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| Hey Insiders, Today we are taking a look at how Toronto and British Columbia defied the global VC funding slump in Q2, why secondaries dealmaking slumped 25% in the first half of the year, and Squadra's new $105M fund. Scroll down for some quick hits, and please let us know what other content you'd like to see in future issues! Karan
p/karan-chafekar | |
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The Canadian city of Toronto and the province of British Columbia (BC) defied the global venture funding slump in Q2. VCs invested $760M (CAD $1B) in Toronto-based startups in Q2 2023, up 71% YoY. Meanwhile, BC-based startups raked in $484.7M (CAD $639.6M) in the same period, up 213% YoY. More: - Funding for Toronto-based startups had reached a three-year low in the previous quarter, which ended with just $90.94M (CAD $120M) capital deployed.
- Notable funding rounds that closed in the recent quarter include AI startup Cohere's $270M (CAD $360M) Series C and satellite telecommunications provider Kepler Communications' $92M (CAD $124M) Series C funding rounds.
- Both companies nabbed nearly half of the total quarterly VC funding.
- Despite the recent uptick in funding, investors remain pessimistic about future prospects, with Highline Beta's founding partner and CEO Marcus Daniels saying: "Signs point to deal-making and fundraising conditions to continue to be challenging, especially with exit opportunities limited and VCs predominately focused on their current portfolio."
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What the numbers say: The global secondary market registered $43B worth of transactions in the first half of 2023, per Jefferies' H1 2023 Global Secondary Market Review. Dealmaking slumped 25% YoY. What happened: The slump is attributed to the widening valuation expectations between buyers and sellers. Secondary investors are wary about a further drop in valuations given the current economic conditions. As a result, they are scrutinizing deals more closely, reducing their check sizes, and investing as a syndicate along with other investors rather than inking solo deals. The conditions have tipped the market in favor of secondary buyers, giving them more negotiating power. Where to see the impact: Jefferies predicts that secondary transactions will reach $57B in the second half of the year as the pressure on limited partners to sell their stakes to balance their portfolios will mount. Despite the expected increase, the yearly total for 2023 is unlikely to surpass last year's tally of $108B. | | | |
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| 3 | | Baltimore-based VC firm Squadra Ventures secured $105M worth of capital commitments for its second fund. The fund, launched in 2021, surpassed its initial target of $80M. Squadra expects the fund size to increase to $120M once new institutional investors join the fundraising after completing their due diligence process. More: - The firm intends to back 12 to 15 startups in the defense and cybersecurity sectors.
- With the funds raised so far, Squadra has already made four investments.
- Initial ticket size will range between $2M and $4M.
- Squadra backed 11 startups with its $27M debut fund in 2021, with individual investments between $500,000 and $2M.
- Guy Filippelli, the former CEO of RedOwl Analytics, which Raytheon purchased for $54M in 2017, launched Squadra and serves as its managing director.
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| 4 | | China Securities Regulatory Commision's vice chair Fang Xinghai met with 30 global VC and PE firms to discuss steps to increase the global investment inflow into Chinese businesses. The move suggests that China is looking to ease investors' concerns amid rising tensions with the U.S., slower economic growth, and Beijing's crackdown on local technology startups. More: - Executives from KKR, Blackstone, Carlyle, Warburg Pincus, Goldman Sachs, Temasek, the Canada Pension Plan Investment Board, and HarbourVest participated in the meeting.
- Also present at the meeting was Neil Shen, the leader of Sequoia Capital China, which recently split from its U.S. entity and will be rebranded as HongShan.
- Representatives of the U.S., EU, Japan, and South Korea's Chamber of Commerce were also present at the meeting.
- Representatives of investment firms discussed ways to remove roadblocks to investing in China and listing Chinese companies overseas.
Zoom out: - Preqin data shows that China-based PE and VC raised funds worth $36.8B in 2022, less than a third of the annual average of $148.9B between 2019 and 2021.
- Fundraising peaked at over $300B in 2017.
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| 5 | | Italian VC firm United Ventures held the first close of its fourth fund at €65M ($72M). The fund's target size is €150M ($166.4M). Half of the fund is earmarked for 15 to 18 early-stage investments across Europe, with the remaining half set aside for follow-on rounds. More: - Individual checks into startups will range from €1M ($1.1M) to €8M ($8.9M).
- Institutional investors CDP Venture Capital, Banca Popolare di Milano, UniCredit, Sella, and Fondazione Carilucca provided the capital for the fourth fund.
- United Ventures' assets under management (AUM) will cross €500M ($554M) if it successfully raises the targeted sum.
- The firm has raised two early-stage funds and one growth fund since its launch 10 years ago.
- United Ventures' portfolio includes 35 startups, including wealth tech firm Moneyfarm, online grocery platform Everli, crypto exchange Young Platform, and agriculture digitization company xFarm Technologies.
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| 6 | | Today's Funding: AI - Singaporean AI-driven generative engineering platform Motion G raised a $16M funding round led by Episteme.
Biotech - Immuno-oncology startup Crescendo Biologics secured $32M from Sofinnova Partners, Andera Partners, Quan Capital, Kreos Capital, and others.
Cybersecurity - Atlanta, Ga.-based privacy management startup OneTrust raised $150M in fresh funding at a $4.5B valuation. Generation Investment Management led the funding round.
Food tech - Kaso, a Saudi Arabia-based B2B digitization and automation startup for restaurants and food suppliers, nabbed $10.5M in seed funding from BY VP, Hala Ventures, Seedra Ventures, Cyfr, and others.
Logistics - Swiss warehouse and logistics drone startup Verity extended its Series B round with an additional $11M funding led by A.P. Moller Holding, with participation from Qualcomm Ventures, Exor Ventures, and others. The funding is an add-on to its previous $32M Series B round that closed earlier this March.
Space tech - German thermal satellite data startup Constellr nabbed €17M (18.93M) in a seed funding round led by Karista, with additional support from FTTF, Lakestar, Vsquared, Amathaon Capital, OHB Ventures, EIT Food, and others.
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| 7 | | Quick Hits: - Invest in Virtuix before they ship their VR treadmills to their waitlist, a $100M opportunity. This opportunity ends on 8/10.*
- Supply Change Capital raised $40M for its debut fund to back global food industry startups.
- Worldcoin Foundation, a cryptocurrency startup co-founded by OpenAI's CEO Sam Altman, is rolling out its Worldcoin cryptocurrency token to 35 cities across 20 countries.
- The South Korean government will set up a $6.2B (8T won) corporate venture capital fund by 2025. Seoul has pledged 10% of the total capital while 90% will come from CVC Alliance, a consortium of 42 VCs.
- Japanese energy giant JERA launched its venture capital division, JERA Ventures, with a $300M initial commitment. The fund will invest in decarbonization technology startups.
- Discover how collagen helps reduce loose skin, deep wrinkles, and dark spots.*
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INSIDE VENTURE CAPITAL LEADERBOARD (30 DAYS) |
 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Eduardo Garcia | |
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