VNTR Capital News Nov 13, 2022 - News, Events, VC Reads
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VNTR CAPITAL COMMUNITY NEWS
Weekly Highlights
Thanks for the rave reviews of our 2nd VNTR Investors Breakfast Roundtable in London on Nov 10, held as a side event to Token2049. Despite the London Underground strike, 40+ investors gathered for engaging roundtable discussions over breakfast in Canary Wharf.
This week VNTR Investors will be visiting Malta, where we are hosting our 1st VNTR Investors Roundtable on Nov 16 during AIBC Europe.
We plan to finish the week strong in Helsinki at the 1st VNTR Investors Roundtable on Nov 18 during SLUSH.
Next week we will gather at VNTR Investors Roundtable Berlin on Nov 24 during the Next Block Expo.
Companies that wish to connect with active investors can apply as a sponsor.
We are excited to be holding our 1st VNTR Investors Breakfast Roundtable in Doha, Qatar, during the World Cup. The date and details are still pending, but we plan to host it during the week of the Semi-Finals and Finals.
Our largest VNTR Investors Breakfast Roundtable in New Delhi on Nov 23 will gather some of the top investors in the region for another round of engaging discussions and exploring collaboration opportunities.
Thank you to our partners for their valuable collaboration and support:
BitDegree is the leading Web3 Learning Hub, helping 20 million learners annually start their journey in crypto and discover awesome Web3 projects.
Cudos provides highly scalable decentralized cloud computing capacity, powering metaverses and the web3 economy.
Learnoverse is the first Learning Metaverse powered by a leading Web3 Learning Platform with 1.3 million learners, launching Learn & Earn token economy and Metaverse NFTs for social status.
Wois is a wisdom-sharing platform for speakers, thinkers, and thought leaders. Wois collects diverse opinions from experts in all sorts of different fields and gives them the possibility to share their opinions on important user-generated questions. You can download their beta apps for iOS / Android.
Upcoming VNTR Capital events:
Nov 16 VNTR Breakfast Roundtable / Malta (during AIBC Europe)
Nov 18 VNTR Breakfast Roundtable / Helsinki (during SLUSH)
Nov 24 VNTR Breakfast Roundtable / Berlin (during Next Block Expo)
Dec 2 VNTR Breakfast Roundtable/ Miami (during Art Basel)
Dec TBD VNTR Breakfast Roundtable / Doha (during FIFA World Cup Qatar 2022)
Jan 14 VNTR Breakfast Roundtable / Zurich (during World Crypto Conference 2023)
Jan 17 VNTR Breakfast Roundtable / Davos (during WEF 2023)
RSVP to Upcoming VNTR Capital Events
The VNTR Capital Investors Community has a growing membership of 310+ qualified investors, actively investing in high-growth technology companies as VC/Crypto Fund managers, angel investors, and family offices.
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UPCOMING VC EVENTS
Nov 15-19 AIBC Europe, Malta
Nov 15 Airspace Investing Cocktail Hour, Zurich, Switzerland
Nov 17-18 SLUSH 202, Helsinki, Finland
Nov 23-24 Next Block Expo, Berlin, Germany
Nov 23-24 Global Blockchain Congress, Dubai, UAE
Nov 28-29 DCENTRAL Miami, USA
Dec 1-3 Art Basel Miami, US
Dec 20 3rd Annual Miami Gala with Andrea Bocelli by United Hatzalah of Israel
Jan 12-14 DLD Munich 23, Munich, Germany
Jan 11-13 Crypto Finance Conference, St. Moritz, Switzerland
Jan 16-20 World Economic Forum, Davos, Switzerland
Jan 16-19 AIBC Africa, Nairobi, Kenya
Mar 13-16 AIBC EURASIA, Dubai, UAE
Mar 29-30 WOW Summit Hong Kong
May 15-19 AIBC Americas, Sao Paolo, Brazil
May 31 - Jun 2 GITEX Africa, Morocco
Jun 26-29 Collision, Toronto, Canada
If you would like to submit VC-related events, please respond to this email or Telegram @byuric
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VC READS
After The FTX Collapse, This May Be A Good Time For VCs To Start Using ‘Common Sense’ Again
As crypto prices plummet, some withdrawals are halted, and FTX scrambles for new investment after its astonishing fall, it seems fair to wonder what will happen to venture investment in the sector. FTX’s debacle already has left its venture investors dumbfounded, with VC titan Sequoia Capital reportedly telling its LPs it has marked down the value of its stake in FTX to zero after investing more than $210 million in the exchange. The crypto venture market has already cooled significantly from 2021 — like most other venture markets. Last year saw a record $23.3 billion invested in VC-backed crypto startups, according to Crunchbase data. Thus far this year, just slightly more than half that number — $12.8 billion — has been invested in similar startups.
