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| Hey Insiders, Today we are taking a look at why Michael Moritz and four other partners left Sequoia, the 83% dip in VC funding for Latin American startups, and a new bill to hold VCs liable for DeFi sanction violations. 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 | | Longtime Sequoia Capital partner Michael Moritz is leaving the VC firm to focus on its independent wealth management business Sequoia Heritage. Four other partners, Mike Vernal, Michelle Fradin, Kais Khimji, and Daniel Chen, also departed in recent months, sources told The Information. More: - The departures have contracted Sequoia's investment staff by 15% to 28.
- The exits come amidst a tumultuous 18-month period for Sequoia, which saw valuation cuts at several portfolio companies, including Stripe, a drop in public stocks, and a write-off of its entire investment into bankrupt cryptocurrency exchange FTX.
- As a result, Sequoia allowed limited partners to withdraw some capital by breaking up its two-year lockup period rule.
- Over his 38-year stint at Sequoia, Moritz has been instrumental in leading the firm's investments into Google, Zappos, PayPal, Yahoo, Stripe, and Instacart.
- He was the co-leader of the firm until 2012, when he stepped down due to medical reasons and handed over the reins to fellow co-leader Doug Leone.
Zoom out: - Last month, Sequoia Capital split its Chinese and Indian VC divisions into independent entities amidst rising global tensions.
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What the numbers say: VCs deployed $1.1B into Central and South American startups in H1 2023, per Crunchbase. Funding slumped by 83% YoY compared to the same time last year. VCs completed 333 deals in the region in the first half of the year, down 56% YoY. What happened: The funding decline impacted late-stage startups the most. The Green Coffee Company's $25M Series C round was the largest late-stage funding round that closed during H1. Early- and seed-stage funding comparatively fared better. Notable early-stage rounds closed in the first half include Digibee's $62M Series B, Clara's $60M Series B, and Ceibo's $30M Series B funding rounds. Why it matters: The funding dip contradicts the region's growth seen in 2021 which made it the fastest-growing region in the world with $19B deployed in that year. | | | |
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| 3 | | A new bipartisan Senate bill intends to hold VCs accountable for portfolio decentralized finance (DeFI) platforms used for money laundering and sanctions evasion. The bill is backed by Reps. Jack Reed (D-R.I.), Mark Warner (D-Va.), Mike Rounds (R-S.D.), and Mitt Romney (R-Utah). More: - The move is aimed at stopping people from dodging U.S.-imposed restrictions.
- The law will hold investors that have deployed more than $25M into the startups.
- DeFi platforms help facilitate peer-to-peer transactions.
- The SEC has ramped up enforcement against crypto exchanges such as Coinbase Global and Binance Holdings.
- Reed said, "DeFi and crypto ATMs are part of a largely unregulated technology that needs stronger oversight and guardrails to prevent rampant money laundering and sanctions evasion."
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| 4 | | Reps. Mike Gallagher (R-Wis.) and Raja Krishnamoorthi (D-Ill.), the two members of the House Select Committee on the Chinese Communist Party, wrote to four U.S. VCs expressing "serious concern" over their investments in Chinese tech startups. The letters were addressed to GGV Capital, GST Ventures, Qualcomm Ventures, and Walden International. More: - Per the letter, Qualcomm Ventures backed 13 Chinese AI startups between 2015 and 2021, of which the committee is particularly concerned about SenseTime and Denglin Technology.
- A New York Times report linked SenseTime to the tracking and profiling of Uyghurs.
- GGV reportedly invested in 43 Chinese startups between 2015 and 2021.
- The letter specifically highlights GGV's investment in facial recognition software provider Megvii, which "actively supports the surveillance of Uyghurs," per the letter.
Zoom out: - The letters are an effort by the bipartisan committee to scrutinize and ban U.S. capital outlay in Chinese startups that might enable China's "advancements in the technologies that could undermine our national security or American values."
- Lawmakers are particularly concerned over U.S. money deployed into AI, semiconductor, and quantum computing technologies in China.
- Lawmakers were also concerned about investments in Chinese startups linked to the profiling and tracking of Uyghur ethnic minorities in the region.
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| 5 | | Israeli VC firm Flora Ventures launched an $80M fund to invest in early-stage sustainable agrifood startups across Israel and Europe. The firm already secured capital commitments worth $50M from investors. More: - Sadot Kibbutzim joined as a strategic partner in the fund and will offer portfolio companies access to agricultural land, production technology, and expertise to scale their technologies.
- Haifa Group and Harel Group were the anchor investors for the new fund.
- Flora Ventures was established by former Mondelēz executive Gil Horsky and Nielsen's incubator founder Esther Barak-Landes.
- With the funds raised so far, the firm has already backed Arrakis Bio, a stealth-mode startup developing animal-free collagen and gelatin.
Zoom out: - The agrifood industry, currently worth $8T, is in dire need of innovation, said the two founders of Flora Ventures.
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| 6 | | Today's Funding: Deeptech - German deeptech startup DGG raised €4M ($4.5M) in fresh funding led by IRIS and joined by RenderedVC, FTTF, and 3VC.
Energy - Energy storage solutions maker Energy Dome extended its Series B round with an additional €15M ($16.7M) in funding, bringing the total raised under the round to €55M ($61.5M). New investors joining the extension round include Innovation Development Oman Investments, Vopak Ventures, 360 Capital, and CDP Venture Capital.
Fintech - Corporate credit card fintech startup Karat Financial nabbed $70M in Series B funding. The funding consists of a $40M equity tranche led by SignalFire and a $30M debt facility provided by TriplePoint Capital.
- Philippines-based consumer fintech Salmon secured a $20M debt facility from Argentum Creek Partners.
IT - ThingTrax, a British startup that identifies inefficiencies in manufacturing and increases operational efficiency, raised £4.3M ($5.5M) in pre-Series A funding. Concentric, Superseed, and Puma Private Equity co-led the latest round.
PropTech - Construction labor recruitment platform Skillit nabbed $8.5M in fresh funding co-led by MetaProp and Bow Capital.
- Independent home inspection startup InspectionGo secured $5.5M in Series A funding led by Wasatch Equity Partners.
Social media - Primetime Partners led a $8M seed funding into Peppermint, a New York-based online community startup providing workshops, clubs, and networking opportunities for seniors.
Transportation - Indonesian EV bike maker Maka Motors bagged $37.6M in seed funding co-led by AC Ventures, SV Investment, and East Ventures.
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- Mobility sector-focused VC firm Stormbreaker Ventures appointed Patrick Shutt as a venture partner.
- Venture Atlas launched the first American Dream Fund, which aims to raise $10M to invest in startups founded by immigrants.
- Jacob O'Connor joined Accelerate Venture Partners as a syndicate manager. The appointment comes as the firm secured $7M in capital commitments towards its fund.
- Blackstone's assets under management crossed the $1T mark, making it the first PE firm to achieve the milestone.
- Japanese bank Mizuho Financial Group is looking to launch a $72M (10B yen) venture debt fund to back startups nationwide.
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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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