| Here's a look at today's VC briefing. - 💰 Investors are raising new secondary funds to invest in startup stakes being sold at discounted rates
- 🔻 U.S. VC-backed startup acquisition drops to a decade low
- ⚓ Xerox anchors Myriad's debut fund, which aims to invest in AI and cleantech
Thank you. Karan
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| 1 | | Investors are raising new secondary funds to capitalize on the startup stakes being sold at a discount by fund managers looking to generate liquidity. Early-stage VC firm Launchbay Capital, previously known as Digital Horizon, held the first close of its debut secondary fund at 25% of the $100M target. The fund intends to buy stakes worth $2M to $10M in growth-stage startups that are making at least $50M in revenue. More: - Launchbay's secondary fund has an investment period of four years and will primarily invest in SaaS, fintech, AI, healthtech, spacetech, and blockchain sectors.
- The British VC firm has created an internal platform that benchmarks pre-IPO company valuations based on brokers' prices, revenue growth, and profitability.
- Launchbay hopes this platform will help minimize the secondary market investment risk.
Zoom out: - Investors expected exit opportunities to improve in the latter half of 2023 when Instacart and Klaviyo debuted on the public markets.
- However, the initial enthusiasm faded after the poor stock market performance of recent IPO debutants, forcing investors to look at alternative options, including secondary markets.
- Due to the prolonged VC market downturn, several limited partners are pressuring fund managers to generate liquidity, forcing the latter to turn to secondary markets to divest their portfolio stakes.
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| 2 | | Companies acquired nearly 700 U.S.-based VC-backed startups with a cumulative value of $26.7B in 2023, per Pitchbook. 
What the numbers say: The M&A transaction tally of 2023 is the lowest seen in the past decade and just a quarter of the record high of $103B seen in 2021. Law firm Debevoise & Plimpton's M&A partner Aly Love Simons expects an uptick in M&A transactions this year. However, investors should expect lower returns as buyers will still offer lower prices. What happened: VCs and industry experts were expecting M&A activity to rise for each of the past six quarters. However, the actual trend has been the reverse of expectations, possibly due to recession concerns, heightened interest rates, and antitrust risks. Another reason is that some startups could not sell at a valuation lower than their previous round due to complex cap table structures. Additionally, larger corporations have been focusing on profitability, which could have been why they haven't scooped up smaller startups. Even cash-rich tech companies are avoiding startup acquisitions as they do not want "to take on [a startup] that's burning cash right now," per NEA partner Vanessa Larco. | | | |
| 3 | | Crypto-focused VC firm 1RoundTable is planning to raise up to $800M in capital for a new fund aimed at backing growth-stage infrastructure, blockchain, and financial services startups. The firm plans to close Fund IV at a minimum of $200M in March 2024. More: - Despite the volatile conditions in the crypto market, 1RoundTable's CEO and managing partner Dan Tapiero believes now is the "single best time to invest in companies."
- Tapiero highlights that the deals currently available are incredible, as startup stakes are discounted by 50% to 80% compared to their previous rounds.
- The firm will also invest in blockchain gaming, NFTs, and metaverse startups.
- 1RoundTable has set a target of investing in 10 to 15 startups, hoping to gain board seats at five to 10 of those companies.
Zoom out: - Tapiero is also the CEO and managing partner of 10T Holdings, which has about $1.2B worth of assets under management and has backed prominent crypto startups such as Gemini, Kraken, Yuga Labs, and Animoca Brands.
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| 4 | | Former Xerox chief strategy officer Chris Fisher co-founded a new early-stage VC firm, Myriad Venture Partners, along with two Xerox Venture executives, Tim Chiang and Dean Mai. The firm held the first close of its debut fund at $100M, which is half the final close target of $200M. The new fund is anchored by printer giant Xerox, which is shutting its corporate VC division Xerox Ventures and will transfer its current portfolio to Myriad. More: - Myriad will have complete autonomy over investment decisions, which frees it from the limitations imposed by being tied to a corporate parent organization.
- The firm will invest across AI, cleantech, and enterprise B2B software domains.
- Myriad aims to write checks between $500,000 and $2.5M in seed-stage startups and between $6M and $7.5M in Series A companies.
- Myriad's portfolio consists of 14 startups, including Seurat Technologies, LinkSquares, Anvilogic, and Mojave.
- The newly launched firm has created an advisory council with Xerox, HCLTech, and other large corporations to facilitate collaborations between its portfolio companies and strategic partners.
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| 5 | | Climate tech investor Propeller closed its inaugural fund at $117M, per Axios. The firm expects to invest in 30 to 40 startups working on developing ocean technology to fight climate change. Individual check sizes will range between $500,000 and $2M. More: - The firm has already invested in 14 startups, eight of which are working on developing ocean carbon capture technology.
- Carbon capture companies backed include electrochemistry-based CO2 removal startup Ebb Carbon, river carbon removal startup CarbonRun, ocean sensor tech company Aquatic Labs, ocean imaging firm Coastal Carbon, and ocean carbon removal company Rewind.
- In addition, the firm has also backed mobile barge maker Circle Seafoods and electric hydrofoil boat maker Naiver.
- Amazon's Climate Pledge Fund's co-founder and leader, Rodrigo Prudencio, joined Propeller last year.
- Former HubSpot co-founder Brian Halligan co-founded Propeller in October 2022.
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| 6 | | Today's Funding: Battery - Portable battery systems startup Instagrid raised $95M in Series C funding led by Teachers' Venture Growth. Morgan Stanley Investment Management, Energy Impact Partners, SET Ventures, and Hightech Gründerfonds participated in the funding round.
Biotech - RNA drug developer Accent Therapeutics bagged a $75M Series C funding round led by Mirae Asset Capital Life Science. Bristol Myers Squibb and Johnson & Johnson's investment arm JJDC backed the funding round.
- Venture Investors Health Fund and State of Wisconsin Investment Board led a $55M Series C funding round into oncology imaging diagnostics platform maker Elephas Biosciences Corp. Existing investors Northpond Ventures, ARCH Ventures, Sands Capital, Moore Strategic Ventures, and others participated in the round.
Cybersecurity - Identity protection solutions startup Silverfort raised $116M in Series D funding. Brighton Park Capital led the round, with additional support from Acrew Capital, Citi Ventures, General Motors Ventures, Vintage Investment Partners, Singtel Innov8, and others.
Graphic Design - Web-based graphic design software developer Kittl raked in $36M capital through an IVP-led Series B funding round.
Healthcare - Forta Health, a startup democratizing access to healthcare by leveraging AI, secured $55M in Series A funding led by Insight Partners. Exor Ventures and Alumni Ventures supported the funding round.
Spacetech - Commercial orbital imagery startup Albedo closed its Series A-1 funding round at $35M. The up round was led by Standard Investments and supported by Booz Allen Ventures, Cubit Capital, Y Combinator, Initialized Capital, Republic Capital, and others.
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- SoftBank Vision Fund executive Rajeev Misra raised $6.8B in capital for his new firm called One Investment Management. Misra expects to close the first credit fund at more than $10B.
- Andreessen Horowitz's general partner, Connie Chan, is stepping down from the role. Chan joined the firm in 2011. Despite resigning, Chan will remain on the board of A16z's portfolio companies.
- Elevate Capital is planning to launch its third fund soon. Founder and managing partner Nitin Rai expects to raise $100M in capital, more than twice its $40M second fund.
- Japanese beauty giant Shiseido has already backed two startups since launching its Long Term Investments for the Future (LIFT) Ventures division last December. The two investments are American probiotic skincare startup Phyla and Australian male grooming brand Patricks.
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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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