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| Hey Insiders, Today we are bringing you an analysis of why aggregate European unicorn valuations dropped in Q1 2023 and how biotech startups, such as ElevateBio, are defying the venture funding slump. Scroll down for some quick hits, then let us know if you'd like to see more in future issues! Karan
p/karan-chafekar | |
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Aggregate post-valuations of European unicorn startups dropped 0.3% YoY from €472.2B ($508.9M) to €471.2B ($507.3B). This is the first time in the last five years that the cumulative valuations of European unicorns have stagnated. In each of the five previous years, the aggregate value increased by at least 50%. In some years, the aggregate value increased by 100%. The present market conditions have created a reversal in the valuation trend, resulting in a plateau in the unicorn count and the loss of unicorn status for a few startups. The unicorn count has remained flat at 128 from last year to this, the first time the count has stagnated since 2012. The funding slump has severely impacted startups that had high cash burn rates. In Q1 2023, unicorn startups raised €1B ($1.08B) in VC funding across 10 deals. Deal value and deal count declined by 87.5% YoY and 65.5% YoY, respectively. 
Median pre-money valuations at the seed stage remained flat at €5.5M ($5.9M) in Q1 2023, with median deal sizes increasing from €1.5M ($1.6M) to €1.7M ($1.8M). Median early-stage valuations continued to slide for the third consecutive quarter, down 15.4% QoQ to $5.5M ($5.9M). The reversal in valuations has largely impacted late-stage and venture-growth startups. Median values of venture growth startups declined 40.9% QoQ to €25.3M ($27.3M) in Q1. However, median late-stage valuations showed a 26.9% QoQ increase due to the presence of an outlier in the dataset, namely German solar startup Enpal which raised €215M ($234M) at a €2.2B ($2.3B) valuation during the quarter. Without the presence of the outlier, Pitchbook expected the valuations to remain flat from the preceding quarter. Swedish buy-now-pay-later startup Klarna's valuation slumped to $6.7B, down 85.3% from its peak value of $46B. The startup reported nearly $1B (10.4B kroner) in full-year operating losses in 2022. In April 2023, Schroders Capital Global Trust marked down the value of its stake in European fintech startup Revolut by 46%. Median pre-money valuations of venture growth fintech startups dropped 59.7% QoQ in Q1 2023. However, valuations of early-stage fintechs increased to €22.1M ($23.8M) in the same period, 60% more than 2022's values of $13.8M ($14.8M). Pre-money valuations of late-stage energy startups dropped 68.9% compared to 2022. However, median seed and early-stage deal values increased 96.0% and 70.9%, respectively, over their 2022 values. The percentage of down rounds increased in Q1 2023, representing 18.8% of all deals. Down rounds were at their lowest in the decade in 2022, representing 15.3% of all deals that concluded in the year. Down rounds are expected to increase as more startups run short of cash runways and venture into the market for fresh capital. |     | |
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| 2 | | Waltham, Massachusetts-based biotech startup ElevateBio raised $401M through its Series D funding round led by Matrix Capital Management's new fund AyurMaya Capital Management Fund. The round is the largest private biotech fundraising so far this year, displacing ReNAgade Therapeutics — which raised a $300M Series A round yesterday — from the top spot. The venture funding slowdown that started in mid-2022 has not impacted healthcare startups as severely as other sectors. Global healthcare sector startups nabbed $5.7B in VC funding in April alone, taking in the highest share of the total financing deployed. The second highest share of funding went to AI startups which raked in $2.8B funding in the month. The funding pace for healthcare startups slowed slightly in Q1 due to macroeconomic uncertainty and market headwinds. Investors were inclined toward making more early-stage bets than late-stage investments. Late-stage investments were reserved for promising portfolio startups through extension and bridge funding rounds. Silicon Valley Bank (SVB) anticipates that non-traditional investors will likely increase their investments in the healthcare sector. However, valuations will probably be lowered, resulting in many flat and down rounds. Funding is expected to remain consistent over the next few quarters due to heightened investor interest in the sector and the availability of dry powder. 
