Hey, Insider! Want to be featured in next week’s newsletter? Answer our weekly question: How do you know when a startup is ready for venture capital? Share your response here. | |  Karan | |
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Liquidators plan to begin selling venture capital investments that fallen crypto venture firm Three Arrows Capital held in portfolio startups within the next three months, per sources close to The Information. Already, other cryptocurrency investors and venture capital firms have expressed interest in nabbing the stakes. Some startup founders have also expressed interest in clawing back their own shares. More: - Three Arrows has invested in 40 blockchain projects, with the most notable of its investments being Aptos Labs, dYdX, and WorldCoin.
- Electric Capital’s managing partner Avichal Garg said, “Smart [venture capitalists] will hunt down great opportunities from forced sellers.”
- Despite the current volatility in the crypto sector, some investments like Aptos Labs, Mysten Labs, dYdX, and Anchorage still remain attractive to investors.
- Since stakes sold in bankruptcy auctions are likely to be discounted, new investors see this as an opportunity to invest in startups they were unable to previously back.
- Existing investors are also eyeing the auctions as a way to double down on their investments, probably at lower valuations than before.
Zoom out: - Investors are also eyeing portfolio startups held by FTX, which is currently undergoing bankruptcy proceedings.
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Venture capital firm Highland Europe has received €1B ($1.09B) in capital commitments towards its fifth fund. The firm intends to back private software and consumer internet-focused tech startups in the region that have been hit by the economic slowdown. More: - The new fund is 40% larger in size than its predecessor, a €700M ($760.5M) fund that closed in 2020.
- Fund V’s closing brings the total capital raised by the firm to date to €2.75B ($2.99B).
- Highland Europe was spun out from Highland Capital Partners in 2012.
- File transfer platform WeTransfer, analytics startup Contentsquare, food delivery startup Wolt, and meal replacement maker Huel are a few of the notable startups backed by the firm.
- The firm was able to exit its investment in Wolt after it was acquired by Doordash for €7B (~$7.6B) in 2021.
Zoom out: - Venture funding for European startups declined by 16% last year to €91.6B ($99.5B), per Pitchbook.
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After a recent spate of financial irregularities at portfolio firms like Zilingo and GoMechanic, Sequoia Capital India and Southeast Asia have roped in Ernst & Young to perform audits of portfolio companies. In addition to the audits, the firm is tasked with adding governance guardrails in place within portfolio companies. More: - Sequoia Capital India will be diligent about taking board seats at companies and may add senior partners to boards instead of junior members from their team.
- In addition to conducting due diligence at initial rounds, Sequoia Capital India and Southeast Asia are planning on conducting due diligence at every follow-on funding rounds as well.
- Irregularities within its portfolio companies had forced the firm to delay the announcement of its $2.85B funds last year.
Zoom out: - The move comes as EY revealed last week that portfolio company GoMechanic inflated revenue figures ahead of the company’s fundraising round.
- Sequoia is GoMechanic’s largest backer, with a 27% stake in the firm, per Tracxn.
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Internal documents seen by Business Insider revealed that Union Square Ventures (USV) delivered one of its major backers, the University of Texas/Texas A&M Investment Management Company (UTIMCO), a combined 59% IRR return on its investments. UTIMCO invested $130M into the firm over the years and earned back $1.2B. More: - The University of Texas and Texas A&M systems' endowments total $65B, which are managed by UTIMCO.
- UTIMCO's venture investments total $6B.
- The company put $22M into USV's 2004 fund –that backed Twitter, Zynga, and Tumblr– and generated $305M in returns against an IRR of 66%.
- UTIMCO invested $25M in USV's 2012 fund, which generated $592M in returns with an IRR of 53%.
Zoom out: - Meanwhile, UTIMCO's $211M total investment in Sequoia Capital is currently valued at $197M, representing a negative IRR of -6.75% due to its recent markdowns.
- The $6.7M UTIMCO invested in Thrive Capital is now only worth $4.6M, yielding a negative IRR of -34%.
- UTIMCO's $92M investment into Prism Ventures has been marked down to zero, with the firm being able to claw back $71M before the IT and life-sciences venture firm shut down.
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Solar startups globally were able to secure $7B in venture funding in 2022, up 56% from $4.5B in 2021. Despite the rise in venture funding, overall corporate funding — including venture capital, private equity, debt financing, and public market financing — for the sector declined to $24.1B, down by 13% from 2021’s totals of $27.8B, per Mercom Capital Group. More: - 21 solar startups were able to nab over $100M each in 2022.
- The sector witnessed 128 mergers and acquisitions in 2022.
- 84% ($5.9B) of the total $7B VC funding deployed was invested in 62 solar downstream companies.
- Intersect Power’s $750M funding round, Longroad Energy’s $500M fundraise, and Yellow Door Energy’s $400M funding were the three largest venture funding rounds in 2022.
- Public market and debt financing for the sector totaled $5.1B and $12B, respectively.
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Private market securities fintech firm PreIPO has partnered with blockchain-focused venture firm SPiCE VC. A number of investors who would not have otherwise had access to SPiCE VC's funds will be able to participate in Fund II via PreIPO's platform. The firm intends to raise $250M for the new fund. More: - SPiCE VC claims that the fund's predecessor, which closed at $50M in 2017, demonstrated a 50.7% IRR yield after investing in blockchain startups and tokens.
- The new fund will have lower minimum investment requirements through the PreIPO platform than a direct investment in the fund.
- Fund II was initially announced in May 2022.
- The firm was able to exit three investments, namely digital security platform INX Limited, online lottery platform Lottery.com, and crypto exchange Bakkt after the three debuted on public exchanges in 2021.
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I'm Kiani from Inside.com, and last week, we asked our venture capital community, "What are the risks associated with accepting venture capital?" Here's a highlighted response we received: - Craig Isaacs (p/craigi | LinkedIn), Owner of BlueGoo Photography, answered, "Oh so many to choose from! My 3 favorites:
- You get someone who KNOWS EVERYTHING about your market segment, without real experience, just because they think they're the smartest person in the room.
- You get someone who is already involved in too many boards, so they're just pushing everyone in the portfolio to make or break ASAP; they have 20 companies and really only need a couple of winners and don't mind if the rest just disappear. YOU of course only have your one company...
- They get preferred shares, so they are made whole before you get $0.01..."
Join the conversations at Inside.com, and we may shout out your name and business or contact you for more! ⭐️
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Quick Hits: - Employee training is crucial, but building a scalable program for it is complex work. Use this checklist to take yours to the next level.*
- Venture firm Battery Ventures is eyeing opportunities to back software startups in Europe and is currently tracking close to 100 companies in the fleet-management sector in the region.
- Databricks is readying the company for a potential IPO by incorporating financial reporting and other compliance tools, per CIO Naveen Zutshi.
- Fifth Wall opened up its decarbonization venture fund to back physical infrastructure assets. The firm had last raised a $740M fund last year and intends to raise a dedicated fund for infrastructure investments.
- Japan is considering removing a restriction that would allow local venture capital firms to increase their investments in foreign startups. Currently, Japanese venture firms can invest less than 50% of their capital in foreign companies.
- Venture-backed HR startup Deel reported $295M in annual recurring revenue as on Jan. 1. The firm last raised $30M in funding at a $12B valuation last year.
- Revolutionary Talent is the Future of HR. Are you ready to tackle your goals?*
*This is sponsored content.
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 |  | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | | | 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 and 1972 Fords. | |
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