Inside Venture Capital

For December 27, 2023

Here's a look at today's VC briefing.

🦄 VC funding for unicorn startups fell to a quarter of the record high of 2021
🏢 Big tech organizations invested more in AI startups than VC firms
🚀 Anthropic increases annualized revenue forecast from $500M to $850M

Thank you.

AI startups have secured more capital from big tech companies so far this year than conventional VC firms, per Financial Times. AI startups have raised $27B so far this year, per Pitchbook data seen by FT. Two-thirds of the total funding was provided by big tech companies, including Microsoft, Google, and Amazon.

More:

Microsoft's $10B investment into OpenAI is the largest funding deal for an AI startup completed this year.
- Microsoft also committed $1.3B to Inflection.
Startups have also preferred getting investment from big techs as many of them also come with computing power deals that help them reduce their AI model building and training costs.
The interest from large corporations has caused a rapid surge in valuations of AI startups, which has pushed AI deals further out of reach of traditional VCs, who are still recovering from the inflated valuations of 2021 and the subsequent markdowns in the following years.

Unicorn startups bagged $78B in total funding so far this year, per Crunchbase.

What the numbers say: This year's tally is just a quarter of the record high of $306B set in 2021. Forecasts suggest that VC funding for unicorn startups is unlikely to match last year's tally of $132B.

What happened: The nine most active unicorn investors have all drastically slowed their dealmaking pace this year. Per Crunchbase, these investors have backed just 13% of the unicorn startups this year, much lower than the 28% funded in 2022 and 30% backed in 2021. The active investors invested in 44 unicorn startups this year.

Relevance: The active investors list includes Tiger Global, SoftBank Vision Fund, Andreessen Horowitz, Accel, Lightspeed Venture Partners, and Index Ventures. The slowed pace of investments in unicorn startups suggests that all growth investors are now investing in earlier stages and holding off their growth investments.

AI startup Anthropic expects to rake in $850M in revenue by the end of 2024, two sources told The Information. The forecasts are higher than its earlier estimates of $500M from this September. The firm is currently on target to rake in $100M in revenue this year, Anthropic announced three months ago. The news comes a week after Reuters reported that Anthropic was looking to raise $750M at a valuation of $18.4B.

More:

Sources claim that Anthropic could potentially reach $1B in annualized revenue by the end of 2024, which amounts to monthly revenue figures of roughly $84M.
The latest revenue projection should instill confidence in Anthropic's investors participating in the upcoming round.
- Menlo Ventures is reportedly poised to lead the round.
The firm has already received a $4B commitment from Amazon and $2B from Google this year.
- Google also led a $300M round in Anthropic earlier this March.
- Shortly after, the firm raised a $450M Series C round led by Spark Capital in May.

So far this year, VCs have invested $10.7B in crypto startups, per Crunchbase data reviewed by BSC. Funding has fallen 68% compared to 2022's tally of $33.3B. The pullback affected mid- to late-stage startups the most, as investors preferred early-stage startups.

More:

Within the crypto sector, NFT, gaming, infrastructure, and Web3 domains continued to rake in funding while funding for crypto data, trading, and enterprise sectors declined.
The overall decline in funding for the sector can be attributed to the regulatory crackdown by the U.S. federal government, a dip in crypto prices, and the slump in venture capital.
Cross-blockchain communication platform Wormhole took away the honors for getting the highest funding within the sector after bagging $225M at a $2.5B valuation.
Last month, crypto trading and wallet startup Blockchain.com raised a $100M Series E down round that slashed its valuation by half to less than $7B.

Scope, an invite-only networking platform for startups, announced a $45M VC fund to back fintech and gaming startups. In addition to the funding, Scope will also provide startups with mentorship and access to its vast network of industry experts.

More:

The VC arm will run as an independent division under the Scope brand name.
Scope is keen on investing in the sectors due to unprecedented growth, technological advancements, changing consumer behaviors, and demand for innovative solutions seen in recent times.
Scope claims its platform has helped startups secure $70M in capital from investors in the recent October to December quarter.
The platform reportedly has 20,000 angel investors, 7,000 VCs, and 200 family offices.

Today's Funding:

Biotech

Chinese diagnostic technology startup Shenzhen Sispoli Bio-Tech raised a $14M (100M yuan) Series B round from Prosperity7 Ventures and Sunland Fund.

Defense Tech

British defense technology startup Labrys Technologies raised a seed funding round worth $5.5M. Project A Ventures led the round, joined by MD-One, Offset Ventures, Marque Ventures, and Expedition Fund.

E-commerce

Texas-based e-commerce platform Cart.com raked in $30M in fresh funding from Trinity Capital.

Web3

Web3 growth marketing platform Addressable bagged $6M in additional funding, bringing the total capital raised this year to $13.5M. Bitkraft Ventures led the round, joined by Karatage, Viola Ventures, Fabric Ventures, Mensch Capital Partners, and North Island Ventures.

Quick Hits:

Raising capital in 2024? Foundersuite is your secret weapon. Build a target list with our DB of 216,000+ investors, manage the raise with our CRM, run due dil with our data room.*
SoftBank Group Corp.'s stock prices rose as much as 7% after the Japanese investment firm announced it will receive $7.6B worth of shares in T-Mobile U.S. Inc. The transaction is part of a previous agreement inked when T-Mobile merged with Sprint Corp. in 2020.
Reddit expects to rake in $800M in revenue through its ad business by the end of this year, slightly lower than its $1B target set two years ago. The social media firm is gearing up for an IPO listing, which could come as early as next year.
Chinese healthcare-focused VC firm Panlin Capital held the second close of its second VC fund, bringing the total capital raised by the firm in the past two years to 1.5B yuan ($209.8M).
Paperless Parts, an estimation and quoting platform for contract manufacturers, is looking to raise $15M in fresh funding, per SEC filing documents seen by Business Journal. The firm has reportedly already raised $5M of the targeted sum.
Frec Direct Indexing lets you achieve index-like performance but end up with more money through tax loss harvesting. See what the hype is all about.*