That cooling may continue as investors start to ask questions they should have been asking all along. “There’s a fine line between betting on the future — even when it means investing in concepts that, at least today, don’t entirely add up — and just throwing money at a concept because everyone else is doing it,” said Bradley Tusk, co-founder and managing partner at Tusk Venture Partners, which invests in the crypto industry. Tusk said while crypto is a useful asset class for people who distrust central banks, that doesn’t justify all of the money raised and invested in the sector.
Emerging VCs Struggle To Raise Funds As Nervous Investors Park Their Money In Big-Name Firms
VC firms have raised a record $151 billion from their investors this year. But for newer VCs, many of whom are from underrepresented groups, fundraising has become paradoxically harder.
In August, venture capitalist Sherman Williams learned that one of his institutional investors was backing out of a $15 million check. Williams suddenly was out 30% of the capital for AIN Ventures, a Black- and woman-led first-time fund focused on deep tech that he was raising.
Many emerging VCs like Williams have seen their own investors, known as limited partners, decide to invest in already established firms rather than making a dicier bet on less-proven VCs—indicating that an industry that prides itself on taking risks is becoming more risk averse with the market downturn.
Dubai Investment Fund, Andreessen Horowitz and Tiger Global are well-positioned to continue their growth in 2023
Depending on how you view things and whether you sit on the side writing the cheque or the side waiting to receive it, the investment landscape of 2022 thus far can either be perceived as 'half full' or 'half empty.' But it’s definitely unlike 2021, which was a banner year by all accounts. Last year (2021) closed out with the highest investment rate ever recorded ($300 Billion), with twice the amount invested in US startups versus 2020. Globally, nearly $1.6 trillion was invested in emerging companies. Comparing 2021 and 2022, the current year has been choppy, at best. What’s now clear is that 2021 was the year for startups seeking working capital. Investors had pent-up demand – and extra cash – after things slowed to a mere trickle in 2020 as the world grappled with the onset of the pandemic. In 2020, investment levels fell below those recorded during the financial crisis from a decade earlier. Many entrepreneurs joked on social media that all they needed to do was to present a venture capital firm with a slide deck and poof they had a six-figure cheque.
October's VC-Backed Funding Rounds Value Was Lowest of the Year
The total value of the venture capital (VC)-backed funding rounds completed around the world in October was the lowest of any month so far this year. There were 1,235 deals adding up to $21.35 billion done in October, S&P Global Market Intelligence said Thursday (Nov. 10) in a press release. This continues a trend that has been seen throughout 2022. Both the number of deals and the total value of the deals have been lower each month compared to the month before, with only two exceptions: from February to March and from May to June, according to the report. Comparing October to the same month in 2021, the volume of deals was down 40%, and the value of the deals was down 60%, the report said. Year to date, as of Oct. 31, there have been 17,843 VC-backed funding rounds totaling about $359.60 billion announced globally, per the report. “Falling valuations of technology companies and rising interest rates did not stop the technology, media, and telecommunications sector from remaining the most attractive target of venture capital investors globally,” the release said. “The sector pulled in 43% of the total capital raised in October.”
Changing times (or, why is every layoff 10-15%?)
First, some recent history…
In 2019, tech and software multiples hit all times high. After 10 years of quantitative easing and lowered interest rates, many did no think tech company multiples could go any higher.
Then COVID hit and the government took unprecedented monetary policy action by dropping interest rates to ~zero, expanding the federal balance sheet by buying assets, and printing trillions of dollars to provide money drops to large swathes of the US population affected by the rushed and unprecedented COVID lockdown policies. A number of these macro financial engineering approaches continued even post COVID-vaccine rollouts, raising questions on what motivated them.
October venture capital deal value, volume continues downward slope
Global venture capital-backed funding rounds in total were $21.35 billion in October, the lowest monthly tally year-to-date, according to S&P Global Market Intelligence data. A global total of 17,843 venture funding rounds representing roughly $359.60 billion have been announced from Jan. 1 to Oct. 31. Transaction value has dropped month over month since January, except from February to March, and from May to June, Market Intelligence data shows. In a year-on-year comparison, deal value was down 60% from October 2021, and deal volume declined 40% to 1,235 deals, which was the lowest number of monthly transactions since January 2022.
