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| Hey Insiders, Today we are taking a look at why Crypto VCs are insisting on board seats, the continued slump in global VC funding, and how AI outperformed investors in selecting PE funds in the Oxford study. Scroll down for some quick hits, and then let us know what other content you'd like to see in future issues. Karan
p/karan-chafekar | |
| 1 | | Crypto VC firms are now insisting on board seats and audited financial statements while investing in new startups, per The Information. At the peak of the crypto boom period, investors were more focused on securing deals, with several VCs avoiding board seats altogether due to potential legal and regulatory risks. However, the fallout of the cryptocurrency exchange FTX unearthed problems in the way these startups are being run, highlighting the need for tighter control and governance. More: - CoinFund and 6th Man Ventures have taken board seats at a majority of the investments made so far this year.
- Additionally, some VC firms are insisting startups hire fractional chief financial officers to control the finances tightly.
- CoinFund's head of venture investments, David Pakman, said, "Board oversight is coming into crypto like it has been everywhere else in tech, and that's a very good thing."
- Decentralized cloud startup Tableland's CEO Andrew Hill backed the changes, adding, "Having a board in place serves as more than just oversight — it provides a sounding board for addressing sensitive challenges, thereby lessening the load for both my co-founder and me."
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| 2 | | 
What the numbers say: Global startups secured $65B in VC funding in Q2 2023, down 18% QoQ and 49% YoY. The funding for Q2 brings the total deployed in the first half of the year to $144B, representing a 51% decline over H1 2022's tally of $293B. What happened: Funding was expected to pick up in Q2, considering heightened investor interest in the AI sector. The AI sector nabbed nearly a fifth (18%) of the total funding so far this year, ending the first half with $25B. However, the fervor for the AI sector could not pause the VC funding slump, which has continued into the fifth quarter. Where to see the impact: Late-stage startups continue to feel the most impact of the pullback, ending Q2 with $31B, the lowest quarterly total on record since 2018. Early-stage startups raked in $27B in Q2, down 45% YoY from $48B deployed in the same quarter last year. The resilience of seed startups weakened in Q2, ending the quarter with $6.8B, 39% down compared to $11.2B deployed in the same period a year ago. | | | |
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| 3 | | An AI model was able to outperform institutional investors in picking European funds to invest in by 5% each year, per a study conducted by Saïd Business School at the University of Oxford. The model generated 2.10x returns against the initial investment, beating the industry average of 1.85x. More: - The AI model used in the study analyzed qualitative data from 400 fundraising prospectuses.
- The study found that the past performance of PE funds and the firm's reputation were completely unrelated to fund performance.
- Despite the success of the model, lead researcher and financial economics professor Ludovic Phalippou advised against using AI as a final decision-making tool, instead using it as a "sense-check" to confirm potential choices.
- He added, "You cannot automatize it and not have any humans intervening. That's a recipe for catastrophe."
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| 4 | | Indian online pharmacy startup PharmEasy is reportedly planning to raise a $300M down round at a valuation of between $500M and $600M. The expected valuation represents a 90% drop over its peak valuation of $5.6B. Healthcare group Manipal is reportedly looking to lead the new funding. More: - PharmEasy is raising fresh funds to pay off its debt to Goldman Sachs.
- The firm had secured $285M from Goldman last year to pay off an earlier debt related to its $600M majority stake acquisition of Thyrocare.
- Its stake in Thyrocare is estimated to be currently worth $241M.
- The wellness consultation, diagnostics, radiology tests, and pharmacy startup had initially filed for an $843M IPO in November 2021.
- The firm deferred the plan after market conditions soured.
- PharmEasy has raised $1.1B in equity and debt funding to date from TPG, Prosus, Temasek, B Capital, Bessemer Venture Partners, Eight Road Ventures, and others.
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| 5 | | African startups raised $1.43B in VC funding in H1 2023, a 46% YoY drop over last year's tally of $2.65B from the same period. Egypt, Kenya, and South Africa nabbed the majority share of the funding, raking in $442.5M, $344.3M, and $329.5M, respectively. African startups were able to defy the VC funding pullback until the end of last year. However, the region succumbed to the global pullback trend this year. More: - Intelpoint's data shows that startups with two founders were more likely to raise funding than startups with a sole founder or three or more founders.
- 65.7% of the startups that raised capital this year had two founders, raking in $937M of the total funding.
- On the other hand, startups with one founder nabbed 3.3% of the total funding, while startups with three founders nabbed 29.4% of the share.
- Fintech startups secured $1B in H1 2023, accounting for 71% of the total funding deployed across the region.
- Within the fintech sector, lending, payments, and insurtech startups raked in 30.4%, 16%, and 8.9% of the share, respectively.
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| 6 | | Today's Funding: Digital transformation - Indian digital transformation consulting firm KaarTech nabbed a $30M investment from A91 Partners.
Fintech - French accounting startup Dougs raised $27M (€25M) from British VC firm Expedition Growth Capital. This is the firm's first outside funding, as it was bootstrapped since its founding in 2015. It generates $16.4M (€15M) in annual recurring revenue.
Healthcare - Swedish medical diagnostics startup Neko Health secured €60M ($65.4M) in Series A capital led by Lakestar, with additional participation from Atomico and General Catalyst. Spotify CEO Daniel Ek co-founded Neko Health along with Hjalmar Nilsonne.
Manufacturing - On-demand manufacturing order management technology solutions maker Gooten closed its Series A funding round at $11M. KEC Ventures led the round, joined by INX International, Tech Pioneers Fund, and others.
Software - API infrastructure startup Speakeasy secured $7.6M in seed funding led by GV, with participation from Quiet Capital, Firestreak Ventures, Flex Capital, and StoryHouse Ventures.
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- Ella Wales Bonner joined British VC firm Cornerstone VC as its newest partner.
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- Monroe Capital acquired venture debt market leader Horizon Technology Finance Management for an undisclosed sum.
- French fintech startup Silvr secured a €200M ($218M) debt facility to support its growth in its home market of France and fund the acquisition of German counterpart Uplift1.
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Term of the Day Adverse selection: Adverse selection is a market dynamic in which a buyer or seller has an informational advantage over another party. Question of the Week What's your stance on employees discussing their salaries with each other? Join the conversation |
INSIDE VENTURE CAPITAL LEADERBOARD (30 DAYS) |
 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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