| Here’s your daily VC briefing: - 🔀 VCs are turning to continuation funds amidst the funding slump
- 🌎 Global VC funding stayed flat in April, ending the month with $22B
- 📉 Oyo is looking to raise fresh funding with a 70% valuation discount
Thank you. Karan
p/karan-chafekar | |
| 1 | | Several VC firms are planning to merge selected existing funds and portfolio startup stakes under a new continuation fund in a bid to navigate the market downturn and liquidity issues. Over the past year, RockPort Capital moved its stakes in two companies into a new fund, Lightspeed merged 10 assets, and Insight Partners closed its second continuation fund. More: - Typically used by the private equity sector, continuation funds earn a median 1.4x return on the capital invested, which matches returns from secondary funds and is slightly higher than the 1.2x multiple on buyout funds, per Morgan Stanley data reported by Axios.
- Moving key assets to a continuation fund allows limited partners to sell their stakes without waiting for startup exits.
- A continuation fund also eases pressure on fund managers to exit portfolio stakes as such funds have no end date, unlike typical VC funds that have a tenure of 10 to 12 years.
- Shasta Ventures tried to move its last fund into a continuation fund, but limited partners rejected the idea.
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| 2 | | Global venture capital funding remained flat in April, ending the month at about $22B, per Crunchbase. 
What the numbers say: Around $2.4B, or 11% of the total funding, went to 1,000 seed-stage companies, while 500 early-stage companies raised $9B. Over 150 Series C and beyond companies raked in 49% of the total funding, raising $10.7B. Relevance: The largest deal to close in April was AI-driven drug discovery startup Xaira Therapeutics' $1B deal. Biotech and healthcare was the leading sector by funding amount, bagging $5.7B, or 26% of all funding. AI sector startups raised $3.9B, or 17% of funding. Hardware, manufacturing, and financial service startups raised $3.3B, $2.9B, and $2.9B, respectively. Data security company Rubrik held its IPO debut in April, making it the third venture-backed private company to list at a valuation of more than $5B this year. | | | |
| 3 | | Budget hotel booking startup Oyo is reportedly raising fresh funding at a valuation of $3B or lower, sources told TechCrunch. The new valuation represents a 70% discount over the firm's peak valuation of $10B in 2019. Oyo is in talks with investors, including Malaysia's sovereign wealth fund Khazanah. More: - The Indian startup has raised about $3.3B in total funding from investors, including SoftBank, Airbnb, Peak XV Partners, and Lightspeed Venture Partners.
- SoftBank, which owns a 40% stake in Oyo, reportedly slashed the startup's valuation to $2.7B in 2022.
- Oyo's founder and CEO, Ritesh Agarwal, expects the company to report about $682M in revenue during the recent fiscal year, which ended in March.
- The firm withdrew a prospectus filed for an IPO listing for the second time.
- Oyo initially planned to raise $1.2B at a valuation of $12B through an IPO listing in 2021.
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| 4 | | Cloud security solutions provider Wiz bagged a valuation of $12B after raising $1B in fresh funding. The latest funding round brings the firm's total funding raised to date to $1.9B. Wiz intends to use the proceeds to back future acquisitions. More: - Last month, the cybersecurity startup announced plans to acquire Gem Security for $350M.
- Wiz reported $350M in annual recurring revenue last year and aims to hit the $1B ARR mark as it gears up for an IPO listing.
- Andreessen Horowitz, Lightspeed Venture Partners, and Thrive Capital co-led the funding round, with additional support from Greylock, Wellington Management, Cyberstarts, Greenoaks, Index Ventures, Salesforce Ventures, and Sequoia Capital.
Zoom out: - VC funding for cybersecurity startups surged by 69% from $1.6B in Q4 2023 to $2.7B in Q1 2024, per Crunchbase.
- Last quarter's tally was the highest since Q1 2023, which saw 154 funding deals worth $2.7B.
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| 5 | | Japanese investment firm SoftBank Group Corp. is looking to acquire struggling British semiconductor startup Graphcore Ltd., sources informed Bloomberg. The talks have entered advanced negotiations, but financial terms are yet to be confirmed. Graphcore was valued at $2.8B at a funding round in 2020. More: - Graphcore develops designs for large "intelligence processing units" used for AI software processing inside data centers.
- However, the startup has struggled to get traction and suffered from slowing hardware sales.
- The Sequoia Capital and Samsung-backed startup reported just $2.7M in revenue for 2022, a 46% drop from the prior year.
- Graphcore's pretax losses widened to $204.6M this year, forcing it to lay off employees and close operations in Norway, Japan, and Korea.
- SoftBank reported strong sales this year, thanks to its majority stake in British-based chip designer Arm Holdings Plc, whose share prices have soared 40% since its IPO debut in February.
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| 6 | | Today's Funding: AI - French generative AI startup Holistic AI closed its first tranche of an initial funding round at $200M, which comprises $80M in equity and $120M in convertible debt. Accel Partners, UiPath, and Google's former CEO Eric Schmidt participated in the round, which valued the company at $370M.
Biopharma - Zenas Biopharma, a startup developing drugs to treat several autoimmune diseases, raised $200M in Series C funding led by SR One, New Enterprise Associates, Norwest Venture Partners, and Delos Capital.
Cybersecurity - Industrial cybersecurity startup TXOne Networks extended its Series B funding round by $51M. The initial Series B round's lead investor TGVest Capital participated in the round along with Pegatron Group, CDIB Capital Group, Taiwania Capital, and Applied Ventures ITIC Innovation Fund.
Foods & beverages - Cocoa-free chocolate maker Voyage Foods bagged $52M in fresh funding led by Level One Fund and Horizons Ventures. Investors participating in the round include SOSV, Nimble Partners, and Collaborative Fund.
Healthcare - Rad AI, a startup that gives objective feedback on medical reports for radiologists, secured a $50M Series B funding round led by Khosla Ventures. Other participants in the funding include World Innovation Lab, ARTIS Ventures, OCV Partners, Kickstart Fund, and Gradient Ventures.
Insurtech - Computer vision and AI-powered property inspection technology startup Honeycomb Insurance raised $36M in Series B funding. Ben-Zaken led the round, joined by Arkin Holdings, Launchbay Capital, Ibex Investors, Phoenix Insurance, and IT-Farm.
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Karan Chafekar | |
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