer Price Index data showed slight improvement, progress toward the Fed's 2% inflation target may be stalling

Soaring debt and deficits causing worry about threats to the economy and markets (CNBC, 5 minute read)

Government debt in the United States has surged by nearly 50% since the onset of the Covid-19 pandemic, reaching a total of $34.5 trillion. This amount is approximately $11 trillion higher than in March 2020 and represents over 120% of the total U.S. economy

The Congressional Budget Office has projected that debt held by the public ($27.4 trillion) will surpass 116% of GDP over the next decade
Rising bond yields pose immediate concerns, as they could impact equity markets and increase interest costs for the government
Policymakers may need to address fiscal imbalances through measures such as tax increases or spending cuts

Meme Stocks Frenzy Reignites Debate Over Market Integrity (Forbes, 5 minute read)

Meme stocks, such as GameStop and AMC Entertainment, are experiencing a resurgence akin to their 2021 meteoric rise. Large volumes of deep out-of-the-money GameStop options were purchased on May 10, with strike prices that would expire worthless on May 17 if the stock price did not rise by approximately 15% and 72%, respectively

Driven by online communities and social media, retail traders are rallying behind these stocks, sparking concerns over market manipulation and regulatory oversight
So far in May, GameStop's share prices have risen by 283% and AMC's by 137%
Suspicious trading activity, resembling pump-and-dump schemes, has attracted scrutiny from regulators like the SEC cautioning against the inherent risks of meme stocks

IMPACT & CLIMATE RESILIENCE

Want To Ensure DEI Works For Your Company? Have Some Standards (Forbes, 6 minute read)

The private sector holds significant potential to drive diversity, equity, and inclusion (DEI) initiatives within American workplaces. Recognizing this, the Corporate Racial Equity Alliance has unveiled a comprehensive framework to guide businesses in maximizing their DEI efforts

Integrated Governance and Leadership Accountability: includes embedding DEI efforts into the company's purpose statement and governance guidelines
Inclusive Workplace Culture: emphasizes creating an environment that fosters inclusion and belonging for all employees, such as adopting and operationalizing anti-bias and anti-racism policies, providing anonymous reporting channels, and codifying cultural norms that promote equity and inclusion

The standards are informed by a CEO Blueprint for Racial Equity and are designed with a focus on addressing the economic insecurities faced by millions of Americans. Known as targeted universalism, this approach identifies barriers faced by marginalized groups and devises solutions that benefit everyone

IPO & EXITS

Shein switches focus to London after New York IPO stalls (Financial Times, 4 minute read)

Concerns about Shein's ties to Beijing have hindered its US IPO plans, prompting the company to explore a London listing as an alternative. Donald Tang, Shein’s executive chair aid that the Singapore-domiciled company had made “progress” on changing the perception that the company is controlled by China, but “not enough” to win over US lawmakers

While Shein has not finalized its decision, a London IPO would be a significant win for the London Stock Exchange, which has been losing listings to US exchanges
Regulatory approval is still pending, both from China and the UK
Shein was valued at $66bn in its last funding round

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

Nothing says 'fair trade' like 100% tariffs