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| Here's a look at today's VC briefing. - ✂️ Hedge funds are offloading their VC stakes to cut losses in the venture asset class
- 📉 Biggest VC exits in 2023 occurred at significantly discounted valuations
- 🚀 SumUp defies VC funding dip with a €285M round
Thank you. Karan
p/karan-chafekar | |
| 1 | | In the current down market, several hedge funds are offloading their VC portfolio stakes in the secondary markets to minimize losses. The four most prominent investors, Tiger Global, D1 Capital Partners, Dragoneer Investment Group, and Coatue, have participated in just 76 VC deals this year, representing an 86% decline since their 436 deals in 2022. More: - While a few hedge funds launched dedicated 10-year vehicles to invest in VC, several invested through their perpetual public and private fund, which allows limited partners to exit their stakes annually or quarterly.
- As LPs are now withdrawing their stakes due to the volatile market conditions, hedge funds are scrambling to maintain sufficient cash to return to investors.
- Though public stocks can be sold instantly, private share sales take time.
- Since liquidating stocks in the secondary markets takes time and hedge funds are unwilling to liquidate at significantly lower valuations, few of them are taking a loan against future secondary sales.
Zoom out: - Hedge funds significantly increased their VC investments during the pandemic, which fueled the tech dealmaking boom.
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| 2 | | Several venture-backed startups that recently went public or were acquired fetched far lower valuations than their peaks, per Crunchbase. 
What the numbers say: The firm that saw the largest markdown was grocery delivery platform Instacart, which went public in September at an initial valuation of $8.3B, significantly lower than its peak valuation of $39B. The firm's market capitalization has continued to drop since its public debut, with the current share prices giving it a valuation of $6.6B. Digital mortgage provider Better.com, which went public in August, has a market cap of around $360M. The firm was valued at $4B in 2020 and was about to go public via a SPAC merger in 2021 at a $7.7B valuation. Relevance: Some venture-backed startups were able to get away with modest markdowns. Marketing automation provider Klaviyo debuted at $9.5B, just shy of its peak valuation of $9.5B. Atlassian acquired Loom for $975M in October, which is 35% lower than its peak valuation of $1.5B from its Series C round in 2021. Travelers Insurance acquired Corvus Insurance for $435M, lower than its previous price of $750M. What happened: The valuation markdowns are not surprising, given the current market conditions. Only generative AI and obesity therapeutics sectors are defying the VC slump with large and lucrative exits. | | | |
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| 3 | | VCs in Southeast Asia are turning to early-stage deals in the absence of exits due to heightened interest rates and inflation. This has caused a 31% increase in seed funding deal sizes from the end of 2019 to Q3 2023, per Preqin data reviewed by Business Times. In the same period, Series C deal sizes increased by 112%. More: - Between Q1 and Q3 2023, the region saw 44 exits, which generated $1.03B in exit value.
- In comparison, there were 76 exits in 2022 that generated $4.1B in exit value.
- Due to the VC slump, average exit values dropped from $51.5M in 2022 to $22.7M this year.
- Vertex Ventures partner Gary Khoeng said that Southeast Asia has limited exit opportunities as its capital markets are not sufficiently mature.
Zoom out: - ASEAN investors had $7.4B in dry powder available for deployment at the end of March 2023, up 25% QoQ.
- Earlier this April, Vertex Holdings raised $541M for its fifth Southeast Asia and India-focused VC fund, making it the fourth-largest ASEAN-focused fund in the last four years and the fifth-largest in a decade.
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| 4 | | British fintech startup SumUp bagged €285M ($306M) in equity and debt funding. The round was a flat round, which helped the firm to keep the same $8.5B valuation as its previous round from June 2022. The firm will use the proceeds to fuel international expansion and develop new products. More: - Sixth Street Growth led the round, joined by Bain Capital Tech Opportunities, Fin Capital, and Liquidity Group.
- SumUp has provided online payment services and card readers to more than 4 million merchants across 36 countries.
- It recently commenced operations in Australia.
- The firm reported a €1.2M ($1.3M) profit on €150M ($161.4M) revenue in 2022.
- In early 2022, the firm was targeting a valuation of $22B.
- Investor Groupon liquidated some shares this October, giving the startup an implied valuation of $4.1B.
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| 5 | | Harpoon Ventures secured $125M in capital commitments towards its fourth fund. The firm intends to back startups developing commercial products that can also be sold to federal agencies. More: - SEC filings show that Harpoon initially intended to raise $225M for the latest fund.
- The current fund is slightly larger than its predecessor, which closed at $122.5M in 2021.
- Harpoon has backed four startups with the new fund, including cleantech startup Solugen and satellite company Astranis Space Technologies Corp., which was valued at $1.6B.
- Instead of encashing its stake in a few years, Haroon holds on to the shares perpetually, said founder Larsen Jensen, a former Navy SEAL and venture capitalist at Andreessen Horowitz and Lightspeed Venture Partners.
- Harpoon is backed by Andreessen Horowitz veteran Peter Levine and former Olympic swimmer Michael Phelps.
Zoom out: - U.S.-based VC firms have raised funds worth $42.7B in the first nine months of this year, putting it on track to have the lowest full-year total since 2017, per Pitchbook.
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| 6 | | Today's Funding: AI - Andreessen Horowitz and Lightspeed Ventures led a €385M ($415M) funding round into French AI startup Mistral AI, valuing the seven-month-old startup at $2B. Salesforce, BNP Paribas, CMA CGM, General Catalyst, Elad Gil, Emerson Collective, Conviction, Bpifrance, and others participated in the round.
Biotech - French gene-editing company Eligo Bioscience raised $30M in Series B funding led by Sanofi Ventures. New investor Bpifrance participated in the round along with returning investors Khosla Ventures and Seventure Partners.
- Hoba Therapeutics, a startup developing novel therapeutic proteins for patients with chronic neuropathic pain and hearing loss, bagged €23M ($24.75M) in Series A funding. Indaco Venture Partners and Medical Incubator Japan co-led the round, joined by Novo Holdings, Eir Ventures, and the Export and Investment fund of Denmark.
Fintech - GFO-X, a regulated and centrally cleared trading platform for digital asset derivatives, closed its Series B funding round at $30M. M&G Plc's asset management arm, M&G Investment, led the round.
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| 7 | | Quick Hits: - Want to master Kubernetes? The Kubernetes Cookbook is a must-have guide to discover guidance on cloud architecture analytics, optimization, governance, and more.*
- Consumer-focused VC firm Sauce.vc acquired a 4% stake in GRM Foodkraft Pvt. Ltd., the subsidiary of GRM Overseas. Sauce.vc acquired a 3% stake directly from the company and the other 1% from other stakeholders. Financial details of the transaction were not disclosed.
- Chinese VC firm Addor Capital is looking to raise a $350.3M (2.5B yuan) fund to invest in the green-energy industry.
- AI startup OpenAI hired WilmerHale attorneys Anjan Sahni and Hallie B. Levin to investigate the events that led to the ouster of CEO Sam Altman.
- British VC firm 4Bio Capital will hold the final close of its third fund in H1 2024. The new fund aims to back advanced therapeutic startups in Asia.
- Bestselling book on alternative investing offers the first chapter free for a limited time. "Money Shackles" innovates the way you think about money.*
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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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