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| Hey Insiders, Today we are bringing you an analysis of Atomic's new $320M fund and Vice Media's bankruptcy. Scroll down for some quick hits, then let us know if you'd like to see more in future issues! Karan
p/karan-chafekar | |
| 1 | | Miami, Florida-based VC firm Atomic secured $320M in capital commitments from limited partners toward its fourth fund. The current fund is its largest yet to date, eclipsing the $260M preceding fund from 2021. Venture studio Atomic will use the funds to create new startups and back existing portfolio companies. The fund sifts through its ideas to incubate startups and finds co-founders to develop them further. With the new fund, the firm intends to create nearly 60 startups, half of which it expects to reach the market. 90% of the fund's capital is institutional, provided by LPs such as Marc Andreessen and StepStone Group. The firm targets 3x to 5x return on early-stage investments. 
Atomic's fundraising comes as LPs are slowing their commitments to new VC funds. U.S.-based VC firms raised 99 new funds worth $11.7B in Q1 2023, per Pitchbook. At the current pace, fundraising at this year's end may fall short of 2018's totals and come 73% lower than the record set in 2022. Despite the slowdown, two funds closed above $1B in Q1, namely B Capital Group's $2.1B fund and Bain Capital Ventures' $1.9B fund. 
Last year, VCs slowed their fund deployment into startups. However, they were able to raise funds worth $170.8B in 2022, surpassing the previous year's total of $158.5B. As a result, U.S.-based VC firms had $289B in dry powder available at the end of last year. LPs were making commitments to new VC funds until the end of last year. However, most of the new capital was being raked in by experienced fund managers. On the other hand, first-time fund managers found the fundraising environment very challenging. Debut VC funds secured $10.2B in 2022, less than half of the $22.2B secured in the previous year. Pitchbook expects the environment to remain challenging this year for emerging fund managers, who may witness an even steeper drop in funding. S2G Ventures senior managing director Sanjeev Krishnan believes that "A lot of investors would probably prefer the new Sequoia fund to a new emerging fund manager right now." Niche and differentiated funds will be able to attract capital from LPs amidst the tough funding environment. Despite the waning confidence in global growth-stage technology firms, Southeast Asian VC firm East Ventures raised $250M for its 12th fund today. The firm intends to double down on growth portfolio companies. Last week, Mayfield Fund raised two funds worth $955M, of which $580M is earmarked for early-stage fund Mayfield XVII with the remaining $375M for Mayfield Select Fund II to back Series B and beyond startups. The new funds are 27% larger than the previous funds that raised $750M from LPs. The firm intends to stick to its previous investment philosophy of backing 30 startups per fund, most in the early stages. Mayfield's Navin Chaddha believes that this consistency helped the firm raise capital from LPs while other fund managers struggled to close. |     | |
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| 2 | | Yesterday, Vice Media filed for Chapter 11 bankruptcy in the U.S. A consortium of previous lenders led by Fortress Investment Group with additional backing from Soros Fund Management and Monroe Capital agreed to purchase the company's assets for $225M unless it can find another bidder willing to pay a higher price. The consortium invested $20M in Vice to help it with bankruptcy dealings and find a buyer. The price offered for Vice's assets represents a significant markdown from its peak valuation of $5.7B in 2017. The firm expects the Chapter 11 process to conclude over the next two to three months. 
Vice Media joins the list of VC-backed startups that raised over $1B yet declared bankruptcy or shut operations. Vice joins the likes of biotech startup Intarcia, digital video upstart Quibi, blood testing startup Theranos, and most recently, cryptocurrency exchange FTX, all of which flamed out. Sequoia Capital, which invested $214M into FTX, marked down its entire stake to zero after the exchange declared bankruptcy late last year. Intarcia, Quibi, Theranos, and FTX had raised $1.98B, $1.75B, $1.05B, and $1.97B, respectively, from investors. Now the newest addition to the list, Vice Media has raised $1.6B from investors and VCs to date, including 21st Century Fox, A+E Networks, Technology Crossover Ventures, The Walt Disney Company, TPG, and others. Vice Media entered bankruptcy after failing to find a buyer. Earlier this year, CNBC reported that Vice had restarted its sale process at a lower price after it failed to find bidders willing to buy the firm for between $1B and $1.5B. Vice lowered the asking price to below $1B, but the move failed to entice buyers. The firm considered selling itself in parts, per Axios. 
Vice Media's valuation peaked at $5.7B in 2017 when it raised $450M from private equity firm TPG. Per Axios, the firm mostly raised debt funding since then at lower valuations. Troubles at the firm started when several sexual harassment allegations emerged in December 2017. After the news surfaced, A+E Networks roped in Nancy Dubuc to succeed then-CEO Shane Smith. Dubuc laid off 10% of staff months after joining in a bid to restructure the firm. Vice acquired Refinery29 for $400M in 2019 to grow its revenues. It attempted to go public via a SPAC merger with 7GC & Co Holdings at a $3B valuation in 2021 before the market cooldown disrupted its plans. The firm struggled to match up its revenues against its lofty valuations. Per WSJ, the firm reported $600M in revenue in 2022, missing its revenue target by over $100M. The firm's revenue reported in 2018 was between $600M and $650M. Earlier this year, Vice secured $30M in debt financing from existing backer Fortress Investment Group to pay overdue bills. Vice is not the only media company to struggle. Peers Vox Media and BuzzFeed are in similar boats. Earlier this year, Vox raised $100M at a $500M valuation, half its previous valuation. BuzzFeed earned $400M in revenue last year, yet it has a market cap of less than $100M. | | | |
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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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