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| Hey Insiders, Today we are bringing you stories about why funding for ERP startups will remain robust in 2023, the 10 startups that entered the unicorn club in May, and the funding decline for Boston-based startups. 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 | |
| 1 | | Venture capital funding for enterprise resource planning (ERP) startups is expected to remain strong as global companies are expected to spend $46.86B on ERP software this year, up from $44.72B in 2022. ERP software has the ability to generate cost savings for corporates, making them an attractive value proposition, especially during periods of economic headwinds. Additionally, corporates have to invest in ERP systems to upgrade legacy software and increase cross-functional connectivity. More: - The ERP sector defied the venture funding pullback last year, ending the year with $23B in capital.
- The sector raked in a 37% share of the $62.4B invested in cloud-based business software startups.
- ERP software is critical to the company's supply chain and financial transactions, per Stokke CEO Jacob Kragh.
- Notable startups in the space that secured funding recently include Belgian startup Thynk, which raised a $13M Series A round in April, and procurement-focused ERP startup Zip, which raised a $100M round in May.
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In the month of May, 10 global startups cemented their status as unicorns with a valuation of over $1B. Five startups on the list were based in the U.S., two in China, and one each in Canada, Indonesia, and Japan. Unicorn startups raked in $5B of the total $22B VC funding deployed globally. Here are the startups that entered the unicorn club in May: - Canadian generative AI startup Cohere raised $270M in Series C funding led by Inovia Capital at a $2.2B valuation.
- Generative AI startup Runway secured $100M in Series D funding at a $1.5B valuation led by Google.
- Chinese battery storage startup Ryefield Energy raised $140M at a $1.4B valuation. Sparkedge Capital led the round.
- Indonesian aquaculture startup eFishery raised $108M in Series D funding at a $1.3B valuation. Abu Dhabi's G42 Expansion Fund led the round.
- Wastewater treatment solutions startup Gradiant secured $225M Series D funding led by BoltRock Holdings and Centaurus Capital at a $1B valuation.
- Irvine, California-based restaurant management software maker Restaurant365 secured $135M in funding co-led by KKR and L Catterton.
- Proptech startup Avenue One raised $100M from WestCap at a $1B valuation.
- Goldman Sachs led a $72M Series D funding into Japanese ride-hailing app GO at a $1B valuation.
- Chinese humanoid robot maker Zhiyuan Robotics raised an undisclosed round led by Baidu Capital at a unicorn valuation.
- Gene delivery technology startup VectorBuilder raised an undisclosed sum at a $1B valuation.
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Boston-based startups attracted $2.8B in VC funding in Q1 2023, representing a 71% drop over the peak value of $9.8B in Q4 2022, per Business Journal. Across the top 10 metro areas nationally, only San Jose and Seattle have witnessed higher funding drops in the same period. For comparison, the median drop across the 10 metro areas was 74%. More: - Investments are expected to fall even further this year, making conditions difficult for startups that raised funding in the peak of 2021 as they will be fast approaching the end of their cash runways in the middle of this year.
- Boston-based VC firm Flybridge's general partner Jeff Bussgang said, "This is the new normal, and it's a recalibration back to what it was in 2017, '18, and '19."
- Nevertheless, Bussgang is optimistic that the region will benefit slightly due to the funding being deployed into AI startups.
- Frank Ahimaz, a senior lecturer at Sloan, expects the funding pullback to impact women and minorities the most.
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In the 12 months preceding this March, limited partners reduced their commitments to PE, VC, real estate, private debt, and funds-of-funds by 15% to 64%. VC fundraising saw a 38.4% decline. The high interest rates and volatile macroeconomic conditions have severely impacted returns on private investment, causing LPs to curb their investments in the asset class. However, investors are now raising Secondary funds to buy out stakes of other LPs. More: - As a result, secondary funds raised 39% more capital over the 12-month period ending March.
- Blackstone closed two secondary funds worth $25B in January.
- The move is helping investment firms scoop up stakes in promising startups in the secondary markets at huge discounts.
- The move is beneficial for investors that are short on cash and are looking to liquidate their stakes in portfolio startups in order to generate liquidity.
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| 5 | | Funding for European startups is expected to total $51B in 2023, per Atomico. The funding represents a decline of 39% over 2022's values of $83B, which itself declined 22% from peak values of $106B in 2021. More: - The slump in European tech startup funding is attributed to the retreat of U.S. investors.
- Despite the drop, the European tech industry showed signs of resilience, with overall valuations of public and private tech companies in the region crossing the $3T mark.
- The funding pullback will impact late-stage startups more than early-stage ones, accounting for 93% of the deficit between 2022 and 2023.
- Early-stage startups raising less than $15M rounds collectively raised $8.2B in the first half of 2023, down from $10.3B a year ago.
- The global macroeconomic headwinds have impacted the valuations of startups, with average multiples of public SaaS startups now 5x their revenue, compared to the previous average of 7.8x.
- As a result, 20% of the rounds in Q1 2023 were down rounds.
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| 6 | | Today's funding: AI - Legal AI startup EvenUp secured $50.5M in Series B funding at a $325M valuation. Bessemer Venture Partners led the funding with participation from Bain Capital Ventures, SignalFire, DCM, NFX, and others.
Agriculture - Colombian coffee producer The Green Coffee Company raised $25M in Series C funding. Names of the investors were not disclosed.
Cloud - French cloud communications startup Ringover closed its Series B funding round with €20M ($21.5M) capital. Orange Ventures and Bpifrance Large Venture led the funding round.
Cultivated meat - British cultivated meat startup Uncommon, formerly known as Higher Steaks, nabbed $30M in Series A funding led by Balderton Capital and Lowercarbon Capital.
E-commerce - Brazilian e-commerce facilitator Nocnoc raised $14M in Series A funding led by PayPal Ventures. Mouro Capital, Quona Capital, Caravela Capital, Broadhaven, and Ignia backed the funding round.
Energy - French paper-based bio-enzymatic fuel cells maker BeFC raised €16M ($17.2M) through an Otium Capital-led Series A funding round. Existing backers Demeter, BNP Paribas, and Supernova Invest participated in the funding round.
Healthcare - Boston, Massachusetts-based healthcare management solutions provider Laudio secured $13M in Series B funding led by Define Ventures.
Web3 - Newark, Delaware-based Web3 game launcher and aggregator HyperPlay raised $12M in Series A funding co-led by Griffin Gaming Partners and BITKRAFT Ventures.
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| 7 | | Quick Hits: - One of "The 7 Best Startups You Can Buy on StartEngine Right Now" according to InvestorPlace is open for investment again — join their funding round before it closes.*
- PE fund investors have over-allocated their commitments to the asset class, with some investors allocating between 17% to 20% of their capital, more than twice their initial target of 10%, per Blackstone's Verdun Perry. With distributions down 40% to 50% last year, investors are finding it difficult to commit additional sums to the PE asset class.
- PE firm Thoma Bravo's co-founder Orlando Bravo expects the PE market to perform better than VC, as the declining valuations, increased inflation, prospects of recession, and tight labor market are all good market conditions to ink private equity deals.
- Israeli VC firm 91 Ventures raised a $15M fund to invest in pre-seed and seed-stage startups in the region. The firm intends to write individual checks of $500,000 to $1M.
- Palo Alto, California-based VC firm Valley Capital Partners' general partner Mitchell Kokko has moved to Pittsburgh to scout for deals in enterprise software, AI/ML, robotics, and cybersecurity sectors.
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INSIDE VENTURE CAPITAL LEADERBOARD (7 DAYS) |
 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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