Week of June 10th, 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: Xcimer Energy Leads The Way As Big Rounds Dry Up (Crunchbase, 5 minute read)

Xcimer Energy (Energy): secured a $100 million Series A led by Hedosophia. The company specializes in laser-driven inertial fusion and plans to use the funding to build a prototype laser system, including the "world's largest nonlinear optical pulse compression system"
Pika (Artificial Intelligence): raised an $80 million round led by Spark Capital, valuing the company at $470 million. Pika is among a growing group of startups developing text-to-video AI software
Prolific Machines (Biotech): raised a $55 million Series B. The startup's platform enables commercial customers to produce biological products more efficiently using light, particularly in cellular agriculture and nutritional protein production
Restor3d (3D Technology): secured a $70 million financing. The startup specializes in 3D printed personalized orthopedic implants, utilizing biomaterials, 3D printing technologies, and AI to repair the human body
Osteal Therapeutics ($50M): raised a $50 million Series D. The biotech startup focuses on developing new drug/device therapies for orthopedic infections, utilizing approved drugs for new routes of local, concentrated delivery

In 2024, many Y Combinator startups only want tiny seed rounds — but there’s a catch (Techcrunch, 4 minute read)

The latest Y Combinator accelerator batch features startups seeking relatively small rounds of funding, typically $1.5 million to $2 million, with lower equity stakes compared to traditional seed rounds

Many of these startups have already secured funding from multiple angels, making it challenging for institutional investors to secure double-digit ownership
YC's 7% equity stake further influences startups to seek less dilution
While some outliers secure substantial funding, the overall trend suggests a shift towards smaller rounds, reflecting founders' realism in the current market

Crossing The Series A Chasm (Crunchbase, 5 minute read)

The state of Series A fundraising in 2024 is causing increasing concern among founders and investors alike. The bar for investment has significantly risen, leading to fewer startups meeting the criteria for Series A funding. The root of the problem lies in the significant increase in seed rounds of more than $5 million between 2021 and 2023, creating two categories of startups seeking Series A funding: those with inflated valuations and those with shorter runways

The median step-up in valuation from seed to Series A has notably increased, from $19.5 million in Q1 2022 to $28.7 million in Q1 2024
Series A investors now seek startups with stronger revenue performance, targeting $2 million to $3 million in ARR, compared to $1 million to $2 million in previous years
This trend has resulted in a decline in the percentage of seed startups closing their Series A within two years, dropping from 31.8% in Q1 2020 to just 12% in Q1 2022

INDUSTRY

13% of VC firms aren’t planning to raise another fund (Pitchbook, 4 minute read)

According to Pitchbook’s semiannual VC Tech Survey, 13% of venture GPs don’t plan to raise another fund as the LP pullback spoils fundraising efforts. That’s double the rate in H1 2023 (6%)

Emerging managers, who entered venture during the LP market boom in 2019-2020, face challenges in fundraising amid slow exits
This environment led to a quarter of GP respondents becoming more active in the secondaries market

Silicon Valley in uproar over Californian AI safety bill (Financial Times, 5 minute read)

California is considering legislation that would impose strict safety measures on AI companies, including requiring a "kill switch" for powerful AI models, sparking controversy among tech giants and investors

The proposed bill aims to ensure that AI developers do not create models with hazardous capabilities, such as aiding cyberattacks or developing weapons
Critics fear the bill could hamper innovation, drive AI startups away from California, and impede the development of open-source AI models

VC funding in healthcare has been more resilient than other industries (Carta, 4 minute read)

The 2024 venture capital downturn hasn't impacted all industries equally, with the health sector, including healthtech, biotech, pharma, and medical devices, showing resilience

The health sector's share of all venture capital invested has increased from 21% in 2018 to 32% in 2024
This growth is particularly driven by the biotech/pharma segment, which has doubled its share of total capital invested since 2018
Founders of early-stage healthcare companies have been experiencing less dilution in primary rounds compared to SaaS startups

INDUSTRY WORLDWIDE

US-backed funding rounds in China fall to lowest in a decade (S&P Global, 5 minute read)

In 2023, US venture capital-backed funding rounds for mainland China companies plummeted to their lowest level since 2013, totaling $3.93 billion, a 52% drop from the previous year. The number of deals also fell sharply by 46% to 116

This decline is attributed to escalating US-China trade tensions, US investment restrictions in China's tech sector, and reshoring policies such as the CHIPS Act, which incentivizes investment in the US or NAFTA-aligned countries
Additionally, Chinese government initiatives to support local industries deter US investors

