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| Hey Insiders, Today's newsletter covers: - 📉 The slump in crypto VC funding despite a surge in bitcoin prices
- 🔢 Clarity on valuation multiples after upcoming IPO debuts
- ⚖️ Lawsuit filed against SEC by a coalition representing PE, VC, hedge funds
If you find this newsletter useful, please share it with your friends and colleagues. Thank you. Karan
p/karan-chafekar | |
| 1 | | Venture capital invested in crypto startups slid for the fifth consecutive quarter in Q2 2023, closing the three-month period with $2.3B, per Pitchbook data reviewed by Reuters. The quarterly total was the lowest over the last three years. VCs invested $5B in crypto startups in H1 2023, down by almost three-quarters year-on-year. More: - Investors are exercising caution with their crypto investments since the downfall of exchange FTX and hedge fund Three Arrows Capital.
- Restive Ventures' partner Cameron Peake said, "The biggest change from the height of the market is more time to do deeper diligence."
Zoom out: - Investments in the crypto sector have remained low despite a 55% YTD surge in Bitcoin prices this year.
- VC investments in the crypto space correlate to crypto prices, albeit with a lag of three to six months.
- As a result, investors expect VC investments in the crypto sector to increase by the end of this year.
Q: Do you think VC funding for crypto startups will increase by the end of this year? Join the conversation here. |     | |
| 2 | | Investors will be closely monitoring the upcoming IPO debuts of Instacart and Klaviyo, as that will bring clarity to the valuations of private companies. What happened: Even after the two upcoming filings, investors do not anticipate a surge in IPO listings unless they perform exceptionally well. Nevertheless, the filings should have a significant impact on the valuations of both primary funding rounds and secondary trading. 
What the numbers say: Valuation multiples of late-stage startups reverted to their pre-pandemic values of 5x by Q2 2023. The current multiple represents a steep plunge over the peak values of 22x seen in mid-2021. The exact valuation multiples investors can expect will become clear a few weeks after the three imminent IPO debuts. Why it matters: The uncertainty of valuations has caused a dilemma for existing shareholders of private startups. They must decide whether to liquidate their holdings before the IPO or hold out for the public debuts. | | | |
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| 3 | | Sequoia Capital's chief Roelof Botha and partners Alfred Lin and Pat Grady reportedly traveled across the U.S. to meet more than 50 of the firm's largest limited partners in July. The trip's primary purpose was to ease LPs' concerns and retain their confidence as the firm grapples with its split from its Chinese and Indian businesses, a reduction in crypto fund size, failed bets, and the departure of key executives, including Michael Moritz. More: - Per Financial Times, one of Sequoia Capital's large backers is presently assessing its options, adding to the urgency of these reassurance efforts.
- During the recent trip, the three top leaders assured LPs that the firm is on stable ground thanks to its recent decisions to streamline operations and is set to capitalize on the AI boom.
- Sequoia is confident that LPs will continue to back their firm, asserting, "The fact we've had 51 years of good performance gives us breathing room."
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| 4 | | A coalition representing private equity, venture capital, and hedge funds filed a lawsuit against the Securities and Exchange Commission in a conservative federal appeals court. The lawsuit aims to block the new regulations outlined by the SEC last week that require fund managers to issue quarterly financial statements to investors, conduct annual audits, and prohibit side letter deals in which some investors are offered better terms than others. More: - The Managed Funds Association, the American Investment Council, the National Venture Capital Association, and the National Association of Private Fund Managers brought about the lawsuit.
- Lead plaintiffs' attorney Euguene Scalia said, "The rules exceed the Commission's statutory authority, were adopted without compliance with notice-and-comment requirements, and are otherwise arbitrary, capricious, an abuse of discretion and contrary to law."
- The plaintiffs argue that investors in private funds are wealthier and more sophisticated than other investors and can negotiate their terms with fund managers.
- The SEC has a counter-argument that fund managers frequently overvalue the assets in their portfolios, use conflicted sales tactics, and have opaque fee structures.
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| 5 | | The Catalyst Fund held the first close of its climate-focused fund at $8.6M, against a target of $40M. The firm intends to back fishery management, food systems, cold chain, waste management, and water management startups across Africa. More: - Limited partners contributing to the fund include FSD Africa Investments (FSDAi), Cisco Foundation, USAID Prosper Africa, and Andrew Bredenkamp.
- The fund has already backed 10 startups from six African countries, with plans in place to back an additional 20 this year.
- Eventually, the firm intends to back a total of 40 startups from the current fund.
- Ticket sizes for pre-seed, seed, and Series A stage startups will be $200,000, $500,000, and $1.5M, respectively.
- The fund's managing partner, Maelis Carraro, said, "Overall, having exposure of about $2.2M for each startup makes sense because we are coming in super early to be the early catalyzer for other investors to come in. The instrument we use at the pre-seed stage is a standard SAFE (simple agreement for future equity)."
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| 6 | | Today's Funding: AI - AI-powered financial fraud, money laundering, and international financial crimes detection startup ThetaRay secured $57M in capital from investors. Portage Capital Solutions led the funding round with additional backing from existing backers Jerusalem Venture Partners and OurCrowd.
Biotech - Star Therapeutics, a biotech startup developing therapies for hematology and immunology applications, closed its oversubscribed Series C funding round at $90M. Sofinnova Investments led the round with participation from Qatar Investment Authority, Catalio Capital Management, Agent Capital, Soleus Capital, NYBC Ventures, and other existing backers.
- Orally administered RNA-particles biotech startup ViAqua Therapeutics raised a $8.25M funding round led by S2G Ventures. Rabo Ventures, The Trendlines Group, Agriline Limited, Nutreco, I-Lab Angels, and Circle Investments participated in the funding round.
Cybersecurity - Healthcare data security and automated expert certification software maker Integral secured $6.9M in seed funding led by Haystack, The General Partnership, and Virtue Ventures.
Energy - German switchgear technology developer Nuventura bagged €25M ($26.8M) in Series A funding led by Mirova, with additional support from Forward.one, EIC Fund, IBB Ventures, ADB Ventures, Cycle Group, Future Energy Ventures, and DOEN Participaties.
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| 7 | | Quick Hits: - Launch your MVP with AWS. The Build Accelerator offers access to on-demand content, technical support, and $2K in AWS Activate credits. Apply today!*
- Suzanne Kim, the former managing director at Hellman & Friedman, joined Haun Ventures as a partner. She will be responsible for managing investor relations for the crypto-focused VC firm.
- AnD Ventures hired Ron Porat as its CTO and Studio Lead to help grow portfolio startups and validate their product ideas.
- Growth Warrior Capital is launching a generative AI-powered pitch deck-building platform dubbed Elevo later this year in October.
- Nordic VC firm Unconventional Ventures has raised half of its targeted €30M ($32.2M) with backing from LPs including Atomico, the Export and Investment Fund of Denmark (EIFO), and Investinor. The fund aims to back European startups led by diverse founders.
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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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