Week of May 13th, 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: Wiz Lands A Billion (Crunchbase, 5 minute read)

Wiz (cybersecurity): a cloud security startup, secured $1 billion in funding at a $12 billion valuation. Co-led by Andreessen Horowitz, Lightspeed Venture Partners, and Thrive Capital, this round marks one of the largest cybersecurity investments this year
Zenas BioPharma (biotech): raised $200 million in a Series C round led by Delos Capital, New Enterprise Associates, Norwest Venture Partners, and SR One
Bluejay Therapeutics (biotech): located in San Mateo, California, secured $182 million in a Series C, the startup plans to advance its treatments for chronic hepatitis D and hepatitis B with the new funding
Zippy Shell (logistics): received a significant $180 million investment from The Carlyle Group, along with a new debt facility led by JP Morgan Chase
Attovia Therapeutics (biotech): closed a $105 million Series B round led by Goldman Sachs Alternatives. Specializing in biotherapeutics for immune-mediated diseases, Attovia raised this round just 11 months after its $60 million Series A

Venture fundraising may not recover until end of the decade (Pitchbook, 4 minute read)

VC firms experienced rapid growth in assets under management from $2.4 trillion to $3.8 trillion between 2021 and 2022. However, fundraising is not expected to return to recent highs until after 2028, with VC firms projected to raise less than $200 billion in 2024, a 48% decline from 2021 levels

This slower growth in fundraising, forecasted at 2.9% annually through 2028, compared to other private capital strategies, could potentially stagnate VC AUM over the next five years if valuations do not recover
Despite some successful tech listings, the exit environment for startups remains challenging

US VC Valuations Report (Pitchbook, 45 minute read)

The overall top-line valuations for companies across all stages have increased QoQ. However, median valuations for early-stage and late-stage companies in Q1 were either flat or down, and the growth between rounds has remained lower than expected

In Q1, roughly 22% of deal count and 34% of deal value in the US venture market went to AI companies, their median late-stage valuation is $40 million higher than other sectors
Exit step-ups remain low, with a large disconnect between public and private valuations. Recent IPOs, like Reddit and Astera have seen significant drops in valuation
Secondary data shows that shares were trading at median and average discounts of 37% and 28%, respectively, showing the challenge of realizing sturdy returns

Former Unicorns Are Bouncing Back From Bankruptcy (Crunchbase, 5 minute read)

Bankruptcy doesn't always mean the end for companies, some emerge stronger. Several famous unicorns, like WeWork, IronNet, Nu Ride (formerly Lordstown Motors), Starry, and Rockley Photonics, are going through or have emerged from bankruptcy

WeWork, once valued at $47 billion, expects to exit Chapter 11 soon after negotiating with creditors to eliminate $4 billion in debt and secure up to $450 million in new funding
Other companies like IronNet have also navigated bankruptcy to restructure their finances and refocus their business models
While these companies may not benefit their initial investors, these companies have a chance to rebuild and potentially succeed in their respective industries

Deal-Making Involving VC-Backed Startups Picks Up Slightly, But Still Slow (Crunchbase, 6 minute read)

The venture capital and M&A sectors are cautiously optimistic about a return to robust deal-making in 2024 after a sluggish 2023. Despite some signs of improvement, Q1 saw only a modest uptick of 20% with 413 completed deals compared to the previous quarter, still falling short of pre-2023 levels

Regulatory hurdles, particularly in the antitrust realm, continue to pose challenges and cause delays in deal closures
There are bright spots, such as the potential rejuvenation of the IPO market and the readiness of cash-rich buyers, including strategic companies and private equity firms, to pursue acquisitions
The increase in deal activity in Q1 may signal the beginning of a more active period for M&A and venture capital investments

INDUSTRY

The SF Bay Area Has Become The Undisputed Leader In AI Tech And Funding Dollars (Crunchbase, 5 minute read)

In 2023, more than half of all global venture funding for AI went to Bay Area companies, indicating a strong cluster of talent in the region, companies in the region raised over $27 billion in 2023, up from $14 billion in 2022

Bay Area companies led in global rounds in the AI sector, accounting for 17% of global rounds in 2023, up from 13% in 2022
Leading AI companies like OpenAI, Anthropic, and Inflection AI have raised significant capital and established major real estate footprints in San Francisco

America is in the midst of an extraordinary startup boom (The Economist, 7 minute read)

