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| Hey Insiders, Today we are taking a look at why Sapphire Ventures earmarked $1B for AI investments, why VCs ditched crypto in favor of AI, and the dip in VC funding for cybersecurity startups. 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 | | Sapphire Ventures is doubling down on AI enterprise startups, with the firm earmarking $1B for investments from the $3B available for deployment across existing funds. The majority of the capital will be directly invested in AI startups, with the firm also keen on joining a few early-stage AI-focused venture funds as a limited partner. More: - "This is not just a commitment in dollars. It's also the commitment that we are going to build up the infrastructure within the firm to help AI companies be successful," said Sapphire's president Jai Das.
- The Austin, Texas-based VC firm has over $10B worth of assets under management (AUM).
- Sapphire has already invested $2.4B across 60 AI-focused startups, including Clari, ThoughtSpot, and DataRobot.
Zoom out: - Per Pitchbook, the AI sector has raked in over $40B of investments so far this year.
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What the numbers say: Global VCs invested $20.2B in the AI sector in Q2 2023, more than 10 times the $2.2B invested in crypto startups in the same period. While VC funding across all sectors experienced an 18% dip compared to the previous quarter, investment in the AI sector remained flat during the same period. At the same time, global VC investments in crypto dipped below 2020's levels. What happened: Investors' interest in crypto waned due to a recent string of bankruptcies, regulatory headwinds, and tumbling token prices. Meanwhile, their interest in the AI sector increased as "it's offering so many more use cases than blockchain," per Millennia Capital's managing partner Joe Zhao. As a result, several crypto-focused VC firms, namely Paradigm and Millennia Capital, are now pivoting completely into AI. Where to see the impact: Some investors, however, remain confident about the crypto sector, especially the intersection of AI and crypto. Startups such as Tools For Humanity and Gensyn that are working in both sectors were able to nab substantial funding during the second quarter. | | | |
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| 3 | | 
Cybersecurity startups nabbed $1.6B in VC funding in Q2 2023, down 63% compared to $4.3B secured during the same quarter last year, per Crunchbase. Funding for the sector matched the previous low of $1.6B from Q4 2019. The quarterly total brings the total raised in the first half of the year to $4.3B, a drop of 60% over H1 2022's tally of $10.8B. More: - Half-yearly funding is also nearly $2B lower than the second half of 2022 when startups raked in $6.4B.
- 11 mega-rounds of over $100M closed in H1 2023, a 67% YoY drop from 33 such transactions recorded in H1 2022.
- Notable funding rounds that closed in the recent quarter include Blackpoint Cyber's $190M funding round, ID.me's $132M Series D, and Cyera's $100M fundraiser.
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| 4 | | Nuclear fission startup Oklo is set to go public via a SPAC merger with AltC Acquisition, a blank check company established by OpenAI CEO Sam Altman and former Citigroup banker Michael Klein. Altman is also an investor and board chairman of the California-based startup since 2015. The transaction is set to value Oklo at $850M. More: - Oklo is building a new generation of smaller nuclear fission power projects, with initial reactor projects planned in Idaho and Ohio.
- AltC has nearly $500M in cash available, which will likely be directed toward expanding Oklo's business.
Zoom out: - Oklo's competitor X-energy is planning to go public via a SPAC merger with Ares Management in a $1.8B deal.
- Investors already lowered its valuation by $300M.
- Altman has also backed nuclear fusion startup Helion Energy, which recently inked a commercial agreement to sell electricity to Microsoft within five years.
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| 5 | | 
Japan's aspirations to become a thriving startup hub are being hampered by stringent tax regulations. With a capital gains tax exceeding 20% and the absence of tax breaks on capital gains for investors, Japan lags behind countries like the U.S., where investors can enjoy substantial tax breaks of up to 100% on capital gains. As a result, VC investment in Japanese startups has remained relatively low compared to other nations, impeding the realization of the country's startup potential. More: - In addition to the lack of capital tax breaks, investors also have to pay income tax on certain types of stock options, which can be as high as 55%.
- Prime Minister Fumio Kisida's government launched a five-year plan in 2022 to encourage the formation of new startups in the nation.
- The government earmarked $7.2B (1T yen) in support, human resource development, and lower visa requirements for entrepreneurs.
- However, despite the measures taken, the impact of the government's subsidies and grants is negated by the stringent tax factors.
Zoom out: - The Bloomberg report highlights the French government's success in increasing VC funding by introducing tax breaks for capital invested in startups in 2013.
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| 6 | | Today's Funding: Agtech - Belgium-based sustainable agriculture agtech startup Aphea.io nabbed €70M ($77.5M) in Series C funding led by Innovation Industries, with additional support from the Bill & Melinda Gates Foundation, Korys Investments, SFPIM, and BNP Paribas Fortis.
Biotech - British Patient Capital led a $70M Series A funding round into Tenpoint Therapeutics, a biotech startup developing therapeutics to address degenerative ocular diseases. F-Prime Capital, Sofinnova Partners, Qiming Venture Partners, and Eight Roads participated in the round.
ClimateTech - Allonnia, a biological solutions startup working on sustainable mining practices, decarbonization, and plastics upcycling, raised a $30M Series A extension round led by Bison Ventures. BHP Ventures, Vale Ventures, PPNG, General Atlantic, and Viking Global Investors participated in the round.
EV - Dutch EV charging automation company ROCSYS raised $36M in Series A funding led by SEB Greentech Venture Capital, joined by Forward.One, the Graduate Entrepreneur Fund, and the European Investment Bank.
Fintech - Collective, an AI-powered fintech platform for freelancers, secured $50M in fresh funding from Google's AI fund, Gradient Ventures, Innovius Capital, General Catalyst, QED, and Better Tomorrow Ventures.
SaaS - IT service management and asset management solutions SaaS startup InvGate secured $35M in growth funding led by Riverwood Capital, with participation from Endeavor Catalyst.
Semiconductor - SMART Photonics, a foundry of Indium Phosphide photonic integrated circuits, secured €100M ($110M) in fresh capital, €60M ($66M) of which came from the government of the Netherlands with the remaining sum arriving from ASML, NXP, VDL Groep, ING, BOP Impact Ventures, and Deep Tech Fund.
Supply chain - Food supply chain startup Silo raised $32M in Series C funding led by Koch Disruptive Technologies. Andreessen Horowitz, Haystack Capital, Tribe Capital, Collate Capital, and Moore Capital joined the funding round.
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- Mark Hawkins, the former president and CFO emeritus at Salesforce, joined New Enterprise Associates as a venture partner.
- Early-stage focused VC firm Adverb Ventures closed its debut fund at $75M.
- Venture studio Co-Created opened an office in New Zealand to cater to the APAC region.
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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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