VNTR Capital News July 2nd, 2022 - News, Events, VC Reads
Hello friends,
Happy Saturday! Have a great weekend!
Scroll down to view Venture Capital news, upcoming VC-related events, and VC news/reads.
VNTR CAPITAL COMMUNITY NEWS
How were your last two weeks? The crypto market and stock market are not performing well :( the VC funding is slowing down, and many companies are adapting by optimizing their workforce.
We hosted our first event in Paris on June 22, 2022, to explore the French VC ecosystem, we met with local VCs, business angels, family offices, startups, and key players. We are going to host recurring events to unite the Venture Capital ecosystem in Paris, London, Austin, Miami, Singapore, Tel-Aviv, and more cities globally. You can view our planned online and offline events at https://www.vntr.vc/events. Please reach out if you would like to partner in building local investors' community in your region.
The VNTR Capital Summer Camp (retreat) in Algarve, Portugal Aug 15-19 agenda was updated. Join us to travel together with active investors, explore the region, and enjoy the various unique experiences. You can review the planned program at https://www.vntr.vc/camp.
Join our online sessions:
July 13th VNTR Capital Expert Session - Launch Your VC Firm in a Few Clicks with Vauban CEO, Ulric Musset. Vauban got acquired by Carta yesterday.
July 19th VNTR Capital Growth Roundtable - active members network, share what they are working on, and connect with other members globally.
We would like to thank our partners CoinsPaid, CoinsPaidMedia, Vauban, TWO12, and Ampere for their ongoing support and for providing value to our community members and their portfolio companies.
Join our offline events:
July 7th VNTR Capital New Delhi, India
July 21st VNTR Capital Bengaluru, India
July 27th VNTR Capital Miami, USA
RSVP to Upcoming VNTR Capital Events
The VNTR Capital Investors Community is growing and has 200+ vetted active investors as members.
Want to co-host VC-related events, partner, or sponsor, please respond to this email or Telegram @byuric to discuss collaboration opportunities.
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UPCOMING VC EVENTS
July 11-15 - London FinTech Week, London, UK
July 13-14 - Unchain, Oradea, Romania
July 14-15 - World Blockchain Summit, Singapore
July 19-20 - Venture Summit West, Silicon Valley
July 20-21 - Impact Capitalism Summit, Nantucket, USA
July 20-22 - FinTech Festival India, New Delhi, India
July 25-29 - Web3 Growth Summit, Virtual
July 27-29 - Blockchain Economy Istanbul Summit
Aug 15-19 - VNTR Capital Camp, Algarve, Portugal
Aug 22-25 - AIBC Balkans, Belgrade, Serbia
Aug 24-26 - Startup Day 2022, Tartu, Estonia
Sep 6-7 - Pirate Summit, Cologne, Germany
Sep 7-8 - YC Demo Day Summer 2022
Sep 12-13 - MetaWeek 2022, Dubai, UAE
Sep 26-Oct 2 - Asia Crypto Week, Singapore
Sep 26 - 29 - Oslo Innovation Week, Oslo, Norway
Sep 28 - VNTR Capital Breakfast, Singapore
Sep 28-29 - Token2049, Singapore
Oct 8-14 - Wow Summit, Dubai, UAE
Oct 5-6 - Sifted Summit, London, UK
Oct 18-20 - TechCrunch Disrupt, San Francisco, USA
Nov 1-4 - Web Summit, Lisbon, Portugal
Nov 4-7 - Wow Summit, Lisbon, Portugal
Nov 14-18 - AIBC Europe, Malta
Nov 15 - VNTR Capital Breakfast Malta
Nov 17-18 - SLUSH 202, Helsinki, Finland
Want to submit VC-related events, please respond to this email or Telegram @byuric
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Check out VNTR Capital upcoming events
VC READS
Tiger Global’s Day of Reckoning May Never Come
New York-based Tiger Global Management is taking a lot of heat for incurring one of the largest-ever losses by a hedge fund this year. Things could have been a lot worse for the tech-focused investor, which became the world’s busiest venture capitalist last year. Paper losses at Tiger’s stock-picking arm are staggering. Its main hedge fund, which managed $20.5 billion at the end of 2021, was down 52% in the first five months. Its other large long-only stock fund fell 61.7%. Stumbles of this scale prompted the firm to cut its management fees, perhaps as a gesture of apology to its investors. As the June quarter nears its end, all eyes will be on Tiger Global to see how much money it has lost. Its performance in the unicorn-picking arm, in particular, is the wild card. Though it began as a hedge fund, Chase Coleman’s Tiger Global has supersized thanks to its venture capital business. As of October, Tiger Global managed about $95 billion — with its venture capital business accounting for around two-thirds of the total.
