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| Hey Insiders, Today's newsletter covers: - 🤖 AI startups nab 26% of total funding in 2023
- 🚀 Mining startups defy VC funding pullback
- 🛡️ Defense tech startups rake in $200M
If you find this newsletter useful, please share it with your friends and colleagues. Thank you. Karan
p/karan-chafekar | |
| 1 | | U.S.-based artificial intelligence startups have nabbed 26% of the total funding in 2023, per Crunchbase. Due to the current buzz around AI startups, funding for the sector has more than doubled since last year. In 2022, AI startups received 12% of the total funding. More: - The AI sector has defied the venture funding pullback, which has seen VC funding in North America plummet by 50% YoY in the first half of 2023.
- The AI sector has been able to nab a bigger share of the funding due to its potential to impact other sectors such as real estate, fintech, biotech, Web3, and HR.
- Crunchbase reckons that the funding frenzy for the AI sector is reminiscent of venture funding deployed into the internet sector 25 years ago.
Q: Does the current AI funding frenzy parallel the historic investment rush toward the internet sector? Do you think that investors are likely to repeat the same mistakes? Join the conversation here. |     | |
| 2 | | Mining startups have secured $550M in VC funding so far, per Pitchbook. The amount raised so far is higher than the $508M raised in the first three quarters of last year. 
What the numbers say: VCs are investing heavily in critical mineral startups due to their importance in energy transition. However, investors need to be wary of the risks associated with backing mining startups due to recent allegations of human rights abuses and their role in national security. Relevance: TechMet raised a $200M fund from limited partners S2G Ventures and Lansdowne Partners to back critical mineral startups. Machine learning-powered rare-earth metal deposits identification startup KoBold Metals raised $195M from Bill Gates' Breakthrough Energy Ventures at a $1B valuation. Why it matters: Per the International Energy Agency, global organizations will require six times more mineral inputs in 2040 than today to reach net zero goals by 2050. | | | |
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| 3 | | VCs have invested $200M in U.S.-based defense tech startups, per Crunchbase. VCs have historically shied away from investing in defense tech due to moral concerns. Daniel Ateya, the president and managing director of Raytheon's VC division RTX Ventures, has urged other VCs to increase their deployment in the sector, cautioning, "If you sit on the sidelines, your adversaries will use it to their benefit." More: - Several investors are realizing the strategic importance of defense investments and launching dedicated funds.
- Last year, Thomas Tull launched a multi-billion-dollar U.S. Innovative Technology Fund, which has already backed Anduril, Capella Space, and Shield AI.
- Defense tech investments are becoming more appealing to investors due to the high returns expected on exits and the rising valuations of startups in the sector.
- Additionally, several defense tech startups are diversifying their revenue streams by catering to commercial businesses in addition to government and defense clients, giving them a stable income.
Zoom out: - Last year, U.S.-based defense tech startups raked in $2.1B in funding, the majority of which came in through software and hardware tech startup Anduril's $1.5B Series E funding round.
- Anduril was valued at $8.5B last December.
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| 4 | | Australia's sovereign wealth fund, Future Fund, missed its returns target for the fiscal year ending June 30. Future Fund achieved 6% returns on investments, lower than its target of 10%. The fund expects returns to be lower than the 8.8% returns averaged over the past decade due to heightened inflation and interest rates. More: - The $133B (AU$206B) fund lowered its allocation to developed market equities in the recent fiscal year.
- The fund has billions of AI investments through PE and VC funds, which have shown strong equity market performance in the first half of the year.
- However, the investments in the sector have not risen as sharply as public markets, per Future Fund head Peter Costello.
- As a result, the fund "did not want to bet the farm on that sole theme," per Costello.
- Instead, the firm is now focusing its investments on gold, infrastructure, and inflation-linked bonds.
Zoom out: - Australian pension funds AustralianSuper and the Australian Retirement Trust achieved 8.2% and 10% returns over the same period, respectively.
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| 5 | | New York-based VC firm CoinFund has secured capital commitments worth $152M from investors towards its latest fund. The firm intends to back early-stage crypto and AI startups. The fund was oversubscribed and closed higher than its initial target of $125M. More: - CoinFund co-founder and chief investment officer Alex Felix said, "In the post-FTX era, we've seen a lot of developers resolve to finish the roadmap to a decentralized application developer stack. Now you're seeing a big, renewed focus on scalability, interoperability, and user experience to really bring that roadmap to decentralization to completion."
- Felix said that the slowed pace of dealmaking has allowed them to be more thoughtful about the investments.
- CoinFund has backed 100 companies to date, including Giza and Cosmos.
- The fund exclusively invests in pre-seed, seed, and Series A stages.
Zoom out: - Per Galaxy Digital Holdings, only 10 crypto funds raised $720M in Q2 2023, the lowest quarterly total since Q3 2020.
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| 6 | | Today's Funding: Advanced materials - Battery recycling startup Redwood Materials achieved a $5.25B post-money valuation at its latest $1B Series D funding round. Goldman Sachs Asset Management, Capricorn's Technology Impact Fund, and funds managed by T. Rowe Price Associates co-led the funding round.
Enterprise software - Revenue enablement startup Mediafly secured $80M in fresh funding led by BIP Ventures, with additional participation from Boathouse Capital.
- Compliance and risk management startup Hyperproof doubled its valuation with a $40M funding round led by Riverwood Capital.
Fintech - Brazilian fintech startup Nomad raised $61M in Series B funding led by Tiger Global Management. The startup was valued at 1B Brazilian reais (~$360M).
Semiconductor - AI semiconductor startup Sapeon nabbed $45M (60B won) in Series A funding at a valuation of $378M (500B won). Ascent Equity Partners led the funding round, with additional backing from GS Group affiliates, Daebo Communication & Systems Co., Hana Financial Group, Mirae Asset Venture Investment, We Ventures, E1, and others.
Space - Space robotics startup GITAI extended its Series B funding round with $15M additional capital.
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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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