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| Hey Insiders, Today we are bringing you an analysis of why APAC family offices expect a drop in VC returns in the next 12 months and the most active U.S. investors in May. Scroll down for some top funding news and quick hits, then let us know which sector-specific funding you'd like to see more of in future issues! Karan
p/karan-chafekar | |
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Nearly 48% of Asia Pacific-based family offices surveyed by Preqin expect returns from VC investments over the next 12 months to be lower than the previous 12 months. Family offices had a similar sentiment toward PE investments, with 46% anticipating a drop in funding, per Preqin's APAC Family Office Report 2023. APAC region investors are not the only ones with a pessimistic outlook for the next 12 months. 60% of global investors share a similar view, per Preqin's previous survey done in November 2022. Capital deployment from APAC family offices is expected to remain fairly muted throughout the year, in line with global trends. The primary reason behind the pessimistic outlook is the disparity in valuations between private and public equity. The alternative investments segment has faced a decline in recent times due to global macroeconomic pressures. Inflation, rising interest rates, and geopolitical risks were the top three concerns for investors, as confirmed by 80%, 70%, and 67% of the survey respondents, respectively. As a result, family offices expect a further correction in private equity valuations, closing the disparity between them and their publicly listed counterparts. The recovery in alternative investments is contingent upon the recovery in public markets, a drop in interest rates, and the stabilization of banking systems. Despite the uncertainty in the alternative asset class, only 31% of respondents intend to decrease their commitments toward VC investments in the next 12 months. The majority of family offices hope to take advantage of lower valuations in a bid to profit in the long term. However, family offices intend to be selective and strategic about their investment decisions. Diversification will be a top priority for family offices, which will not only provide them with broader access to deals but also help reduce portfolio risks. With that in mind, family offices will remain very cautious about direct investments, especially with valuations and deal terms. Family offices will likely choose funds with broad exposure to different types of startups across various sectors. The macroeconomic headwinds have hampered VC returns due to the frozen IPO market, which is causing portfolio startups to delay their listings, which in turn is delaying VCs' timeline to cash in the returns. Per Preqin, the value of exits of PE and VC-backed startups in the APAC region so far this year is only 15% of 2022's tally from the same period. The poor exit environment is causing family offices to look at the secondary market. Additionally, family offices are finding investment opportunities in the secondary market, allowing them to take up stakes in promising startups at attractive prices. Despite the challenging market environment, family offices remain optimistic about investment opportunities across the healthcare, electric vehicles, biotech, and manufacturing sectors, all of which have the potential to generate strong long-term returns. Investors are also buoyed by the opportunities in the region due to rising population and increased technology adoption. |     | |
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Only five investors made more than six investments each in the month of May, per Crunchbase. The most active U.S. investors in the month were Gaingels, Soma Capital, FJ Labs, General Catalyst, and Salesforce Ventures. Investors have drastically reduced their pace of investments compared to last year, suggesting that investors are taking a cautious approach to their investments. Investors are expected to remain cautious with deployment until the public markets recover, interest rates decrease, and exit opportunities become available. In May 2022, the top two investors, Andreessen Horowitz and Tiger Global, made 23 and 20 investments each, respectively. The two combined made seven investments in the last month, starkly contrasting their deal-making pace from last year. Khosla Ventures and Insight Partners made two investments each, an 80% drop over the 10 deals inked in June 2022. Gaingels made eight investments in May, the most notable of which was leading a $3M seed round for Los Angeles-based customized meal kit startup VitaBowl. Gaingels has been a consistent VC investor, constantly inking more than 10 deals every