GPs increase personal capital share in their funds / Exit values decline 87.2% for U.S. unicorn startups / 31 VCs apply for Wisconsin's $50M VC fund

Plus, Fanatics appoints head of investor relations as it gears up for an IPO listing

Inside.com Part of   Network April 28, 2023

Presented by

Some general partners are putting more personal capital in their own funds to demonstrate to limited partners that they are willing to bear the same degree of risk as them. KKR's GPs contributed $1B to the firm's sixth European buyout fund that closed at $8B earlier this month. KKR's GPs' contribution to the fund represents 12.5% of the total fund value, much higher than the industry average of 1% to 2%.  More: Financial services group Investec claims that GPs are now contributing nearly 5% of the total fund's size on average.  Investec's Jonathan Harvey reckons that GPs' contribution can rise above 10% after taking into account informal commitments.  Due to volatile market conditions, LPs are increasingly asking about the GP commitments in the fund before making an investment decision, per Bain Capital's CFO and COO Michael Ward.  While most of the capital comes from GPs' personal capital reserves, several firms extend credit lines to junior partners to invest in the fund.  The upside of the increased GP commitment is that it ensures that fund managers are taking only as much risk as they can handle.

What the numbers say: Due to macroeconomic headwinds, exit opportunities have declined for U.S. VC-backed unicorn startups. From the start of 2022 until the end of Q1 2023, exits generated $78.7B of value for VCs, down 87.2% from peak values of $763.8B in 2021. There is a lack of IPO and buyout options for unicorn startups. Additionally, M&A transactions have declined consistently since the beginning of 2022. In Q1 2023, five unicorn startups were acquired by larger organizations, representing a cumulative transaction value of $3.7B, the lowest quarterly total in the past 10 years.  What happened: M&A activity was initially expected to pick up, especially as larger corporations with surplus cash would be able to scoop up startups running out of cash runway. However, M&A activity has remained relatively muted as larger organizations gravitate toward share buybacks and raising shareholder value. There were $175B worth of share buybacks announced by February 2023 from the start of the year, double the figure reported in the same period in 2022.  What next: Pitchbook expects M&A activity for unicorn startups to remain subdued due to the disparity of valuations. Aggregate post-money valuations of U.S.-based unicorn startups have remained constant from last year, with the current crop of 704 active unicorns in the nation currently having a cumulative valuation of roughly $2.4T, the same as last year.

A message from UPWAY Finding your ideal e-bike should be an easy ride.  Meet Upway - the #1 certified e-bike provider. Upway’s goal is to make electric mobility affordable for everyone. They source only from the best electric bike brands in the world, carrying a huge selection of both new and pre-owned bikes on their website, all up to 60% off retail prices. Their team of master mechanics, based in Brooklyn, NY completes a 20-point certification, giving each bike a one-year warranty. Upway wants to help consumers make an optimal choice rather than having to close their eyes and point. Every bike is delivered fully assembled directly to your doorstep within 2-5 business days. Use code INSIDE for $200 off your next purchase of $500+. Get your e-bike

Thirty-one VC firms applied to secure funding from the Wisconsin Economic Development Corp. (WEDC). WEDC received $50M through the State Small Business Credit Initiative (SSBCI) to allocate for VC funds. However, the higher VC interest means that they have received demands worth around $500M.  More: Of the 31 firms that applied for the funding, 19 were based in the state, while 12 were from other states.  Any fund chosen by the committee must, at a minimum, match state investments with equivalent amounts from private investors. Zoom out: In addition to the SSBCI funding, Wisconsin Gov. Tony Evers has proposed allocating $75M from the state budget to a venture capital program.  WEDC CEO Missy Hughes is confident about their ability to run the new fund.  The Wisconsin Investment Fund has already invested $600M in startups in the sector and has $1.5B in assets under management.