The Dollar Stock Club: Delisting Looms For These Poorly Performing SPACs
When shares of a company that went public via a SPAC merger are down around $1 or $2, things are already not good. That’s because the overwhelming majority of blank-check acquisition companies debut at $10 per share. When they find a company to buy and take public, anything under that threshold is a negative return. Of course, as we’ve documented previously, SPAC deals carried out in 2020 and 2021 have broadly been truly terrible performers. Many venture-backed technology and consumer-facing companies have done particularly poorly, a trend that became apparent late last year and has only worsened since. Now, share prices have gotten so low that several companies have received notice from Nasdaq that they are in danger of delisting. Under the exchange’s listing requirements, companies must maintain a share price over $1.
Even A16z Is Slowing Its Investing Pace
Andreessen Horowitz is one of the most-recognized venture capital firms in Silicon Valley and it just keeps growing. But amid a broader pullback in venture investment, the firm also appears to be slowing down its investing pace this quarter, at least compared to where it was last year. To be clear, a16z hasn’t hit the brakes. In fact, it’s still one of the most active investors in the United States, according to Crunchbase data, along with Tiger Global Management. It’s just not investing at the same rapid pace it adopted last year, according to our data. The firm has participated in 46 funding rounds totaling around $2.5 billion so far in the second quarter, the lowest levels since before 2021, Crunchbase data shows. The number of rounds it has participated in and the amounts raised in those funding rounds is also down quite a bit from the first quarter of this year, when the firm participated in 62 funding rounds that totaled around $6.1 billion.
Celsius Shareholder BnkToTheFuture Proposes Bitcoin Investments, Restructuring in Rescue Bid
Crypto investment platform BnkToTheFuture proposed three recovery plans on Thursday aimed at helping users affected by the insolvency of crypto lender Celsius. BnkToTheFuture is registered as an excluded securities business with the Cayman Islands Monetary Authority and holds 5% of Celsius. “We believe that this allows us to call a shareholder meeting as part of our statutory shareholder rights that legally cannot be ignored by the Celsius board,” it said in the Thursday post. The first proposal calls for restructuring and relaunching Celsius, which would allow depositors to benefit from “any recovery through financial engineering.” This could refer to the issuance of additional tokens or additional fundraising.
Have Valuations Really Fallen Off A Cliff In 2022?
Global funding has slowed since March, and as the public market downturn stretched into the second quarter, investors have raised repeated alarms to founders to cut back and assume that raising capital at last year’s inflated valuations is now off the table. Startups raised funding at record rates during the 2021 go-go year. Now, founders report that raising funding has become much more challenging. From an investor’s perspective, it’s a better environment to invest, as prices have come down and funding rounds are less competitive, allowing time for due diligence and getting to know founders. So are valuations really down markedly this year? Not according to Crunchbase data. We reviewed U.S. fundings from Series A through Series C between 2018 through the first half of 2022 to look at average and median check sizes to see how they have changed. What we found: Average and median-sized rounds raised by startups in the first half of this year are not down dramatically.
