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| Here's a look at today's VC briefing. - Investors look to scoop up startups shunned by VCs amidst the funding slump
- U.S. VC valuations continue downward trajectory as the number of down rounds increases
- WeWork's failure exacerbates SoftBank's losses
Thank you. Karan
p/karan-chafekar | |
| 1 | | Investors are raising funds to acquire promising startups shunned by VCs with a view to turn around the business. With interest rates rising and private valuations slumping, VCs are pulling back from unprofitable startups, leaving many at risk of running out of cash. New groups like Resurge Growth Partners aim to buy majority stakes in these startups and operationally revamp them. More: - Resurge, started by investors Oren Peleg and Eyal Malinger, is raising a €120M ($128M) fund to buy startups.
- Matthew Bradley left VC firm Forward Partners to establish takeover firm Tikto Capital last year.
- Even veteran investors, such as Oaktree Capital Management and Beringea, see an opportunity to scoop up stakes at a discount and are looking to make investments ranging from €10M ($10.7M) to €30M ($32.1M).
Zoom out: - VCs have drastically slowed down their investment pace this year, investing just $73B globally in Q3, down from $106B invested in the same period last year.
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| 2 | | 17.1% of all U.S. VC funding rounds that closed in Q3 2023 were down rounds, per Pitchbook's latest U.S. Valuations report. 
What the numbers say: The percentage of down rounds completed in Q3 was the highest across the last 10 years. Down rounds have steadily increased each quarter, with Q2 and Q1 witnessing 13.5% and 9.3% such rounds, respectively. 26.4% of all deals closed so far this year were done at flat or reduced valuations. Relevance: At the early stage, median pre-money valuations of U.S. startups remained at $40M, in line with the past year's figures. Meanwhile, median pre-money valuations of late-stage startups dropped 15.1% YoY to $52M in Q3. Venture growth stage startups have witnessed the largest contraction in valuations so far this year. Median pre-money valuations of U.S. venture growth startups YTD was $129.6M, down 65.2% compared to the record-setting highs of 2021. However, median valuations more than doubled in Q3 to $260M. | | | |
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| 3 | | SoftBank reported a substantial $6.2B loss in Q3, highlighting its ongoing struggles with Vision Fund investments. The losses were partly driven by the bankruptcy filing of one of SoftBank's most prized and funded startups, WeWork. Per Pitchbook, the total fair value of SoftBank's Vision Fund 1 and 2 portfolio has now slumped to $42.3B and $28.5B, respectively. More: - Less than half of SoftBank Vision Fund 1's public companies have returned a gross multiple on capital invested (MOIC).
- DoorDash is currently the top-performing public company in SoftBank's portfolio, returning an 11.1x MOIC, representing $7.5B in returns over the $680M investment.
- SoftBank realized a $307M gain on its $31M investment in gene-sequencing firm 10x Genomics, representing a 10.9x MOIC.
- The majority of SoftBank's public companies have done poorly, reckons Pitchbook.
- In addition to WeWork, SoftBank also lost its $1.2B investment in smart window company View.
- Despite the grim outlook, SoftBank still has a couple of high-performing startups in its portfolio, including Indian e-commerce marketplace Flipkart and TikTok-owner ByteDance, that will likely deliver solid returns.
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| 4 | | Fidelity Management & Research has marked down the value of its investment in indoor farming startup Bowery Farming by more than 85%, per regulatory filings seen by Pitchbook. The startup is facing fundraising challenges and could only raise $85M at the first close of its Series D round, much lower than its target of $220M. More: - The funding round's target was already lower than its $320M Series C1 round from 2021, which Fidelity led at a valuation of $2.32B.
- Due to a cash crunch, the firm announced two rounds of layoffs, the latest of which was announced in October, less than five months after the first.
- Bowery also postponed opening two new farming facilities in Georgia and Texas.
Zoom out: - VCs invested $275.5M into indoor farming startups in the first three quarters of this year, dropping 87% YoY compared to the $2.1B invested in the same time last year.
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| 5 | | Alphabet's Google is reportedly planning to invest "millions of dollars" into AI chatbot startup Character.AI, two sources informed Reuters. Another source said that the investment could be structured as a convertible note. More: - Character.AI allows people to chat with virtual versions of celebrities or fictional characters.
- Within the first six months since its launch, the firm's website received 100 million monthly visits.
- The firm is growing in popularity amongst users between the ages of 18 and 24, which account for 60% of its web traffic.
- Character.AI is also looking to raise equity funding at a valuation of $5B.
- The firm last raised a $150M funding round led by Andreessen Horowitz at a $1B valuation earlier this year.
Zoom out: - Google recently invested $2B in AI startup Anthropic in the form of convertible notes.
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| 6 | | Today's Funding: AR/ VR - Surglasses, a startup making augmented reality surgical products for orthopedics and neurosurgery, secured a $6.5M pre-Series A funding led by Taiwania Capital.
Biotech - Biotech startup ViaNautis, formerly known as SomaServe, closed its Series A funding round at $25M (£20M). The round was led by 4BIO Capital, BGF, and UCB Ventures, with additional support from Cystic Fibrosis Foundation, Eli Lilly, Origin Capital, Meltwind, and O2H.
Enterprise software - Global venue management software platform maker Roller raised $50M in fresh funding led by Insight Partners.
Fintech - BondEvalue, a fintech startup that operates the digital bond exchange BondbloX, bagged $6M in fresh funding. Beacon Venture Capital led the Series B round, with Thailand's Kasikornbank, MassMutual Ventures, and Citigroup participating in the round.
Robotics - AI-powered robotics startup Aigen raised a Series A funding round worth $12M. ReGen Ventures led the funding round, along with NEA, Cleveland Avenue, Incite, and Susquehanna Private Equity.
SpaceTech - End-to-end space transportation company Firefly Aerospace raised an undisclosed sum through a Series C round that gave the firm a pre-money valuation of $1.5B. AE Industrial Partners led the round, which was backed by Mitsui & Co.
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| 7 | | Quick Hits: - Elevate your Kubernetes skills with this must-read resource for building cloud-native applications. Get your Kubernetes Cookbook today.*
- According to Pitchbook, Sequoia was able to buck the VC funding slump trend and mark up the value of its funds due to the recent upswing in public stocks and the valuation surge of a few strong-performing startups, particularly in the AI sector. Additionally, several portfolio companies were able to retain or increase their valuations through insider-led rounds.
- VC firm SOSV invested $180,000 each into five startups in Pakistan: Truckistan, BusCaro, Metamorph, Umrah Companions, and MedIQ Smart Healthcare.
- Lloyd's of London decided to abandon the proposed SPAC merger of Financials Acquisitions Corp. with the newly formed insurance venture London Innovation Underwriters and liquidate the SPAC entity due to volatile capital market conditions.
- Navot Volk joined Ground Up Ventures as a full-time venture partner. Volk will focus on investing in the Israeli tech ecosystem.
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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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