Jacksonville, Florida-based sports merchandising startup Fanatics hired Deborah Crawford as head of investor relations. The move indicates that the firm is gearing up for an IPO listing, although the firm has not set a date for the public debut.  More: Crawford was formerly the head of investor relations at Meta for over eight years, prior to which she held a similar role at Netflix and Ancestry.com.  Per Crunchbase data, the firm has raised $4.9B in funding from VC and PE firms over 11 funding rounds.  It last raised a $700M round led by PE firm Clearlake Capital Group at a $31B valuation in December 2022.  Shortly after a $1.5B funding round in March 2022, it acquired trading cards maker Topps for $500M.  The IPO listing could potentially create an exit path for notable backers of the firm, including SoftBank Vision Fund, Blackstone Group, Thrive Capital, and Silver Lake. Zoom out: Johnson & Johnson announced earlier this week that it is spinning off its consumer health division under a separate brand Kenvue, which is looking to hold an IPO debut at a $40B valuation.

British VC firm Sturgeon Capital is looking to invest in early-stage startups across Central Asia and South Asia, excluding India, with its new $35M Emerging Opportunities II (SEO II) fund. The firm will continue to invest in line with the predecessor fund's investment thesis of backing seed to Series A startups across the fintech, B2B software, and marketplace sectors.  More: SEO I fund, launched in 2020, invested in 18 startups.  The new fund was launched in February 2023.  Sturgeon has already backed Bangladeshi edtech startup Shikho and Central Asian fintech firm Oasis MFI with the funds raised so far.  Sturgeon partner Alex Branton said the fund aims to capitalize on the "rapid digitization of some of the world's least developed countries that are following the emerging markets' technology playbook." The firm is a "for-profit and for-impact investor, with an impact strategy built on three pillars of employment, financial inclusion, and gender," added Branton.

AI platform Hugging Face's co-founder and CEO Clément Delangue will invest in AI startups alongside early-stage backer Matthew Hartman's new VC firm Factorial Capital. The firm raised a $10M debut fund to boost investment in the AI ecosystem. Factorial aims to write checks of $100,000 on average.  More: The firm has already backed two AI startups: AI privacy system training startup flower.dev and open-source chatbots library Nomic AI.  Partners in the firm, including Delangue, will split the investment equally with Factorial.  Partners are also free to manage their individual portfolios.  "Capital is important, especially because a lot of startups in AI right now need compute and need infrastructure that can be costly," said Delangue.  Hartman was previously a partner at Betaworks Ventures.

Quick Hits: This app makes it easy (and fun) to level up fast in math, data, and CS. Try it free for 30 days + get 20% off an annual premium subscription.* Some European VCs are optimistic about a recovery in the market despite funding plummeting 65% YoY in Q1 2023. Project A's general partner Anton Waitz expects "things will become more active in the second half of this year," albeit at lower valuations.  SkyBridge Capital founder Anthony Scaramucci believes that a resurrection of the FTX exchange is unlikely. Scaramucci's comments come days after Bloomberg uncovered that VC firm Tribe Capital is looking to revive FTX with a $250M capital injection.  Stormbreaker Ventures hired former AT&T mobility and consumer operations CEO Glenn Lurie as general partner. Additionally, the firm hired founder and early-stage investor Bart Lorang as a venture partner.  Mark Cuban-backed interactive entertainment startup Fireside secured $25M in Series A funding at a $138M post-money valuation.  A new report released by the African Private Equity and Venture Capital Association shows that 49.2% of the VC investment into African startups in 2022 was done by U.S. and U.K.-based investors.  Unleash Google Cloud's full potential! Learn with step-by-step recipes in the GCP Cookbook. Download your copy now.* *This is sponsored content.

Upcoming Events May 02 - Inside Startups Coffee Break (Register Here) May 08 - Inside.com Town Hall (Register Here)

Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot.  Editor Aaron Crutchfield is based in the high desert of California. Over the last two decades, he has spent time writing and editing at various local newspapers and defense contractors in California. When he's not working, he can often be found looking at the latest memes with his kids or working on his 1962 and 1972 Fords.

Visit upway.co for your next e-bike.

767 Bryant St. #203, San Francisco, CA 94107 Copyright © 2023 Inside.com

Did someone forward this email to you? Head over to inside.com to get your very own free subscription! You received this email because you subscribed to Inside Venture Capital. Click here to unsubscribe from Inside Venture Capital list or manage your subscriptions.