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| Hey Insiders, Today's newsletter covers: - Foreign investors scaling back investment in China
- Higher TVPI from specialist funds than generalists
- Dawn Capital's two new funds worth $700M
If you find this newsletter useful, please share it with your friends and colleagues. Thank you. Karan
p/karan-chafekar | |
| 1 | | Foreign investors have significantly reduced their VC investments in the Greater China region, which includes China, Taiwan, Macau, and Hong Kong. During the first half of 2023, foreign investors' participation dwindled to a historic low, participating in just 264 deals totaling $4.3B. 92.4% of the rounds involved investors from Greater China. More: - The highest retreat was seen in U.S.-based investors due to the rising tensions between the U.S. and China.
- U.S.-based investors participated in just 3.2% of deals in H1, down from 4.6% last year.
- After the Biden administration's executive order limiting investments in Chinese semiconductor, quantum computing, and AI startups in August, several U.S.-based firms have drastically scaled back their investment in the region.
- Due to the geopolitical shift, Sequoia decided to split its Chinese and Indian investment divisions into separate entities earlier this June.
- Last week, GGV also split its Chinese investment unit into an independent entity.
Q: Will investors from other nations step up to bridge the financing gap for Chinese startups due to reduced support from U.S. investors? Join the conversation here. |     | |
| 2 | | Specialist funds have delivered slightly better total value to paid-in capital (TVPI) than generalist funds, per Pitchbook. 
What the numbers say: Pitchbook analyzed 1,824 VC funds with vintages between 2000 and 2020. The study found that in VC funds less than $250M, specialist funds bagged higher IRR and TVPI than generalist funds, especially in funds with vintage years later than 2010. In contrast, for VC funds more than $250M and with vintages from 2015 to 2020, generalist funds demonstrated a 5% higher internal rate of return (IRR) than their specialist counterparts. What happened: Generalist funds leverage portfolio diversification, allowing them to distribute investments across various sectors. This strategy helps mitigate risk, ensuring a stable IRR even when specific sectors underperform. In contrast, specialized funds adopt a longer investment horizon, yielding marginally superior returns. Relevance: So far this year, specialist funds have bagged 26.4% of the total capital, an uptick over 22.2% in 2014. Since the TVPI is only marginally better in specialized funds, several could be enticed to become generalists due to the higher IRR in recent years, per Pitchbook. | | | |
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| 3 | | European B2B-focused VC firm Dawn Capital raised $700M for two new funds. $620M of the capital is earmarked for its fifth early-stage fund, with the remaining $80M set aside to double down on existing portfolio companies. The firm aims to invest in 20 startups in Series A and Series B stages from the Dawn V fund, with initial check sizes ranging from $10M to $40M. More: - The firm is one of Europe's most prominent tech investors, having previously backed Swedish online payments startup iZettle and open banking startup Tink.
- PayPal acquired iZettle for $2.2B in 2018, and Visa acquired Tink for $1.9B (€1.8B) in 2022.
- Dawn Capital raised funding amidst the challenging fundraising environment due to its deep relationships with institutional investors.
- "Suddenly, with everything with the markets and the denominator effect, their private book was overallocated even if technically by their own benchmarks they weren't. That meant a lot of funds could only re-up with existing managers or those with high convictions," said Dawn Capital partner Hannah Gubbins.
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| 4 | | Amazon announced it would invest up to $4B in AI chatbot maker startup Anthropic for a minority stake. The firm will make an initial investment of $1.25B over two years. The investment could balloon to $4B, contingent upon Anthropic meeting certain conditions. The fundraising is part of Anthropic's new funding round. More: - Amazon will also incorporate Anthropic's technology into its product lineup.
- In return, Anthropic will use Amazon's custom chips to build its AI software.
- Amazon has designed two new Trainium and Inferentia processors to power machine-learning applications.
- Anthropic's AI chatbot, Claude, competes with OpenAI's ChatGPT.
- The startup secured $450M from Google, Spark Capital, and Salesforce earlier this May at a $4B valuation.
- Anthropic had raised $1B from investors before the current round.
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| 5 | | Cybersecurity-focused VC firm Cyberstarts has secured capital commitments worth $480M toward a new opportunity fund. The new fund comes after Cyberstarts raised a $200M Opportunity Fund last year. With the new fund, the firm will double down on promising startups in its portfolio. More: - Cyberstarts is backed by Sequoia Capital and debuted with a $54M fund in 2018.
- The firm, founded by Gili Raanan, raised its second $100M fund to back seed and Series A stage startups in 2020.
- The firm has successfully exited cloud security startup Bionic, acquired by CrowdStrike for $350M, and Axis Cybersecurity, acquired by Hewlett Packard Enterprise earlier this year.
- Cyberstarts portfolio startups have a combined valuation of $30B.
- Notable startups in its portfolio include Fireblocks, Wiz, and Noname Security.
- Last Wednesday, the firm participated in Israeli cybersecurity startup Legit Security's $40M Series B funding round.
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| 6 | | Today's Funding: Biotech - Blood testing startup Adela closed a new $48M funding round from F-Prime Capital, OrbiMed, Deerfield Management, Decheng Capital, and RA Capital Management.
- Genome editing startup Hangzhou Qihan Biotech closed its pre-Series B funding round at $16M. Zhejiang Industrial Fund provided the funding with additional participation from other investors.
Energy - Continuum Industries, a British startup providing AI-powered infrastructure development platform for power, utility, and renewables companies, locked in $10M in Series A funding. Singular led the latest funding round with additional backing from Credo, Playfair, Techstart Ventures, and others.
Fintech - Financial wellbeing startup Mintago raised $4.75M in fresh funding led by BlackLion Ventures, with participation from Love Ventures and Cur8 Capital.
Logistics - Austrian storage and logistics startup Storebox extended its Series B funding round, bringing the total raised under the round to €67.5M ($71.7M). Existing backers Wille Finance, Kineo Capital, Urban Pioneers, ActivumSG, Hansi Hansmann, and Markus Ertler participated in the current round.
Media - Capital D invested $85M in British media startup Electrify Video Partners.
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- Digital health startups bagged $2.1B in VC funding through 146 deals in H1 2023, per Pitchbook. Funding declined 25% QoQ from 1.2B in Q1 to $0.9B in Q2.
- NATO's €1B ($1.06B) defense fund, which launched last year to boost the alliance's military technology edge, appointed Andrea Traversone to lead its operations as its managing partner. Traversone was previously with British VC firm Amadeus Capital Partners.
- Per a new report, The Definitive Guide to Venture Capital Fund-of-Funds 2023, 85% of European VC fund-of-funds surveyed by Mountside Ventures invested in emerging fund managers.
- Specialty startup financing provider Hercules Capital appointed Nikos Theodosopoulos as an independent member of its board of directors.
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Term of the Day Dry powder: Dry powder is a slang term used to denote the cash reserves available for investment with venture capital and private equity firms. Question of the Week Do you share details about your salary with your coworkers? 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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