Sequoia Capital still maintains massive public positions in Unity and DoorDash whose stocks have plummeted 80% and 75% respectively from their all-time highs. Two of Sequoia Capital’s largest bets have been cratering on the public markets — yet the firm still holds the vast majority of its original ownership positions.
VC fund returns nosedive as private market pessimism grows
For years, venture funds have posted the highest returns of any alternative asset class—handily besting private equity, real estate, private debt, and real assets. Now that run is being threatened by a radical repricing of fast-growing companies with little or no profits. In Q1, more than 68% of venture funds suffered a drop in total realized and unrealized returns versus capital invested, according to a recent PitchBook analyst note on VC fund performance. Of those funds, the median decline is 3.5% from 2021's peak in terms of TVPI, the ratio of the fund's current value and distributions to the amount paid into the fund to date. That decline is surpassed only by the downturns during the global financial crisis, at 7.8%, and the dot-com crash, at 15.7%.
Here’s what’s hot — and what’s not — in fintech right now
Financial technology is the hottest area of investment for venture capitalists — $1 out of every $5 of funding flowed into fintech startups in 2021.But with a recession possibly around the corner, investors are writing fewer — and smaller — checks. And they’re getting much more selective about the kind of companies they want to back. According to CB Insights, global venture investment in fintech firms sank 18% in the first quarter of 2022. That’s led to something of a rotation out of certain pockets of fintech that were hyped by venture capitalists last year, such as crypto and “buy now, pay later,” and into less sexy areas focused on generating stable streams of income, like digitizing payment processing for businesses. So what’s hot in fintech right now? And what’s not? I went to the Money 20/20 Europe event in Amsterdam in June to speak to some of the region’s top startup investors, entrepreneurs and analysts. Here’s what they had to say.
Sequoia Capital Reportedly Raising 2 New Funds Despite Chilling VC Climate
Sequoia Capital—which has invested in some of the biggest names in the startup world, from Apple to Instacart—is raising two new U.S.-focused funds of up to $2.25 billion, according to a report in The Information. The Menlo Park, California-based venture titan is looking to close a $1.5 billion U.S. growth fund focused on mature private companies, and a $750 million fund focused on earlier-stage startups. According to the report, the firm expects to close the funds in July. The new funds will be “sub-funds” after Sequoia Capital did away with the typical 10-year fund model and created a new, open-ended Sequoia Capital Fund late last year. That fund distributes money into close-ended sub-funds such as seed, venture, and growth for new investment. Any exits from those funds replenish the main Sequoia Fund in a type of VC-related symbiotic relationship.
Why the Crypto Unwind Wasn’t Contagious (This Time)
In January, as crypto and equity markets were beginning a slow, steady decline, the International Monetary Fund (IMF) published a report warning that crypto was becoming more intertwined with conventional markets. The report’s writers worried that “widespread adoption [of cryptocurrency] could pose financial stability risks.” That is, a major crypto crash could have impacts on mainstream banking, equity, or credit markets, in much the same way the collapse of real estate-backed instruments froze markets in the 2008 Great Recession. In particular, the IMF warned that “the rising use of leverage” in trading tokens increased the chances of systemic contagion. While I’m no fan of the IMF as a political organ, its analysts correctly spotted the risk. In fact, we learned from a report Wednesday the formerly huge crypto fund Three Arrows Capital (3AC) is insolvent and will be liquidated, ultimately due to its margin-driven trading strategy.
Here’s Carta’s response to venture becoming more global
Equity service platform Carta has acquired Vauban, an online platform that helps investors back private companies from end to end. As first reported by The Information, the deal was framed by Carta as a way to support investors of all sizes, from the sub-million-dollar level into the billions of dollars worth of dry powder. Carta said that it is not disclosing any details beyond what it wrote in a blog post, meaning that the price of the deal will remain unknown. The entire full-time Vauban team is joining Carta, the company says. The acquisition, closed today, is yet another example of the expanding competitive surface area between Carta and AngelList, two platforms that are racing to build a software suite that solves some of venture capital-backed startups’ key pain points. Last year, AngelList Venture launched AngelList Stack, a new suite of products that will compete with Carta in providing services to help founders start, operate and maintain ownership over their companies.
