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| Here's a look at today's VC briefing. - ⏳ Coatue slowed down dealmaking by 57% amidst economic challenges
- 🇺🇸 U.S. investors scaled back their participation in European VC rounds
- 💥 Energy sector emerged as a bright spot in M&A transactions with an 8.26% surge in activity
Thank you. Karan
p/karan-chafekar | |
| 1 | | Crossover investor Coatue Management participated in 29 VC deals last year, lowering its dealmaking by 57% compared to the 70 deals backed in 2022, per Crunchbase. Last year's tally signifies an 82% plunge over the record-high 168 deals inked in 2021. The slowed dealmaking does not imply a retreat in VC funding but merely hints at Coatue's conservative investment approach in response to the current economic environment. More: - The cumulative value of the deals Coatue participated in during 2023 was $4.1B, which is about one-tenth of the $43B deal value from 2021.
- Earlier this month, Coatue announced it is shutting down its European office to streamline its investment approach and prioritize domain expertise over regional coverage.
- Despite shutting its London office, Coatue remains committed to investing in European startups.
- General partner Michael Gilroy, who co-led its growth team, is also reportedly leaving the firm.
- To help startups avoid down rounds, the firm raised a $3B structured equity fund at the start of this month.
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| 2 | | U.S.-based investors participated in 1,863 European VC deals in 2023, which represents just 20% of the overall deal count, per Pitchbook. 
What the numbers say: In 2023, U.S.-based investors scaled back their participation in European VC deals by 40% compared to the previous year, where they backed 23% of the overall deals in the region. Despite the retreat, the participation levels remained the third-highest over the past decade. Thanks to Europe's growing VC environment, U.S.-based investors have significantly upped their participation each year from just 11% in 2013. What happened: The data indicates that U.S. investors are likely concentrating on their core domestic markets over backing foreign startups. The global economic volatility has lowered the risk appetite of foreign investors. While Coatue retreated from the region, others are bullish about European startups and are expanding their presence in the region despite the VC downturn. IVP and Andreessen Horowitz are setting up offices in Europe. Additionally, General Catalyst acquired German early-stage VC firm La Famiglia last October to increase its regional presence. | | | |
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| 3 | | The energy sector witnessed M&A transactions worth $380.8B in 2023, per Pitchbook. The energy sector emerged as a bright spot amidst the tepid M&A environment, with an 8.26% surge in activity compared to the previous year. Pitchbook senior analyst Jinny Choi believes the surge seen in the energy sector was driven by the spending spree of oil and gas producers looking to sustain their growth by investing in energy transition projects. More: - The most notable M&A deals in the energy sector included Exxon Mobil's $60B acquisition of shale driller Pioneer Natural Resources and Chevron's $53B purchase of Hess Corporation.
- Oil and gas producers continue to acquire rivals in a bid to expand market share and increase reserves.
Zoom out: - Worldwide M&A deal count in the tech industry dropped by 24%, while overall deal value dropped by about 45%.
- The IT industry witnessed the biggest drop in M&A transactions.
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| 4 | | Elon Musk's AI startup xAI has reportedly increased its fundraising target from $1B to $6B, per securities filing seen by Crunchbase. The Austin, Texas-based startup is aiming for a $20B valuation per FT. More: - The news comes after Musk denied securing commitments worth $500M from investors against its $1B target last week.
- Musk launched xAI last July and already launched its chatbot dubbed Grok last month.
- The startup has reportedly reached out to family offices in Hong Kong, investors in Japan and South Korea, and sovereign wealth funds in the Middle East to raise the funding, sources informed FT.
- Morgan Stanley is assisting xAI with the fundraising process.
Zoom out: - Investors remain bullish about AI startups, with several getting away with sky-high valuations.
- Rival Anthropic is reportedly targeting a 4.5x valuation jump from $4.1B to $18.4B at the upcoming $750M funding round, which Menlo Ventures is poised to lead.
- Canadian AI company Cohere is also looking to raise between $500M and $1B at a significantly higher valuation than its $2.2B valuation from last June's $270M Innovia Capital-led Series C round.
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| 5 | | Australian VC firm Virescent Ventures is looking to raise $200M in capital for its second Clean Energy Innovation Fund. The second fund will continue the agenda of the first fund, which is to invest in Australian startups that are helping the nation achieve its net-zero objectives. More: - The Clean Energy Finance Corporation (CEFC), which established Virescent in 2022, is set to be a cornerstone investor in the new fund with a commitment similar to that of the first fund.
- To date, the climate tech VC firm has backed 33 climate tech startups, with the value of its specialized portfolio exceeding $260M.
- 44% of Virescent's portfolio amount is invested in clean energy transition startups, with food and agriculture, circular economy, and mobility and smart cities accounting for 11%, 20%, and 18% of its portfolio, respectively.
- The firm will continue to invest along the same four key thematic areas with the second fund.
- Virescent has invested $18M in specialist seed funds and incubators.
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| 6 | | Today's Funding: Enterprise software - Regulatory and compliance software developer Thentia extended its Series B funding round by $38M. First Ascent Ventures, Spring Mountain Capital, BDC Capital, and Espresso Capital led the funding round.
- Process and e-filing technology startup Proof Technology closed its Series B funding round at $30.4M. Long Ridge Equity Partners led the round, with additional participation from Blue Heron Capital and The LegalTech Fund.
- German procurement process technology startup akirolabs bagged $5M in seed capital from HTGF, OTB Ventures, D11Z Ventures, and Serpentine Ventures.
Retail - Sterne India Pvt Ltd., the parent company behind retail technology platform Arzooo, extended its Series B round with an undisclosed sum provided by SBI Investment, Trifecta Leaders Fund, and 3Lines Venture Capital. The firm had raised $70M in the initial Series B round in 2022.
PropTech - AI-powered homeowner and builder collaboration platform Digg raised $7M in seed funding led by Oregon Venture Fund and Legacy Capital Ventures.
Transportation - BluSmart, an Indian ride-hailing startup with an all-electric vehicle fleet, raised $25M in mezzanine equity and debt funding from Swiss impact firm ResponsAbility.
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- Chamath Palihapitiya has reportedly canceled plans to raise a $1B early-stage investment fund for his VC firm Social Capital, according to Axios.
- SoftBank Ventures Asia is officially rebranding to SVBA, which symbolizes the change in ownership after The Edgeof acquired it from SoftBank Group Corp. last June.
- VCs invested $9.7B in Japanese startups in 2023, up 10% compared to the previous year, per Preqin and Nikkei Asia.
- Michael Calore joined 5AM Ventures as the head of investor relations. Calore previously led the investor relations division at RA Capital and was the head of capital development at Redesign Health.
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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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