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| Hey Insiders, Today we are taking a look at why Indian VC funding slumped 68% YoY, why e-commerce enablement funding continued its downward slump, and why Stability AI raised capital via a convertible note. Scroll down for some quick hits, then let us know what other content you'd like to see in future issues. Karan
p/karan-chafekar | |
| 1 | | Indian startups secured $5.46B in venture funding in the first six months of the year, a 68% drop from the $17.1B raised during the same period last year, per Tracxn data seen by TechCrunch. Tiger Global and SoftBank have virtually halted their investments in the nation, causing a massive drop in funding. More: - No new unicorns were minted in the nation so far this year, a stark contrast to the 18 and 16 entrants to the unicorn club in H1 2022 and H1 2021, respectively.
- Funding has slowed down across all stages.
- 325 seed stages deals were inked in the period, a third of the 936 deals from the same time a year ago.
- Series A and B stages deals slumped from 296 in H1 2022 to 108 in H1 2023.
- Only 36 late-stage deals closed in H1 2023, down from 137 from the previous year.
- Per sources, SoftBank has been liquidating its stake in Indian fintech Paytm.
- Rahul Chandra, the co-founder of Arkam Ventures, believes that some active late-stage investors will not return to their usual investment level in India for at least another two years.
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What the numbers say: VC funding for the e-commerce enablement startups in Q1 2023 continued along the downward trajectory that started in Q3 2021. In the first quarter of this year, e-commerce enablement startups raked in $3.4B in VC funding, down 72.2% YoY and 11% QoQ. What happened: The macroeconomic headwinds such as intense competition, rising customer acquisition costs, rising inflation, heightened interest rates, and a reversal in online shopping trends have caused VC funding to slump quarter-on-quarter. The drop was surprising given that consumer e-commerce spending increased 8% YoY to $250B in the U.S. 
Relevance: Within the e-commerce sector, buy-now-pay-later (BNPL) and credit startups nabbed the majority ($2B) of the funding. Other sub-sectors of fraud prevention, e-commerce as a service, fulfillment & delivery, and storefronts & headless APIs secured $351.9M, $157.3M, $118.8M, and $102.9M funding, respectively. | | | |
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| 3 | | Stability AI, the AI startup behind image generation tool Stable Diffusion, has reportedly raised nearly $25M capital via convertible notes from investors, sources informed Bloomberg. The move comes after it was unable to raise equity funding at a $4B valuation, an ask which was four times higher than its previous valuation. Stability AI spokesperson Motez Bishara denied that the firm struggled to raise money, adding, "We have not been actively fundraising or launched a formal round and have not had fundraising problems." More: - Ashton Kutcher's VC firm Sound Ventures has reportedly participated in the convertible note round, which will convert to equity at the next financing round.
- Convertible notes are increasingly becoming a good option for startups that want to postpone their valuation repricing to the next round.
- The news of the funding comes amidst a volatile period for the startup.
- In early June, a Forbes report claimed that Stable Diffusion's source code was written by a different group of researchers and that founder Emad Mostaque had a "history of exaggeration."
- Shortly after, the head of research David Ha and COO Ren Ito departed the firm.
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| 4 | | Kansas City, Missouri-based investment firm American Century Investment acquired Portland, Oregon-based VC firm 3x5 Partners for an undisclosed sum. The transactions only include the partners and team members, but not all of 3x5's assets. More: - 3x5's managing partners, Nicholas Walrod, Tony Americh, and Joe Biller, will lead the private investment team at American Century.
- They will report to chief investment officer Victor Zhang.
- Since its founding in 2011, it has deployed $500M into energy, food, healthcare, sanitation, climate, and environment sustainability startups.
- American Century Investment manages about $200B in assets.
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| 5 | | The Manhattan federal appeals court upheld the SEC disgorgement order against former Oak Investment Partners executive Iftikar Ahmed, ordering him to surrender $64M to the regulator. Ahmed and his wife, Shalini Ahmed, claimed that the disgorgement order was improperly enlarged and attached many assets belonging to her. More: - The duo alleges that the original claim was worth $42M.
- The U.S. appeals court has asked the SEC to conduct an asset-by-asset inquiry to determine the rightful owner of the assets attached, including two Park Avenue apartments, Harry Winston jewelry, and other luxury goods.
- The former venture capital fund manager Ahmed was also ordered to pay $21M in civil penalties and $17M in interest and appreciation.
Zoom out: - Ahmed joined Oak Partners in 2004 and diverted funds into bank accounts opened in the firm's name.
- Ahmed was arrested in 2015 on insider trading charges.
- He fled to India, prompting Oak Partners to conduct an internal investigation which found that he embezzled $65M from the firm and its portfolio companies.
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| 6 | | Today's Funding: AI - New York-based applied AI research firm Runway extended its Series C funding round with an additional $141M from Google, NVIDIA, Salesforce Ventures, and other existing backers.
- Typeface, a generative AI platform for enterprise content creation, entered the unicorn club after an oversubscribed $100M Series B round led by Lightspeed Ventures Partners, Madrona, GV, Menlo Ventures, and M12.
Cybersecurity - AI-powered threat intelligence, automation, and threat response startup Cyware secured $30M in Series C funding led by Ten Eleven Ventures, with participation from Advent International, Zscaler, Prelude, and others.
- New York-based bring-your-own-device security startup Venn Software nabbed $29M in Series A funding led by NewSpring.
- Automated network assurance platform IP Fabric closed its One Peak-led Series B funding round at $25M. Senovo and Presto Ventures participated in the funding round.
Food Tech - German-cultivated fish startup BLUU Seafood closed its Series A funding round at €16M ($17.4M). Sparkfood and LBBW VC led the funding round, joined by SeaX Ventures, Manta Ray Ventures, Norrsken VC, Delivery Hero, and others.
Healthcare - Author Health, a Boston, Mass.-based healthcare startup for Medicare Advantage recipients, raised $115M in fresh funding from General Atlantic and Flare Capital Partners.
Logistics - Nuvocargo, a startup developing logistic software to manage freight shipments, raised $36.5M in Series B funding at a $250M valuation. QED led the funding round.
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| 7 | | Quick Hits: - Protect your code with help from Docker. Read our white paper to learn how to stay ahead of security threats and build a resilient tech stack.*
- Tiger Global reportedly received several offers for portfolio companies but rejected them since it felt the offers were too low.
- Emerald Technology Ventures secured over €250M ($272M) in capital commitments toward its industrial climate-tech fund.
- British early-stage tech investor Fuel Ventures launched a £100M ($126M) fund to invest in pre-seed and seed-stage startups in the U.K. across SaaS, marketplaces, fintech, and e-commerce sectors.
- Life sciences VC firm Vesalius Biocapital nabbed €95M ($103M) from investors towards its fourth fund.
- It's never been easier for your sales organization to accelerate growth. Learn how AI and more can help you sell in a whole new way.*
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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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