On Thursday (30 June 2022), at a signing ceremony hosted by NATO Secretary-General Jens Stoltenberg, Leaders and Ministers from 22 Allied countries launched NATO’s Innovation Fund, the world’s first multi-sovereign venture capital fund.
"This fund is unique", the Secretary-General said, "with a 15-year timeframe, the NATO Innovation Fund will help bring to life those nascent technologies that have the power to transform our security in the decades to come, strengthening the Alliance’s innovation ecosystem and bolstering the security of our one billion citizens."
PE-VC funding rose 11% to $26.5 bn in the first half of 2022
Amid fears of a funding winter, private equity and venture capital (PE-VC) deal value rose 11 percent to $26.5 billion in the first half of 2022, compared to $23.9 billion in the year-ago period, according to data from Venture Intelligence. However, the average cheque size has decreased by 12.5 percent to $39.5 million even as the number of deals struck rose 27 percent to 667.
The biggest startup fundraises this year to date have been Dailyhunt’s $805-million round, a $665-million round by Byju’s, and a $255-million tranche raised by ShareChat as a part of a $520-million round that started in December last year. The six months up to June (H1) have seen a few big bang private equity deals as well. Bodhi Tree, an alternative investments platform backed by Qatar Investment Authority, has led a $1.78-billion funding round for Viacom18 and a $600-million round for educational services company Allen.
Mapping Central and Eastern Europe's VC ecosystem
Russia's invasion of Ukraine has been disastrous for Central and Eastern Europe, yet the region's startup ecosystem remains resilient. In the midst of geopolitical instability and harsher market conditions, startups in CEE have secured €2.4 billion (about $2.5 billion) across 312 deals so far this year, according to PitchBook data. In terms of capital raised, the region is already two-thirds of the way to last year's record total. Although much smaller than other European venture markets, CEE is known for its strong digital economy and startup-friendly governments. As the region produces more unicorns and high-profile tech companies like Skype and Bolt, investors are becoming increasingly open to funding startups from the area. Estonia is leading the region in terms of capital raised, but other countries like Poland and Croatia are attracting more attention. On the other hand, Russia has seen VC capital decrease significantly this year as the war with Ukraine causes investors and companies to distance themselves from the country.
Analysts identify 3 critical flaws that brought DeFi down
The cryptocurrency market has had a rough go this year and the collapse of multiple projects and funds sparked a contagion effect that has affected just about everyone in the space.
The dust has yet to settle, but a steady flow of details is allowing investors to piece together a picture that highlights the systemic risks of decentralized finance and poor risk management.
Here’s a look at what several experts are saying about the reasons behind the DeFi crash and their perspectives on what needs to be done for the sector to make a comeback. One of the most frequently cited reasons for DeFi protocols struggling is their inability to generate sustainable income that adds meaningful value to the platform's ecosystem.
4 Actions Startup Founders Should Take Now To Counter Impending Stagflation
Proactive founders can get in front of the pending turbulent economic environment. They must navigate a fiscal minefield full of paradoxes, such as dwindling runway versus mounting sales pressure, or suppliers forcing price hikes while investors push for profitability. Stagflation looms on the horizon, a menacing mix of slowing growth, rising unemployment, and persistently higher input prices (inflation). Altogether, stagflation is a toxic recipe for company financials, especially for early-stage companies not yet fully scaled and profitable. What’s different about today’s version of stagflation versus that of the 1970s is increased complexity. The Federal Reserve can try to cool the economy by raising interest rates to make business and consumer spending less attractive. However, the U.S. government is powerless to deal with inflationary global supply chain issues, such as product shortages. What can founders do? Here are four actions to take immediately.
