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| Hey Insiders, Here are the latest stories: - California passes new law asking VC firms to report investment diversity information
- Generative AI deal count drops in Q3
- M&A, IPO, and VC funding drops for medtech startups
If you find this newsletter useful, please share it with your friends and colleagues. Thank you. Karan
p/karan-chafekar | |
| 1 | | California Gov. Gavin Newsom has officially signed Senate Bill 54 into law. Starting March 1, 2025, venture capital firms operating in the state will need to disclose the diversity metrics of investments. With the new law, VC firms are required to disclose the race, disability status, and sexual orientation information of the founders they back. More: - The new law is aimed at increasing transparency in the allocation of VC investment and promoting diversity within the VC sector.
- "This bill resonates deeply with my commitment to advance equity and provide for greater economic empowerment of historically underrepresented communities," Newsom said.
- The new bill initially received pushback from the National Venture Capital Association and TechNet, with the former arguing that the bill could produce "misleading and counterproductive data that would hurt the cause of diversity, equity, and inclusion efforts while creating unnecessary costs and risk for California venture capitalists."
Zoom out: - Startups led by women, Black, and Latinx founders receive less than 5% of the total VC funding.
Q: Will the new Senate Bill 54 push VC firms to increase their diversity and allocate more capital to underrepresented founders? Join the conversation here. |     | |
| 2 | | 101 VC deals for the generative AI sector were closed in Q3 2023, 29% lower than the preceding quarter, per Pitchbook. 
What the numbers say: Despite the drop in deal count, the deal value was higher than the previous quarter, thanks to Anthropic's $4B round led by Amazon. Without Anthropic's round, the deal value would have been lower than the last quarter. What happened: Index Ventures' partner Bryan Offutt said, "Momentum is definitely waning as the market comes back to earth." Generative AI has been one of the sectors to defy the VC funding dip. However, investors are now coming to the realization that some early companies were interesting experiments but not great businesses, per NFX general partner Pate Flint. Flint added, "The retention and monetization are just not there." Where to see the impact: The larger deals in the sector are driven by corporate entities rather than investors. Sierra Ventures' managing director, Tim Guleri, remains optimistic about the potential of generative AI, adding, "The impact we need to be looking through is not through weeks or months, but quarters and years." | | | |
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| 3 | | Per EY's Pulse of the Industry report, VC funding, M&As, and IPOs have dropped significantly for the medtech sector. Only four companies have gone public in the last 12 months leading up to June. M&A transaction values have declined by 44% compared to the previous 12 months, as VC funding has slumped 21% to hit the lowest levels since 2016. More: - The challenging scenario is further compounded by the medtech industry's revenue growth rate, which has decelerated to a mere 0.4%, a significant slowdown from the already modest 3.5% annual growth rate observed in 2022.
- The medtech industry generated $573B in revenue in 2022.
- The prevailing market conditions have made it difficult for startups to bring their innovative technologies to the market without sufficient capital.
- However, investors are cautiously optimistic about the prospects going into 2024.
- EY's life sciences partner, John Babitt, expects the market conditions to improve in the last quarter of 2023 and next year.
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| 4 | | The Massachusetts Institute of Technology's endowment lost 2.9% on its investments, dropping the value of its endowment fund from $24.6B in 2022 to $23.5B at the end of the recent fiscal year. MIT said, "retrenchment in the valuations of venture capital portfolio companies affected the performance." More: - The VC funding dip has severely impacted endowments, which have heavily invested in the sector.
- Endowments received median returns of 9.3% in the last fiscal year ending June, per the Wilshire Trust Universe Comparison Service.
- The dip impacted larger endowments more than smaller ones.
- Endowments greater than $500M received median returns of 6.2%, whereas smaller endowments less than $500M bagged 10% returns on their investments.
Zoom out: - Duke University disclosed it lost 1% on investments in the same period.
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| 5 | | Cloud computing startup Lambda Labs is reportedly in advanced talks with investors to raise $300M in funding, sources informed The Information. Billionaire Thomas Tull's U.S. Innovation Technology Fund is reportedly leading the round, with SoftBank set to participate as well. The firm is targeting a valuation of $1.5B. More: - Lambda Labs rents out servers running Nvidia GPU chips for running deep learning applications.
- The firm also rents co-location space in data centers in San Francisco.
- Nvidia, which was considering investing in the round, is not expected to join the funding round.
- Lambda Labs expects to bring in $250M in revenue in 2023 and nearly $600M in 2024.
- The firm has raised $112.2M in total funding to date, the last of which came through a $44M Series B round led by Mercato Partners in March 2023.
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| 6 | | Today's Funding: Cybersecurity - The founding team of cloud-native security pioneer Twistlock is back with a new security governance startup called Gutsy. The firm emerged from stealth with a $51M seed funding round led by YL Ventures and Mayfield.
Database - Modern data management platform TileDB closed its Series B funding round at $34M. AlleyCorp led the funding with participation from Two Bear Capital, Nexus Venture Partners, Intel Capital, Lockheed Martin Ventures, NTT Docomo Ventures, and others.
Healthcare - CommonsClinic, a healthcare startup offering expert care for spine, orthopedic, and pain management, raised $19.5M in Series A funding led by RA Capital Management. Floating Point, Courtside Ventures, and Time BioVentures participated in the round.
- FluidAI Medical, a company that leverages AI to detect postoperative leaks, secured $15M in Series A funding led by SOSV and Graphene Ventures.
Software - Nx, a software platform that helps developers manage their codebases, closed its Series A funding round at $16M. Nexus Venture Partners and Andreessen Horowitz led the funding.
Transportation - Personal eVTOL aircraft startup Jetson raised $15M in seed funding.
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- Global venture capital funding for crypto startups fell by 63% YoY to just $2B in Q3 2023, per Bloomberg.
- Grand Ventures launched its second $50M fund to invest in early-stage companies across fintech, DevOps, and supply chain sectors.
- Venture capital firm ALIAVIA Ventures secured $8.7M capital for its debut fund, which aims to exclusively back female tech-founded startups across Australia and the U.S.
- JPMorgan Chase's asset management arm is opening up its private equity investments to individual investors with a perpetual fund. Individual investors will need to make a minimum commitment of $25,000 to participate in the fund and can liquidate their holdings every quarter.
- monday.com and BILL drove acquisition, engagement, and retention by adding Cord's SDK to their product. You can, too.*
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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