ECONOMIC SNAPSHOT

May 2024 jobs report: 272,000 jobs added, sharply beating expectations (JP Morgan, 4 minute read)

The U.S. labor market showed resilience in May, adding 272,000 jobs, an acceleration from April's gains. However, there were modest downward revisions to previous months' job growth. Industries like health care, government, and leisure/hospitality were key contributors to job gains

Despite solid headline numbers, underlying data suggests a slowing pace of job growth, with the unemployment rate rising to 4%, the highest in over two years
Average hourly earnings rose by 0.4% month-over-month, reflecting strong wage growth, although it's expected to moderate later this year
Inflation remains a concern, with the Consumer Price Index rising by 3.4% year-over-year in April

Nvidia Shares Now Trading At Just $120 After Stock Split In Wake Of Monstrous Run (Forbes, 4 minute read)

Nvidia's share price reached its lowest point since late 2022 following a 10-for-1 stock split based on Friday’s closing share price of $1,210. Despite this, shares opened at around $120 on Monday, but are still within 5% of its intraday (split-adjusted high of $125.59 last week)

The split, prompted by Nvidia's surge in the stock market amid investor interest in AI technology, reflects the company's remarkable growth
The company exploded from a sub-$300 billion market valuation to almost $3 trillion, making Nvidia the third-largest company in the world
Nvidia was among the 10 most expensive S&P 500 components by share price at Friday’s close but is now in line with the S&P median of $118 per share

IMPACT & CLIMATE RESILIENCE

The Portion Of US VC Funding That Went To Female Founders Hit A New Peak In 2023, Thanks To Massive AI Deals (Crunchbase, 4 minute read)

In 2023, U.S. venture funding for startups with at least one female co-founder reached a new peak, with a quarter of all funding—amounting to $34.7 billion—invested in such companies. This increase from 15% in 2022 was largely driven by billion-dollar-plus rounds raised by AI companies with female co-founders, such as OpenAI and Anthropic

While funding amounts to female-only founded companies remained flat at 3%, funding proportions to female/male co-founded companies ranged between 9% and 12% from 2015 to 2022 before jumping in 2023
Although the proportion of funding counts to companies with at least one female founder has consistently ranged from 19% to 24% since 2016, late-stage funding counts show a lower proportion (16%) compared to seed (23%) and early-stage (19%) fundings

Federal appeals court blocks Fearless Fund from issuing grants to only Black women (CNN, 4 minute read)

The U.S. Court of Appeals for the 11th Circuit has blocked the Fearless Fund's grant program, which exclusively supports Black women entrepreneurs, ruling that it likely violates provisions of Title 42 of the US Code, which prohibits racial discrimination in contracts

The court granted a preliminary injunction, halting the fund's grant application process
The lawsuit was filed by anti-affirmative action legal strategist Edward Blum on behalf of the American Alliance for Equal Rights, arguing that excluding non-Black individuals from the grant program constitutes racial discrimination
Blum hailed the ruling as a victory for civil rights laws. Fearless Fund's CEO Arian Simone expressed devastation at the ruling, asserting that it stifles diversity efforts and sends a message against leveling the playing field for underrepresented groups

IPO & EXITS

Texas is coming for Wall Street with a new BlackRock-backed stock exchange (CNN, 3 minute read)

The TXSE Group, a new national stock exchange based in Dallas, is set to challenge the dominance of established exchanges like the New York Stock Exchange and Nasdaq. Backed by heavyweights such as BlackRock and Citadel Securities, it aims to file for registration with the SEC later this year

TXSE Group seeks to capitalize on the economic strength of Texas and the Southeast, catering to the growing demand for alternative trading platforms
The motivation behind the emergence of such exchanges lies in the declining number of public companies in the US
TXSE Group aims to offer stability, predictability, and reduced costs for corporate issuers and investors alike

London is desperate for IPOs. Could Shein end the drought? (CNN, 3 minute read)

Shein, is reportedly considering going public in the United Kingdom, aiming for an IPO that could value it at around £50 billion ($64 billion). While Shein initially eyed a New York listing, political opposition in the US has steered its focus toward London

Reports suggest Shein might seek to raise over £1 billion ($1.3 billion) from the sale of new shares
If Shein proceeds with the London listing, it could provide a much-needed boost to the city’s stock exchange, which has seen notable departures in recent years
Ethical concerns about Shein's business practices, including supply chain transparency and environmental impacts, may arise among UK investors

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.

Become part of the our revolution.

Happy reading,

AI8 Ventures’ Research & Investment Team

Have You Heard About the New Texas Stock Exchange?