Startup Founders Say Venture-Capital Investors Are Driving Harder Deals
Startup founders say venture-capital investors are offering tougher terms as companies attempt to raise money amid economic uncertainty and a broad selloff in tech stocks. Valuations are sharply lower than they would have been last year, according to entrepreneurs who gathered at the Collision tech conference that drew 35,000 attendees in Toronto last week. “We’re raising a Series A right now,” said Dejan Mirkovic, chief executive and co-founder of Goose Insurance Services Inc., a Vancouver-based startup with an app that people use to find, get quotes for and buy insurance. In venture capital, “A” series funding follows initial angel or seed investments and can be followed by additional rounds of venture funding. “The issue is that the market has a lot of capital to deploy, but everyone’s a little gun-shy,” Mr. Mirkovic said last week in Toronto. “A 30% haircut right now is what we’re seeing,” he said, referring to the decline in startup valuations from their peak.
A look into the British DFI’s plan to invest in African economies, venture funds, and tech startups
On April 4, the U.K.’s development finance institution, Commonwealth Development Corporation (CDC) Group, formally changed its name to British International Investment. As part of the name change, the development finance institution (DFI) announced that it surpassed its pledge to invest £2 billion in Africa over the last two years. It was a reminder of the series of work BII had accomplished on the continent leading to this point: over 600 portfolio businesses with a value of $4.2 billion. Nigeria is its biggest investment market in Africa, with a portfolio of $570 million. Within this period, the impact investor-backed several firms in various sectors like banking, trade, private equity, and venture capital. Some deals include $300 million direct equity in DP World, $75 million direct debt in Stanbic IBTC Bank, $100 million in Standard Chartered, a $20 million investment in Verod Cap, and a $15 million investment in the TLcom TIDE Africa Fund.
Biotech VC funding softens amid macroeconomic headwinds
The need for scientific innovation during the height of the COVID-19 outbreak fueled investor interest in pharmaceutical and biotech startups. As a result, the industry registered record VC fundraising in 2020 and 2021, reaching $28.2 billion and $38 billion, respectively, according to PitchBook data. While US-based pharma and biotech companies kept pace with the pandemic-era venture funding levels at the start of this year, deal activity began to slow in Q2. And venture capitalists predict investments will be even less robust in the second half of 2022. While demand for new medicines doesn't drop amid a weak macroeconomic environment, investors say that the rise in interest rates and the generally depressed dealmaking climate are leading to a slowdown in investments in life sciences startups. "Later-stage investing has slowed more significantly than the early-stage investing," said Greg Yap, life sciences and healthcare-focused partner at Menlo Ventures. That is because most crossover investors, who until recently led most late-stage biotech deals, are now finding better value opportunities in the public market.
FinTech to stay on venture capital investors' radar despite recession fears
Investments in the FinTech sector will continue to remain on venture capital and investment funds’ radars, despite slowing economic growth and mounting worries about a global recession.
Although the pace of investment has moderated and investors are more careful about which start-ups they finance amid macroeconomic headwinds, the FinTech sector in the GCC remains attractive, boosted by the relative strength of the region’s economies on the back of higher oil prices, experts said during DIFC FinTech Week, a two-day event for key FinTech players to discuss the future drivers of growth in financial services. “It [FinTech] has a very high 'investability' in the market versus other sectors because of the attractiveness and 'understandability' around its economics,” said Sharif Elbadawi, chief executive of Dubai Future District Fund.
‘Find the smartest technologist in the company and make them CEO’
Marc Andreessen arrived in Silicon Valley 28 years ago, fresh from the University of Illinois, where he and a colleague developed NCSA Mosaic, the graphic web browser that opened the world’s eyes to the potential of the internet. As an entrepreneur, Andreessen launched Netscape, whose IPO was the bellwether event of the first internet boom, and Opsware, an early cloud and software-as-a-service (SaaS) company. He then cofounded Andreessen Horowitz with Ben Horowitz, building it into one of the world’s premiere venture capital firms. Andreessen’s experience gives him a unique perspective on how new technologies develop, disrupt, and create opportunities for business. It’s a perspective that is of particular interest at a time like this when so much is unclear about the future of technology. Andreessen recently joined McKinsey senior partner Tracy Francis and the Quarterly editorial director Rick Tetzeli for a wide-ranging discussion.