Despite the funding pullback, U.S.-based VC firms raised $21.8B worth of healthcare-focused funds in 2022, the second-highest yearly total behind the record-setting total of $28.3B from 2021. In Q1 2023, VC raised funds worth $6.8B to deploy into healthcare startups. Twenty-seven new healthcare-focused funds closed in Q1 2023, demonstrating a strong investor interest in the sector. Per SVB, roughly $55B in dry powder is available with investors to back healthcare startups. ElevateBio's current funding round brings its total capital raised to date to $1.25B. ElevateBio's CEO David Hallal claims that "the majority of our capital is still on our balance sheet," giving them "degrees of freedom" to grow. The large reserves of capital give the company the luxury of going public at its will rather than out of necessity. ElevateBio last raised a $525M Series C round in 2021. At the time, the round was the second-largest private biotech funding of the year. ElevateBio intends to use the proceeds from the current funding round to advance its tech platforms and expand its geographic reach. Additionally, funds will enable the firm to grow its end-to-end genetic medicine manufacturing platform BaseCamp and gene editing platform Life Edit. New investors Woodline, Novo Nordisk, and Lee Family Office participated in the funding round, joined by existing backers Emerson Collective, SoftBank Vision Fund 2, Fidelity Management & Research, F2 Ventures, Redmile Group, EDBI, Samsara BioCapital, and others. ElevateBio also signed a partnership with Novo Nordisk that could help the firm potentially make $2B, contingent upon achieving certain milestones. Novo Nordisk will provide an undisclosed upfront cash payment to Elevate Bio's integrated subsidiary Life Edit Therapeutics, with additional payments of between $250M to $335M for each milestone for seven programs under the collaboration. ElevateBio added over 15 new biopharma in the last year, including Novo Nordisk. | | | |
| 3 | | Today's Funding: - Anthropic, the startup behind the AI chatbot Claude, raised $450M in fresh funding led by Spark Capital, bringing its total funds raised to date to over $1B. Google, Salesforce Ventures, Sound Ventures, and Zoom Ventures participated in the funding round.
- Turkish AI firm Insider secured $105M in fresh funding at a $2B valuation. Qatar Investment Authority and Esas Private Equity provided the funding.
- Goldman Sachs invested $72.1M (10B yen) into Japanese ride-hailing startup Go. The funding round helped the firm cement its unicorn status with a $1B valuation.
- Sunnyvale, California-based humanoid robot startup Figure nabbed $70M capital led by Parkway Venture Capital with additional support from Adcock, Aliya Capital, Bold Ventures, Tamarack Global, and FJ Labs.
- Bank of America led a $35M Series D round into enterprise productivity startup OpenFin. The funding round saw participation from Pivot Investment Partners, ING Ventures, CME Ventures, and others.
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- S&P Global Ratings downgraded SoftBank's ratings from BB+ to BB, classifying its stock as speculative grade, citing high exposure to unlisted company shares. SoftBank said, "It is extremely regrettable that our financial soundness was not properly assessed, and we will continue our dialogue with S&P."
- French insurance firm Axa's VC division, Axa Venture Partners, launched a new €1.5B ($1.6B) late-stage fund to invest in North American and European tech startups. The parent firm anchored the new fund with a €750M ($809.5M) commitment.
- Ali Partovi's VC firm Neo secured $235M in capital commitments toward two new funds. $180M of the capital is earmarked for its seed fund and companies emerging from its accelerator, with the remaining $55M for late-stage investments.
- Moonfire raised $115M in capital toward its second fund that aims to back AI, web3, AR/VR, health, work, finance, and gaming startups.
- Healthcare firm Wellstar launched a $100M fund under its Catalyst by Wellstar initiative to "shape the future of healthcare."
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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