Aaron Harris has a bone to pick with VCs telling founders that there is no funding.

Plus: The Information has a different take on creator economy funding.

Inside.com Part of   Network July 07, 2022

Aaron Harris, the co-founder of Magid & Co. and former partner at Y Combinator, thinks there is a massive contradiction at the heart of the tech downturn. While crossover funds may be justifiably worried about deploying capital and losing LPs, traditional VCs are sitting on mountains of cash that they absolutely must invest. More: It is thus suspect, according to Harris, that the same VCs with more dry powder than ever before are telling founders that there is no funding to be had and that they need to cut the fat in order to survive. The current economic situation is very different than the past three crunches in 2000, 2008, and 2020. Whereas in 2000, the dot-com bubble burst because most tech companies had no business models, today’s public tech companies have serious cash flow and future prospects. In 2008, trust in holdings completely evaporated, and investors did not know what they were holding. The situation is different today, where the uncertainty surrounds inflation and a possible recession, but not underlying duplicity. 2020 was a massive external shock that quickly turned as new conditions created new ways for tech to corner markets. Investors do need to reconsider how they price deals, but there is no reason for them to stop investing, particularly as tougher conditions make the best founders stand out. Indeed, founders who can show strong numbers and have established trust with investors will find themselves able to raise rounds, and the VCs that back them will have good prospects of having picked winners down the road. This hinges on founders being willing to take less cash, and VCs need to overcome the fear trickling down from the public markets.

Sheffield, U.K.-based data center immersion cooling systems manufacturer Iceotope Technologies raised $35.8M (€30M) in fresh capital. The capital came from a syndicate led by Singapore's private equity firm ABC Impact. Electrical connection provider nVent, Energy Efficiency Income Trust, and others also participated. More: Iceotope offers a liquid-based cooling system, which it claims is more energy-efficient than traditional air-based systems. Its selling point is that its technology is both cheaper in the long run and more environmentally friendly for server warehouses. Iceotope asserts that its tech offers a 96% water reduction, up to 40% power reduction, and up to 40% carbon emissions reduction per kW. The sustainability justification was specifically mentioned by Tan Shao Ming, chief investment officer at ABC Impact, as the reason for his firm's investment. The wider lens: The global data center liquid cooling market is expected to grow at a CAGR of 24.8% to $6.4B by 2027, according to a recent study. Particularly the growth in edge computing and other high-performance methods has increased the need for lower-energy cooling solutions.

Contradicting Crunchbase’s report of soaring funding for creator economy startups, The Information sees 26% less capital QoQ for the U.S.-based companies in the segment. The $700M raised in the last three months marks the fourth consecutive quarterly decline in total funding. More: According to The Information’s Creator Economy Database, funding for creator economy startups dropped over 60% from the same period last year in Q2’22. With just over 25 funding rounds for U.S. startups providing support for online influencers, the total raised capital to date grew to more than $6.6B since the database was started in early 2021. A big source of the dip comes from creator economy companies that overlap with the Web3 domain, which is experiencing serious contractions in its own right. They pulled in less than $80M over 10 deals in the second quarter, 12% of its total funding. That figure is down from $332M over 10 deals in Q1, which made up almost 40% of total funding. Only five startups providing services to creators raised $142M in the second quarter, down from the 17 that raised $340M in the first quarter.

Planetarium Labs reeled in $32M in Series A capital for its platform to support community-powered and governed Web3 games. The funding was led by Animoca Brands and saw the support of Krust Universe, WeMade, and Samsung Next. More: Pioneering open-source blockchain games, Planetarium is building a gaming ecosystem based on Libplanet blockchain technology. Libplanet is already the home of Nine Chronicles, an open-source online RPG, and has backing from Animoca. Multiple game studios from the Asia-Pacific region are teaming up with Planetarium Labs to build out multiple community-driven game initiatives this year. The consortium includes Krust Universe, the investment arm of South Korea’s Kakao, game publisher WeMade, and others.

Today's Funding 💸 Biotech/Health CareConnectMD (Cosa Mesa, Calif.), primary care and care coordination services for Medicare patients: $25M led by TT Capital Partners. Blockchain Cauldron (London, U.K.), storytelling-based crypto gaming: $6.6M Seed led by Cherry Ventures, participation from Cassius, Seedcamp, Playfair. DevOps Baserow (Amsterdam, Netherlands), collaborative no-code database platform: $5.1M Seed led by Inkef, participation from firstminute capital, Seedcamp and Frontline, et al. Enterprise APFusion (Champaign, Ill.), B2B marketplace and SaaS for auto salvage companies: $6.5M Seed led by Left Lane Capital, Bedrock Capital, participation from M25. Fintech UnDosTres (Mexico), airtime top-ups, service payments, and entertainment purchase automation: $30M B led by IDC Ventures, participation from Telegraph Hill Capital, AI8 Ventures, Benber. Finli (Los Angeles, Calif.), payment management platform built for service-based SMBs: $6M Seed led by Urban Innovation Fund, participation from Motley Fool Ventures, M13, Alumni Ventures, et al. Crescent  (Lincoln, Neb.), cash management for companies: $5M Pre-Seed from Nathan McCauley, et al. Industrial Celus (Munich, Germany), AI-based circuit board engineering: $25.5M A led by Earlybird Venture Capital, participation from DI Capital, Speedinvest, Plug and Play.

Quick Hits Expense management slowly killing you? Get $100 to see how painless it should be.* Konvoy has launched a third vehicle with $150M to place Pre-Seed/Seed/Series A bets on technology, platforms, and Web3 gaming. Telegraph Hill Partners closed out its fifth fund with $525M for its VC/growth equity investment strategy targeting biotech and life science companies. RefleXion Medical, a therapeutic oncology company developing biology-guided radiotherapy, raised $125M in new debt from Oxford Finance. IBM has bought DataBand for its observability platform for data and machine learning pipelines for an undisclosed sum. Autocheck, a Nigerian e-commerce platform for cars, will acquire CoinAfrique, a classified ad marketplace, for an undisclosed sum to expand into Francophone Africa. *This is a sponsored post.

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Inside VC's writer/curator Stephen currently lives in Berlin and is pursuing a Master's degree in philosophy. He otherwise spends his time trying his hand at recipes from India and Southeast Asia, escaping it all at the kickboxing gym, and offending aural sensibilities with his band. Editor Aaron Crutchfield is based in the high desert of California. Over the last two decades, he has spent time writing and editing at various local newspapers and defense contractors in California. When he's not working, he can often be found looking at the latest memes with his kids or working on his 1962 Ford.

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