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| Hey Insiders, Today's newsletter covers: - 57.7% drop in U.K. VC deal value in H1
- Drop in the number of mega funding rounds
- Pantera Capital's strategy pivot
If you find this newsletter useful, please share it with your friends and colleagues. Thank you. Karan
p/karan-chafekar | |
| 1 | | The amount of venture capital invested in U.K.-based startups dropped 57.7% YoY in H1 2023, per Pitchbook. British startups raised £7.9B ($9.8B) in H1, of which £4.3B ($5.4B) came from Q2 2023. More: - The fundraising so far this year contrasts with the record high of £29B (~$36B) reached in 2022.
- The primary factor behind this year's slowdown is a substantial 70% YoY reduction in funding for late-stage startups, which accounted for 40.5% of total deals.
- Early-stage investments also experienced a similar decline.
- However, the share of capital allocated to early-stage startups increased from 19.3% in 2022 to 27.9% this year.
- Acquisitions accounted for the majority of the 124 estimated exits so far this year, with only two IPO listings taking place this year, chief among which was World Chess' listing earlier this April.
- Although the number of exits remains consistent with last year's records, the value of VC-backed exits has declined to £1.3B ($1.6B).
Q: When can we expect VC funding for British startups to bounce back to normal levels? Join the conversation here. |     | |
| 2 | | Mega funding rounds of more than $100M are becoming increasingly scarce. This year, only 93 U.S.-based startups have secured such substantial funding between Series A and Series D rounds, in stark contrast to the past two years when more than 800 startups raised mega-rounds. 
What the numbers say: The global startup landscape mirrors this trend, with only 200 startups worldwide raising more than $100M funding rounds so far this year. In addition to the count, the average size of mega funding rounds has also decreased. U.S. startups have raised $17.2B from mega rounds this year, while global startups have secured $33.3B. Where to see the impact: The majority of the mega funding rounds in the U.S. this year were raised by startups in sustainability, AI, or healthcare sectors. The top three funding rounds are battery recycling startup Redwood Materials' $1B Series D, EV automaker Zeekr's $750M Series A, and battery materials startups Hithium Energy Storage's $620.9M Series C rounds. | | | |
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| 3 | | VC firm Pantera Capital is adjusting its investment strategy, per managing partner Paul Veradittakit. Notably, the firm is pivoting toward mid-stage crypto startups, a move designed to address the challenges faced by this segment during the ongoing funding downturn. This shift is pivotal given the substantial drop in valuations experienced by Series B to Series C startups within the crypto sector. More: - Per Veradittakit, investments for seed-stage crypto startups will remain slow for another year or so.
- Pantera Capital has $3.3B in assets under management.
- 47% of its capital has been invested outside the U.S.
- Per Veradittakit, the majority of crypto businesses are drawn to Asia due to its relatively stable regulatory environment and large retail user base.
Zoom out: - In Q2 2023, early-stage and late-stage crypto startup valuations slipped 20.3% and 15.8%, respectively.
- In the same period, valuations of seed-stage startups increased by 18.1%.
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| 4 | | The California State Teachers' Retirement System (CalSTRS) has entrusted Sapphire Partners with the responsibility to manage the investments under its five New and Next Generation Manager Funds, collectively representing $1.4B in assets under management. The specialized funds were launched to invest in funds raised by emerging managers focused on early-stage venture capital. The move is aimed at addressing the fundraising challenges faced by emerging fund managers in recent times. More: - CalSTRS is one of America's largest public pension plans, with over $321B in assets under management.
- Fortune reports that CalSTRS had initially hired HarbourVest, Muller & Monroe, and Invesco to oversee the investments for its New and Next Generation Manager Funds.
- The firm brought on Sapphire Partners as Invesco exited this line of business.
Zoom out: - 91% of emerging fund managers have reported that it was difficult or very difficult to raise funds, per the Emerging Fund Manager Report of Q1 2023 published by Signature Block.
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| 5 | | Palo Alto, California-based Web3 VC firm Electric Capital has set a target of $300M for its third core early-stage crypto fund, per SEC filings seen by Axios. The new fund's target is $100M less than its second fund. The Electric Capital Venture Fund III will offer pooled investment fund interests as a type of security. More: - The firm raised $1B worth of funds in March 2022, of which $600M was earmarked exclusively to invest in digital tokens and the remaining $400M to invest in startups.
- The new fund does not appear to have a digital token investment tranche.
- The firm likely has enough capital left over from previous funds to invest in digital tokens, per Axios.
- The firm raised a $110M fund in 2020.
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| 6 | | Today's Funding: Adtech - Adtech data and software solutions firm VideoAmp raised $150M in Series G funding led by Vista Credit Partners.
Advanced materials - Waste-derived advanced materials manufacturer UBQ Materials closed $70M in fresh funding. Eden Global Partners led the fundraising, with participation from TPG Rise Climate, Battery Ventures, and M&G's Catalyst strategy.
AI - Conversational AI platform Druid secured $30M in Series B funding led by TQ Ventures. Smedvig Capital, GapMinder, Hoxton Ventures, and Karma Ventures participated in the funding round.
Data - TPG Growth will invest $336M in Series B funding into data management startup Denodo.
Fintech - French embedded fintech startup Swan bagged $39.6M (€37M) in fresh funding. Lakestar led the Series B round.
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- Seed-stage investor Uncork Capital hired Amy Saper as its fifth partner. Previously, Saper was a partner at Accel, specializing in early-stage investments in fintech and B2B software.
- Inovia Capital closed its first Discovery Fund at $25M (CA$34M). The fund will invest in Canadian VC fund managers investing in pre-seed and seed-stage startups.
- Intercity bus transportation startup Kolors is acquiring B2B vanpooling service provider Urbvan for $12M in cash.
- 9900 Capital raised $100M for its debut fund aimed at tackling the largest global problems, including climate change. The firm is led by managing partner Rory Mounsey-Heysham, who was previously an investor at Gates Foundation.
- Finnish VC firm NordicNinja launched a €200M ($215M) second fund with Japan Bank of International Cooperation joining as a cornerstone investor.
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Term of the Day Return on investment: Return on investment measures the amount of realized value produced minus the cost to achieve that result. Question of the Week Do you share details about your salary with your coworkers? Join the conversation |
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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