Five global startups cemented their unicorn status in April 2023, three of which were AI startups. The rate of new unicorn count by month has been in single digits since October 2022. Due to the challenging economic environment, the valuations of two startups, namely Tonal and Cybereason, dipped below the $1B mark, dropping them from the unicorn list. Considering the prevailing economic conditions, Crunchbase reckons more startups are on the verge of losing their unicorn valuations. More: - Fitness equipment maker Tonal raised a $130M down round last month with a reported valuation between $550M and $600M, nearly a third of its peak valuation of $1.6B from March 2021.
- Endpoint security startup Cybereason raised $100M in funding led by SoftBank at a $350M valuation, 90% lower than its previous valuation of $3.2B.
- Per Crunchbase, nearly 40% of the 1,400+ startups on the unicorn list last raised funding between 2020 and 2021. Many of them will likely be looking to raise new funding soon.
- Startups that joined the unicorn list in April include cloud infrastructure firm CoreWeave, AI-driven data analytics company Quantexa, AI-powered coding assistant Replit, green hydrogen maker Ohmium, and chip materials firm B&C Chemical.
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What the numbers say: Ares Management secured $500M from sponsors for its blank check SPAC entity Ares Acquisition Corp. II. The SPAC is the largest yet since January 2022. So far this year, 13 SPACs have raised $1.5B from sponsors. The figure pales in comparison to the $163B raised by over 600 SPACs when the market was at its peak in 2021. What happened: SPACs investments reverted to pre-pandemic levels in 2022 due to the lackluster performance of SPAC IPOs. The De-SPAC Index — which evaluates the public performance of companies listed through a SPAC merger — slumped by 75% in 2022. In the previous year, the De-SPAC Index had fallen by 45%. Why it matters: Despite the previous poor public performance of SPACs, the new SPAC entities formed this year indicate that investors expect SPACs to "benefit if the wariness of IPOs disappears," per Bloomberg. In February this year, SilverBox Capital raised $138M from sponsors towards its SilverBox Corp. III SPAC. Bloomberg estimates that currently, there are almost 200 SPACs with $47B capital seeking a target entity to merge within the next six months before their deadline for listing is up and they have to return money to sponsors. Where to see the impact: The Ares offering, underwritten by Citigroup and UBS, has two years from now to find a suitable target company and complete the merger. Considering Ares's first SPAC, a $1B entity that merged with nuclear power technology firm X Energy Reactor, investors are confident about the prospects of Ares's new entity.
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In 2023, corporate venture capital (CVC) firms are leading or co-leading a greater proportion of deals they're involved in, compared to the previous year, per Crunchbase. Crunchbase believes this is due to traditional venture capital firms, such as SoftBank and Tiger Global Management, scaling back their investments. Additionally, corporate VCs are making long-term strategic bets to increase their product offerings. Corporate VCs are likely securing favorable deals due to a lack of IPO and M&A opportunities, and dropping valuations. More: - Microsoft made a $10B investment into AI startup OpenAI at the start of this year.
- Alphabet-backed GV has led 60% of the funding rounds it participated in so far this year.
- GV has led investments into AI platform Anthropic, genetic medicine startup Aera Therapeutics, and medicine startup Chroma Medicine.
- Salesforce's VC division, Salesforce Ventures, has led or co-led half the deals it participated in this year, up from less than a fifth in 2022.
- Software and deeptech-focused Intel Capital has increased the share of rounds it leads from nearly 33% last year to 50% so far this year.
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ByteDance, the parent company of the social media app TikTok, is under increased scrutiny from the U.S. and Chinese governments, leaving billions of dollars in potential gains for investors on hold. Due to uncertainty over its IPO timeline, SIG and Sequoia liquidated shares worth $100M in March. The company's valuation has halved from a peak of $500B to $220B in the secondary market due to ongoing regulatory concerns. In March, the FBI and Department of Justice were looking into ByteDance's potential use of TikTok to spy on American journalists. More: - Investors are trying to figure out the impact of rising tensions between China and the U.S. on ByteDance.
- Last year, ByteDance reportedly made $25B in gross operating profit after taking in $80B in revenue.
- ByteDance backer and board member Sequoia China reportedly holds a 10% stake in the firm.
- Sequoia China participated in ByteDance's Series C round in 2014, nabbing a 10% stake at a valuation of $465M. The firm has since maintained its equity percentage by investing in most subsequent rounds.
- At current valuations, Sequoia's share is now worth more than $22B.
- Besides Sequoia, SIG, General Atlantic, and Coatue hold the largest stakes in the firm.
Zoom out: - If ByteDance were to go public at the current valuation, it would likely become the largest-ever tech IPO, surpassing Alibaba's public offering, which helped it secure $25B at a market cap of $231B in 2014.
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VC firm Longwood Fund secured $180M from investors toward its new fund. The business will invest in biotech firms working on a single or small number of medications closer to commercialization and have a clear route to profitability. Longwood's focus for the new fund is much narrower than its previous $170M fund that invested in large biotech firms developing fundamental science for various applications. More: - Half of the fund will be earmarked to invest in in-house startups, with the remaining for late-stage biotechs.
- Pyxis Oncology, TScan Therapeutics, Photys Therapeutics, and Carbon Biosciences are some notable startups that have spun out from Longwood.
- The firm is expecting to back 10 to 12 startups.
- Individual check sizes will range from $20M to $30M, lower than its previous check sizes of $30M to $50M.
Zoom out: - Per Pitchbook, VCs invested $4.1B in pharma and biotech startups in Q1 2023, the lowest quarterly total in the past three years.
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Crypto-focused VC firm Standard Crypto intends to focus on startups working on blockchain gaming, decentralized social platforms, and blockchain-based music services. Co-founder Alok Vasudev believes that this is the right time to back the next wave of crypto consumer adoption startups, as opposed to other crypto VC peers making safer bets on crypto infrastructure startups following the fallout of FTX. More: - Vasudev said, "If you think about the blockchain infrastructure as the roads that we have, we have enough roads. We need destinations."
- Standard Crypto recently invested in the decentralized social platform Farcaster, blockchain gaming startup Limit Break, music startup Audius, blockchain infrastructure firm Mino Games, and decentralized governance software maker M^Zero Labs.
Zoom out: - Standard Crypto's focus shift comes as the crypto markets show signs of recovery, with Bitcoin prices up 71% in the first quarter of this year.
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Quick Hits: - The company behind these surgical robots is planning to list on Nasdaq. Last day to fund your investment is on 5/10.*
- Energy Impact Partners secured $111.9M in capital commitments from limited partners towards its Elevate Future Fund I.
- Bankrupt crypto exchange FTX is reportedly trying to claw back $3.9B from digital asset lender Genesis Global Capital and its parent firm GGC International.
- VentureWave invested $40M into Funderbeam, giving it a majority stake in the firm. Both firms are jointly establishing a new entity to provide venture deal execution and secondary investment opportunity to angel and institutional investors.
- Fairway Capital Management's PE & VC Opportunities Fund is available for custody at both Fidelity Investments and Charles Schwab & Co. Both will help improve access to the fund for registered investment advisors and family offices.
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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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