In America, startups have formed a smaller and smaller portion of the business landscape. Nonetheless, an array of data indicates that Americans are rediscovering their go-getting spirit, fueled by the pandemic, when millions lost their jobs and more shifted to remote work, giving them more freedom to venture

Last year applications to form businesses reached 5.5 million, with a monthly average 80% higher than during the decade before covid
In 2020 and 2021 many startups catered to the working-from-home revolution (online retailers, small trucking firms, landscapers). Since mid-2022, however, the baton has been passed to technology firms
In 2019 just 5% of business-owning families were black and 4% Hispanic. By 2022 their shares had risen to 8% and 7%, respectively

INDUSTRY WORLDWIDE

Global VC Funding Isn’t Slowing, But It’s Not Growing Either, April Numbers Show (Crunchbase, 4 minute read)

Global venture capital funding in April 2024 remained steady at just over $22 billion, showing a slight increase from the previous year. Despite the surge in AI technology adoption among startups, venture funding growth has slowed down

Seed-stage companies received about $2.4 billion, early-stage companies secured $9 billion, and late-stage companies raised $10.7 billion
The emergence of generative AI has spurred the creation of new startups, but larger software companies are adapting quickly to the new technology landscape
Overall, the venture capital industry is in a phase of adjustment, with valuations stabilizing and a focus on exploring new AI applications

Mapped: The Number of AI Startups By Country (Visual Capitalist, 5 minute read)

The visualization highlights the top 15 countries with the most AI startup activity from 2013 to 2023. Overall, the data underscores the dominance of the U.S. in AI innovation and investment, here are the key points:

The United States leads with 5,509 newly funded AI startups, followed by China (1,446) and the United Kingdom (727)
The U.S. significantly outpaces other countries in private AI investment, totaling $335 billion from 2013 to 2023
In 2023, private investment in the U.S. increased by 22%, while it decreased in China (-44%) and the UK (-14.1%)

ECONOMIC SNAPSHOT

Pick Up in NY Fed Survey (Bloomberg, 4 minute read)

According to a survey by the Federal Reserve Bank of New York, consumers anticipate prices to rise at an annual rate of 3.3%, the highest reading since November, while home price growth also saw a rapid increase, the fastest since July 2022

This data aligns with recent reports indicating persistent inflation and soaring home prices
Despite this, many Fed officials want more evidence of sustainable inflation before considering interest rate cuts
Confidence in finding a new job decreased, impacting household finances, with more consumers expecting to miss debt payments, reaching the highest level since the pandemic's onset

What Frustrates Americans About the Tax System (Visual Capitalist, 5 minute read)

Pew Research's on Americans' frustrations with the tax system, based on a survey of over 5,000 American adults found that...

Around six in ten Americans feel that both corporations and wealthy individuals do not pay their fair share in federal taxes
Complexity of the tax system is another major source of frustration, with over half of respondents expressing frustration
The tax system's structure, particularly its treatment of capital income versus wage income, contributes to disparities in tax burdens between different income groups

IMPACT & CLIMATE RESILIENCE

VC Funding May Be Down, But Here’s How Impact-Focused Startups Can Score Big (Crunchbase, 4 minute read)

In the current climate of reduced global startup funding, sustainable startups are uniquely positioned to attract investors by addressing pressing societal and environmental issues

To stand out, founders must articulate a clear value proposition that demonstrates the financial viability and positive impact of their ventures
In 2024, renewable energy, electric and autonomous vehicles, and climate tech startups are poised for significant growth
The increasing consumer preference for eco-friendly products and growing awareness of environmental issues drive demand in these sectors

IPO & EXITS

Who Needs an IPO? Why Startups Are Offloading Stocks on the Secondary Market (Inc, 5 minute read)

Startups have been hesitant to pursue IPOs due to high interest rates and geopolitical tensions, but they are turning to secondary markets to offload shares. This trend reflects a shift away from the IPO market, which has failed to offer expected returns

Canva and Figma, both in the digital design space, have recently sold shares in secondary sales, with large investors like Goldman Sachs involved
LPs are seeking alternative ways to recoup investments, even at a discount and mature startups facing expiring equity shares may sell to investment banks as a retention strategy for employees
There are regulatory limits to how much you can invest in these types of funds. In 2022, the SEC issued guidance on accredited vs. non-accredited investors: If you have an annual income of $150,000 you can only invest $7,500 in these types of schemes on an annual basis

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

The startup boom!