month in 2022. It last inked 10 deals in February earlier this year. Soma Capital made the highest number of investments so far this year, participating in seven deals. The San Francisco-based VC firm backed sales tax tech startup Zamp, payments and expense tracking fintech Slash, and asset-backed credit card provider Pesto. Additionally, Soma participated in a $2.1M seed funding round for AI and machine learning startup Revv. New York-based VC firm FJ Labs made seven investments in May, bringing its total investments this year to 30. FJ Labs participated in an undisclosed Series A round in athletic products marketplace startup SidelineSwap. The round was led by eBay Ventures. General Catalyst has made 19 investments so far this year, six of which were added in May. Notable deals include healthcare-focused generative AI startup Hippocratic AI's $50M seed round and healthcare software make Adonis' $17.3M Series A round. Hippocratic AI is looking to develop the safest artificial health general intelligence platform. General Catalyst led or co-led the most funding rounds in the month. Salesforce's VC arm, Salesforce Ventures, made nearly 12 deals in the past three months, adding six deals to the tally in May itself. The firm participated alongside Google in AI startup Anthropic's $450M Series C round led by Spark Capital, which valued the firm at $4.1B. Anthropic is developing AI assistant Claude, which is a direct competitor to OpenAI's ChatGPT. Leading Anthropic's Series C round gave Spark Capital the honor of leading the largest deal sizes in May. Within incubators and accelerators, Y Combinator made 12 investments in the month of May. | | | |
| 3 | | Today's Funding: AI - Canadian AI startup Cohere, which builds and trains AI models for enterprise clients, raised $270M in fresh funding led by Inovia Capital, with participation from Oracle, Nvidia, Salesforce Ventures, Mirae Asset, Schroders Capital, Index Ventures, and others. The firm was valued between $2.1B and $2.2B in the recent round, sources informed Bloomberg.
Biotech - Waltham, Massachusetts-based clinical-stage biotech firm Upstream Bio closed its Series B round at $200M. Enavate Sciences and Venrock Healthcare Capital Partners led the funding round with backing from Bain Capital Life Sciences, Wellington Management, OrbiMed, and others.
- San Diego-based gene therapy startup Kate Therapeutics emerged from stealth with a $51M Series A round co-led by Westlake Village BioPartners and Versant Ventures.
- Woburn, Massachusetts-based lipid nanoparticle technology startup Hopewell Therapeutics secured $25M seed funding from Mass Ave Capital, 5Y Capital, BOPU Capital, and IMO Capital.
Cybersecurity - Cybersecurity threat detection and response solutions developer Blackpoint Cyber secured a $190M Series C growth investment led by Bain Capital, with participation from Accel, Adelphi Capital Partners, and Pelican Ventures.
- Data observability and cybersecurity startup Shift5 extended its Series B round with additional $33M funding, bringing the total raised under the round to $83M. Moore Strategic Ventures, Booz Allen Ventures, and Teamworthy Ventures provided the extension funding.
Enterprise - Pigment, a French business planning software startup, nabbed $88M in fresh funding from ICONIQ. Felix Capital, Meritech, IVP, and FirstMark supported the funding round.
Healthcare - Andreessen Horowitz led a $33M seed and Series A funding into New York-based virtual medical practice startup Pomelo Care.
- San Francisco-based clinical data analysis platform Carta Healthcare closed its Series B round at $25M. Memorial Hermann Health System, UnityPoint Health, Paramark Ventures, Asset Management Ventures, and others backed the round.
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- Just Climate, a VC firm established by Al Gore's Generation Investment Management, closed its debut Climate Assets Fund I at $1.5B, exceeding the initial target of $1B. The fund received backing from Microsoft's Climate Innovation Fund, IMAS Foundation, Harvard Management Company, and California State Teachers' Retirement System.
- BlackRock is acquiring European startup loan provider Kreos Capital for an undisclosed sum. The move will enable BlackRock to expand its reach in the venture debt sector.
- German VC firm Yttrium held the final close of its second growth fund at €403M ($433M). The fund intends to back European B2B software and technology companies.
- Singaporean business incubator and accelerator Antler secured $285M in capital commitments toward its emerging growth fund Antler Elevate.
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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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