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| Here's a look at today's VC briefing. - 🚀 VC funding for generative AI startups surged by 268% in 2023
- 🔻 Global M&A transactions slumped to an eight-year low in 2023
- 🤖 Humanoid robot startup Figure AI is raising $500M
Thank you. Karan
p/karan-chafekar | |
| 1 | | VC funding for generative AI startups set a new record in 2023, ending the year with $29.1B from 691 deals, per Pitchbook. Funding surged by 268.4% compared to 2022's tally of $7.9B. OpenAI and Anthropic's multi-billion dollar funding rounds helped generative AI funding reach a record high. However, as the industry matures, VCs are more inclined toward investing in vertical AI domains that are building tailored solutions for specific industries rather than general-purpose horizontal AI solutions. More: - Pender Ventures' partner, Isaac Souweine, believes startups will find it increasingly challenging to develop foundational large language models or generalized products as incumbents, Google and OpenAI, have a significant first mover advantage.
- Instead, startups should focus on vertical AI projects that require smaller datasets, less computational power, and can be developed quickly than building general-purpose solutions.
- Vertical AI solutions will likely disrupt the financial and healthcare sectors as they require tailored AI models.
- Vertical AI startups in the healthcare space can help to draw insights from medical data, personalize treatments, and identify potential drug candidates.
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| 2 | | M&A transactions involving global venture-backed startups hit an eight-year low in 2023, with just 1,783 deals being completed in the year, per Pitchbook. 
What the numbers say: A similar dip was seen in U.S. venture-backed startups, with only 824 deals completed in 2023. M&A dealmaking dropped 30% from 2022. What happened: M&A transactions have dropped each quarter for the past two years, except Q1 2023. The slump in M&A transactions can be attributed to strategic buyers and private equity firms, who have reduced their dealmaking in hopes that startup valuations will continue to drop. There were some outliers in the last year, including Scopely's $4.9B acquisition of Savvy Games Group, Concentrix's $4.8B merger with Webhelp, and BHE GT&S' $3.3B acquisition of Cove Point LNG. Where to see the impact: Thomvest Ventures' managing director Umesh Padval expects M&A transactions to pick up the pace in the next "three to nine months" as startup valuations continue to drop even further. Padval believes cybersecurity, cloud, and AI startups will be prime targets for acquisitions. | | | |
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| 3 | | Uncorrelated Ventures raised a new fund worth $315M. 80% of the capital is earmarked for early-stage traditional infrastructure software startups and the remaining 20% for crypto startups. More: - Uncorrelated Ventures' solo general partner, Salil Deshpande, is bullish about crypto despite the recent bankruptcies, scams, and criminal charges levied on founders.
- Deshpande believes there are value and real-world use cases for blockchain, storage, and computing sectors.
- He added, "I think the use cases were in the past overhyped and overvalued, and it's our job as investors to properly value them."
- The new fund pushed the firm's assets under management over the $700M mark.
- Uncorrelated has been backed by four sovereign funds and one university endowment.
Zoom out: - Deshpande founded Uncorrelated Ventures four years ago after stepping down as the managing director at Bain Capital Ventures.
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| 4 | | London-based VC firm Giant Ventures announced two new funds totaling $250M, including a $100M seed fund and a $150M growth fund. The seed fund will invest in climate tech, health tech, and "inclusive capitalism" startups, while the growth fund will back climate tech startups. The firm has already backed 10 startups with the capital raised so far and plans to invest in 25 early-stage startups through the seed fund alone. More: - Limited partners backing Giant Ventures include BMW, Henkel, RIT Capital Partners, Stepstone, Denmark's sovereign wealth fund, Richard Branson, and others.
- Giant Ventures raised a $50M seed fund and a $50M growth fund in 2020.
- Notable portfolio investments include mental health app Calm, battery storage startup Field, virtual hospital ward company Doccla, and carbon removal platform Ageena.
- Individual check sizes from the growth fund will range from $8M to $12M.
- "Half of this capital is going into European companies, including the U.K., and then half of it is going into the U.S. companies," co-founder and general partner Tommy Stadlen told TechCrunch.
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| 5 | | Humanoid robot maker Figure AI is looking to raise $500M in fresh funding, sources informed Bloomberg. Microsoft and OpenAI are reportedly set to lead the round, with the former planning to invest about $95M while the latter expects to contribute $5M. Figure AI is aiming for a $1.9B post-money valuation at the ongoing round. More: - Last year, Figure AI raised a $70M funding round led by Parkway Venture at a valuation north of $400M.
- Figure AI is developing its first humanoid robot, dubbed Figure 01, to handle hazardous tasks unsuitable for humans and help alleviate labor shortages.
- The startup inked its first commercial deal with BMW Manufacturing earlier this month.
- BMW will deploy Figure AI's humanoid robots in its manufacturing facility in Spartanburg, South Carolina.
Zoom out: - Other startups building humanoid robots include 1X Technologies and Sanctuary AI.
- In addition, Elon Musk's EV company, Tesla, is also working on a humanoid robot called Optimus.
- OpenAI led a $23.5M Series A funding round into 1X Technologies last March.
- The company raised another $100M round earlier this month.
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| 6 | | Today's Funding: Agtech - AI-powered predictive design and multiplex gene editing agtech startup Inari secured $103M in fresh funding from Hanwha Impact, Canada Pension Plan Investment Board, Rivas Capital, NGS Super, and other investors.
AI - Chatbot maker Kore.ai raised $150M in fresh funding led by FTV Capital. Existing investor Nvidia participated in the funding round.
Biotech - Clinical-stage biotech company Cour Pharmaceuticals bagged $105M in Series A funding. Lumira Ventures and Alpha Wave Partners co-led the funding, with participation from Roche Venture Fund, Pfizer, Bristol Myers Squibb, Angelini Ventures, and the JDRF T1D Fund.
Fintech - Fintech startup Portal emerged from stealth with a $34M seed funding round from Coinbase Ventures, Arrington Capital, OKX Ventures, and Gate.io.
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- Electric vehicle propulsion solutions and automatic transmission maker Allison Transmission established its venture division to invest and partner with startups making advancements in commercial-duty mobility.
- World Wide Technology partnered with VC firm NightDragon to widen its access to cybersecurity companies. The firm will incorporate NightDragon's portfolio firms into its commercial operations.
- Accel is reportedly set to lead a $15M to $20M funding round into Indian fast-fashion e-commerce startup Newme. The startup is expecting a post-money valuation ranging between $83M and $85M. The startup had raised a $5.4M seed round led by Fireside Ventures just a week ago.
- SMOK Ventures raised $25M in capital toward its SMOK II fund, which aims to back 25 to 35 startups in the CEE region.
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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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