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| Hey Insiders, Today's newsletter covers: - Industry Ventures' $1.7B secondary funds
- Declining party rounds due to VC funding dip
- Increase in private debt in H1 as it crosses last year's tally
If you find this newsletter useful, please share it with your friends and colleagues. Thank you. Karan
p/karan-chafekar | |
| 1 | | Industry Ventures secured $1.7B in capital commitments for two new secondary funds. $1.45B of the capital is earmarked for the Industry Ventures Secondary X fund, which will invest in secondary stakes of venture funds and private startups. The remaining $260M is for an Industry Ventures Tech Buyout II fund to acquire VC funds less than $750M in size and invest in startups. More: - The 10th secondary fund exceeded its initial target of $1B, making it its largest fund to date.
- The fund is 70% larger than its predecessor, which closed at $850M in 2021.
- Industry Ventures intends to take advantage of the drop in valuations to scoop up startup stakes at a steep discount.
- The new funds pushed the firm's assets under management over the $7B mark.
- The firm has made 600 investments to date, which includes taking stakes in over 400 VC funds and direct startup stakes in 170 businesses.
- Speaking about the activity in the secondary market, CEO and founder Hans Swildens said, "There's a lot of activity, but it's still about a third of what it should be. I think we're nine months into what will be a three-year normalization process."
Q: Will secondary investors still be able to scoop up stakes at discounted valuations now that the VC funding dip has shown signs of easing? Join the conversation here. |     | |
| 2 | | Party rounds — where startups raise capital from multiple investors without a designated lead investor — have declined due to the VC funding dip, per Pitchbook. 
What the numbers say: The average number of investors in 2023 declined to 3.53 per round, down from the peak of 5.84 investors per deal in 2021. The recent investor participation number is the lowest in over a decade. Relevance: AbstractOps CEO Hari Raghavan said, "I think that party rounds are a uniquely bull market phenomenon." The recent bull market had tipped the deal terms in favor of founders, as more investors were vying for rounds. This allowed them to have greater control over their firms since none of the party rounds investors would have a large enough share to take a board seat. Why it matters: VSC Ventures' general partner Jay Kapoor criticized party rounds as investors are unable to hold the company accountable due to the lack of a lead investor. Additionally, Kapoor says, "You can't expect loyalty or much assistance from your investors because they've likely got much less capital invested in you than their other portfolio companies." Despite the dip in such rounds, investors might still participate in party rounds in the generative AI sector, as investing in such rounds gives them more knowledge about the industry. | | | |
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| 3 | | Private debt funds secured commitments worth $94.9B in H1 2023, crossing last year's tally of $91.4B across the same period, per Pitchbook. Since fundraising is typically stronger in the second half of the year, Pitchbook believes that the yearly total at the end of 2023 will cross the $200B mark for the fourth consecutive year. More: - Private credit funds have increased their capital allocation, growing their presence in the market that is largely dominated by banks.
- Private credit funds have overtaken venture capital funds, firmly claiming the second spot in fundraising, right behind private equity.
- Emerging managers bagged a 12.8% share of the total capital raised, higher than their 7.5% share in 2022.
- Fidelity, Eaton Vance, KKR, PIMCO, and Variant launched new private credit funds in H1 2023.
- The assets under management for institutional and retail private credit funds now stand at more than $1.75T.
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| 4 | | Billionaire Xavier Niel is set to invest €200M ($212M) to create an AI research lab in Paris and to invest in startups. Niel has launched the initiative to lure back top French AI engineers who have left abroad to work for big tech firms. With the new initiative, Niel hopes to bridge the AI gap with other nations. More: - Neil said, "We don't want our cloud and AI to be based on algorithms or machines localized in other countries."
- Half of the funding will be invested in the AI research lab, codenamed "Sphere," with the other half to invest in startups directly.
- Neil's telecommunications group, Iliad, will equip the lab with Nvidia's DG SuperPOD graphics cards with the aim of building the most powerful supercomputer in Europe and the 15th most powerful globally.
- Iliad's cloud-computing subsidiary Scaleway will use the research lab to train its large-language models.
- Neil is unfazed by the funding gap for AI startups overseas, adding that most of the AI startups need money to pay for the processors and "not so much the research."
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| 5 | | Vishal Maini, a former researcher at Google's AI division DeepMind, founded a new venture fund to back AI startups. The VC fund, called Mythos Ventures, has already secured $14M in commitments from four dozen investors, per an SEC filing seen by Bloomberg. More: - Maini said, "I was thinking about space exploration, climate change, longevity, and health care, and I keep coming back to AI; It's the transformational technology for all of this."
- The firm will back "pro-social technology" startups that transform industries, with safe and ethical development of AI being a top priority.
- The firm intends to write seed-stage checks between $100,000 to $1M.
- Mythos Ventures has already backed four startups, including robotic stone carving machine maker Monumental Labs, real estate valuation firm ValueBase, and research assistant Elicit.
- Earlier this week, Mythos participated in Elicit's $9M funding round led by VC firm Fifty Years.
- Metaplanet Holdings, Delphi Ventures, Coin Operated Group, and others have backed Mythos Ventures fund.
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| 6 | | Today's Funding: AI - AI model testing and validation solution Kolena raised $15M in Series A funding led by Lobby Capital. SignalFire, BloombergBeta, 11.2 Capital, and Zero Prime Ventures participated in the round.
Biotech - Avalyn Pharma Inc., a biotech startup developing targeted inhalation therapies for pulmonary diseases, closed its Series C funding round at $175M. Perceptive Xontogeny Venture Funds, SR One, and Eventide Asset Management co-led the new funding round.
Energy - Power line infrastructure modeling, simulation, and analysis platform Neara extended its Series B round by $10M, bringing the total raised under the round to $24M. Prosus Ventures, Skip Capital, and Square Peg Capital provided the capital.
Transportation - Gringo, an app for fine payment, taxes, insurance, and loans for Brazilian drivers, raised $30M in Series C funding bringing its total raised to date to $80M. Valor Capital led the funding round, supported by existing investors Kaszek, VEF, Piton, ONE VC, ICU Ventures, and Actyus.
Waste management - Vorwerk Ventures led a €14M ($14.94M) Series A funding into waste management and recycling platform Resourcify.
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- Chinese social e-commerce platform Xiaohongshu's existing investors sold shares to Sequoia Capital China at a valuation of $14B, 30% less than its peak valuation of $20B in late 2021.
- T-Mobile is launching a second corporate venture fund to make strategic investments in startups that will complement the mobile network company's core products and services, expand its business capabilities, create new lines of businesses, and accelerate further development of network and technology. The fund's size was not disclosed.
- Indian edtech startup Byju's is reportedly planning to lay off as many as 5,000 employees. The layoffs are part of a broader restructuring initiative for Byju's, which is under pressure from lenders to cut costs.
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Term of the Day Current ratio: The current ratio, calculated by dividing a company’s assets by liabilities, shows a company’s ability to pay its short-term debts with its assets. 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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