How Startups Can Take Advantage Of Big Tech Layoffs
In the midst of the current global market correction, there has been a litany of layoffs for big and growth-stage tech companies as they shore up balance sheets and cut costs. As a result, there has been an influx of high-grade experienced talent coming online and available to startups with the runways to hire.
This presents a massive opportunity for companies that just raised a round before the window shut, or startups who have taken the “always alive” mentality to their financials. Just six months ago, the amount of software developers, engineers, marketers, and other highly talented professionals on the market was at all-time lows. Hiring was (and to some degree, still is) the biggest challenge for startups looking to grow their teams and hire experienced teams. That’s changing fast.
In India, it could be funding autumn not winter with active funds are still closing big deals
Amidst the funding winter, India managed to create at least 14 unicorns this year – more than last year. This number is all set to increase from 122 to 200 in the next four years, as per a Hurun report. It looks like the prediction might come true as Indian startups raised $12.1 billion till April – via 672 venture capital deals amidst cost cuts and layoffs, according to a GlobalData report. India also saw 28.6% growth in funding value during the same time frame as compared to other countries like UK, US, and China, the report says. Similar growth was seen in May as well this year. A recent report by IVCA-EY said that the private equity and venture capital investments in May 2022 were at $5.3 billion, which is 42% higher than May 2021 – though the startup fund took a 12% hit in the month.
Jumping S-Curves: Building a High-Performance Startup
One of the most important concepts for startup leadership teams to understand is the phenomenon of S-curves. An S-curve such as the one illustrated below represents the natural rhythm of growth, which follows a pattern of discovery, inflection, scaling, and inevitably decay.
Coinbase Pulls Back Its Startup Investing as Others Weigh Options
Investors are fleeing crypto as the markets collapse. So will big crypto companies keep pumping money into startups to help the fledgling industry stay afloat? So far, the data is mixed.
On one hand, industry giant and once prolific investor Coinbase has been tapping the brakes. Its venture arm, Coinbase Ventures, invested in just eight companies in June—including decentralized crypto custodian Entropy and crypto-focused asset manager Valkyrie —compared to 28 in March and 11 in the same period last June, dragging its second-quarter deal count lower, according to data from PitchBook. Non-fungible token marketplace OpenSea, which launched OpenSea Ventures in February, has yet to announce an investment, a spokesperson told The Information.
These four iconic European founders plan to kick the asses of VCs who never started a company
Until recently, Taavet Hinrikus, co-founder of Wise, and Sten Tamkivi, co-founder of Teleport, had banded together as a sort of “mini Angel brand” known as “Taavet+Sten.” Tamkivi has done around 50 angel deals, and Hinrikus has, reportedly, done as many as 150. But they were effectively pooling their personal capital as angel investors. However, evidently, this wasn’t enough for either, plus as former co-founders, they were viscerally aware that almost no VC funds in Europe have been founded by actual former entrepreneurs. And if you think about it, they’re right.
Are Venture Returns About to Cycle?
Yes. We do expect venture capital (VC) returns to be negatively impacted in the coming quarters but doubt that impact will be as pronounced and wholesale as it was during the dot-com era. To this day, the US VC 1999 vintage year fund cohort still reports an overall negative internal rate of return and has yet to return cost. It is true that investments completed at recent elevated valuations will likely have to perform mightily to deliver strong realized returns to investors, but today many venture-backed companies have revenue and revenue growth, a stark difference from many funded in the 1999–2000 era. Thus, the breadth and depth of this cycle may not be as severe.