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| Here's a look at today's VC briefing. - 📝 Down rounds increased while VC conditions continued to remain investor-friendly
- 📉 VC fund distributions slumped to a 14-year low at the end of 2023
- 🧬 European VC firm Medixci merged six portfolio biotech startups into a new company
Thank you. Karan
p/karan-chafekar | |
| 1 | | While valuations showed a slight uptick at the end of last year, the number of down rounds continued to increase. Deal terms remain investor-friendly as VC firms continue to demand investor protection after learning from past experiences of investing at heightened valuations. The investor-friendly terms serve as a catalyst for deal activity and help keep a steady flow of investment opportunities in the market. More: - Investors are strategically investing in relatively stronger companies with solid growth metrics and a clear trajectory toward profitability to mitigate risks in the current economic environment.
- Deal terms will remain in investors' favor until investment returns and exit opportunities improve.
Zoom out: - Valuations started increasing at the end of last year due to the decent performance of public small caps in Q4, the job growth seen in the U.S. economy, and the positive consumer sentiment.
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| 2 | | Returns distributed by U.S. VC funds to limited partners slumped to the lowest point in 14 years in Q4 2023, per Pitchbook. 
What the numbers say: Average U.S. VC fund distributions began slumping after reaching a peak of 32% in Q2 2022. Since then, the returns have dipped every quarter except for a slight uptick in Q1 2023. What happened: Investors are having difficulty encashing their returns due to a lack of exit options. This directly impacts the dry powder available to reinvest in other VC funds. Due to economic volatility, LPs are less inclined to invest in emerging fund managers and VC firms with a poor track record of returns. Sapphire Partners' partner, Laura Thompson, said, "At times like this, LPs reward track records with DPI and a lot of history." Where to see the impact: All signs point to a potential revival in IPO listings in 2024. Companies will certainly be lining up their IPOs in the second half of this year and early next year, per Jefferies TMT investment banking chair Ron Eliasek. An increase in the number of IPOs should help improve VC fund distributions. Until then, VCs suffering from low distributed to paid-in capital returns might have to offload portfolio stakes in the secondary markets to generate some returns for LPs. | | | |
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| 3 | | London, U.K.-based VC firm Medixci has merged six dermatology-focused portfolio startups into a new entity called Alys Pharmaceuticals. Medixci has armed the new biotech startup with $100M in seed funding to make it "a new R&D-centric multi-platform pipeline in immuno-dermatology." More: - The six startups being merged include siRNA-based dermatology therapies startup Aldena Therapeutics, radiotherapy side effects research firm Graegis Pharmaceuticals, cell-driven disorder-focused precision biologic therapies firm Granular Therapeutics, Klirna Biotech, Nira Biosciences, and Vimela Therapeutics.
- Aldena had raised a $30M funding round from Medixci less than a year ago.
- The newly formed merged entity already has a "dozen active programs" and will focus on new therapies for inflammatory diseases, autoimmune diseases, dermatology supportive care for cancer patients, and rare skin conditions in the future.
- Medixci aims to raise $200M in financing from a Series A round later this year.
- Galderma's global head of prescription medicines, Thibaud Portal, co-founded the firm and will lead it as its chief operating officer.
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| 4 | | Indian VC firm Peak XV is taking about 60 founders on a trip to Silicon Valley this week to meet industry leaders and visit AI research centers. The trip, dubbed "Immersion Week," is Peak XV's attempt to broaden its offerings as competition intensifies globally for AI startups. More: - Founders on the trip will get to interact with executives from OpenAI and Nvidia, Sequoia Capital's partner Doug Leone, Uniphore chief Umesh Sachdev, and DoorDash advisor Gokul Rajaram, per the email sent to portfolio startup founders.
- Founders from India, Southeast Asia, and Australia are set to participate in the trip, which will be led by Peak XV's managing directors Shailendra Singh, Rajan Anandan, Harshjit Sethi, Ashish Agrawal, and Surge partner Pieter Kemps.
- Fresh from its split from Sequoia Capital last year, Peak XV hopes the trip provides founders with ideas to build new AI-powered capabilities and find customers overseas.
- The VC firm has about $2.5B dry powder available to invest in India and Southeast Asia.
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| 5 | | African VC and PE firms raised funds worth $2.4B from 43 deals in 2023, per a Briter Bridges report cited by TechCrunch. Some established and emerging African VC funds were able to defy the challenging fundraising climate last year to close large funds. Novastar Ventures partner Brian Odhiambo attributes the increased investment allocations for Africa to the continent's growing young demographic, expansive arable land, vast carbon sink reserves, and rapid urbanization. More: - Odhiambo believes there are vast investment opportunities in fintech, climate tech, energy, and agricultural sectors, as they are all ripe for disruption.
- Meanwhile, Chui Ventures' managing partner, Joyce-Ann Wainaina, sees an opportunity to invest in women entrepreneurs in Africa and the vast potential to tap into the intercontinental free trade area.
- Established VC firm Partech closed its Africa II fund at $300M last year, and Novastar Ventures' agriculture and climate-focused Africa People + Planet fund closed at $200M.
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| 6 | | Today's Funding: Cleantech - Koloma, a cleantech startup extracting carbon-free green hydrogen from natural underground deposits, bagged $245.7M in Series B funding. Khosla Ventures led the round, joined by Amazon's Climate Pledge Fund, United Airlines' Sustainable Flight Fund, Bill Gates' Breakthrough Energy Ventures, and Energy Impact Ventures.
Enterprise - AI-powered software asset management Xensam raised $40M in fresh funding from a single investor, Expedition Growth Capital.
Fintech - European digital payments company Navro raked in $14M in fresh funding led by Bain Capital and Unusual Ventures. Motive Partners and existing investor Fin Capital supported the round.
Healthcare - Tech-enabled mental health platform Headlight emerged from stealth with a $18M funding round led by Matrix and EPIC Ventures.
Proptech - Student accommodation booking platform Amber secured $21M in fresh funding, consisting of $18.5M in equity and the remaining in debt. Gaja Capital led the equity tranche, while Lighthouse Canton and Strive Ventures provided the debt facility.
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| 7 | | Quick Hits: - Visa and Mastercard have come to a historic $5B settlement, marking a pivotal moment for small business owners.*
- Japanese government-backed Development Bank of Japan is set to invest $1B (150B yen) in the form of capital and subordinated debt to strengthen the supply chain in the semiconductor, battery, and other sectors critical to the nation's economic security.
- Bupa Asia Pacific is looking to raise a $20M fund to invest in early-stage healthcare startups.
- 20VC founder Harry Stebbings secured $5M in capital commitments toward its offshoot fund called 20PRODUCT. Individual checks for pre-seed to Series A startups will average $100,000.
- Pre-seed VC firm and accelerator Catalyst Fund held the first close of its latest fund in September 2023. Since then, it has already invested in six African climate tech startups.
- Dive into advanced tips and tricks with the Kubernetes Cookbook. Get your copy compliments of the cloud experts at DoiT.
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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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