Crypto Can Help With Elon Musk’s Twitter Identity Issue
Much furor has been generated on Twitter about Elon Musk’s new "blue tick" (checkmark) verification scheme. Existing blue ticks are up in arms about the plan, which would give anyone a blue checkmark on their tweets if they pay Musk $8 a month, with no questions asked. Twitter Blue marketing makes it clear that there will be no identity verification. Pseudonymous accounts will be able to get blue ticks. Musk has expressed a hope that opening the blue tick scheme to a much wider audience will eliminate hate speech on Twitter and stop the proliferation of bots, spammers, and fraudsters. The payment of $8 per month is nowhere near enough to compensate for elimination of centralized identity checks. And the reason should be entirely obvious to anyone who is familiar with crypto, and in particular the problem that Bitcoin originally solved – the “Byzantine Generals” problem.
SoftBank Vision Fund Dashboard
SoftBank's Vision Fund remains in a state of limbo as its performance suffers. The firm is making few VC investments, with most of its capital already deployed, and a lackluster IPO market has left it with few opportunities to exit private investments. In its latest earnings call, SoftBank CEO Masayoshi Son announced that he would step back from day-to-day management duties while focusing on chipmaker Arm. The firm has suffered a wave of executive departures and recently cut nearly a third of the Vision Fund staff. Both the Vision Fund 2 and the Latin America funds remain at a loss on a cumulative basis. The Vision Fund segment lost nearly $10 billion in the quarter that ended Sept. 30.
Revenue-based financing: A new playbook for startup fundraising
A few years ago, founders only had two options when starting a company — bootstrap yourself or turn to VC money, and they would use that money primarily to pursue growth. Later on, venture debt started to gain prominence. While non-dilutive, its problems are similar to that of VC equity: It takes time to secure, involves warrants, isn’t very flexible, and not every startup can get it. But in recent years, more options have become available to founders. Most startups can now avail non-dilutive capital, and purpose-specific financing has entered the fray. While venture capital remains the most popular avenue for startups, founders should take advantage of all the financing options available to them. Using an optimal combination of capital sources means using cost-effective, short-term funding for imminent goals, and more expensive long-term money for activities with uncertain returns on the horizon.
3D Printing Public Offerings Flopped, But Venture Funding Still Flows To The Space
It’s true that 3D printing technology can produce tons of cool and essential stuff, from airplane parts to custom dental implants to cutlery. But one thing recently public upstarts in the space have proven they can’t print is money. Rather, like most tech companies that made market debuts during the go-go days of 2020-21, 3D printing brands have been getting clobbered in recent quarters. The worst performer on the list, Chicago-based Fast Radius, announced Tuesday that it filed for Chapter 11 bankruptcy. The move comes just nine months after going public through a SPAC merger at an initial market valuation of $1.4 billion. Fast Radius, which provides software and manufacturing offerings for engineers to design and make commercial grade parts, counted UPS and Drive Capital as lead venture backers and Goldman Sachs as a post-IPO investor. It attributes its current financial woes to “headwinds in the capital markets” that “have inhibited our ability to adequately put in place the capital structure needed.” The fast downfall of Fast Radius has wiped out pretty much its entire market cap. Shares are currently down over 99% from the offer price, with broad expectations they’ll go to zero.
Tackling Global Supply Chain Issues Requires Fresh Thinking And Better Tech
Small entrepreneurs never thought much about the supply chain before the pandemic threw the world into disarray. Now, that’s all they think and worry about. And while investors have sunk over $7 billion into supply chain-oriented ventures so far this year, there’s more work to be done to bring solutions to life and to market.
Morningstar Introduces Industry's First Global Unicorn Index Series
Today, Morningstar, Inc. a leading provider of independent investment research, introduces the Morningstar® PitchBook Global Unicorn Indexes™, the first index series to provide daily insights into the behavior and performance of late-stage venture capital (VC)-backed companies, empowering investors to better understand and access this rapidly growing but difficult-to-track asset class. This new series of market indexes combines the leading VC data, analytics, and insights from PitchBook, an independent subsidiary of Morningstar, with the indexing best practices of Morningstar Indexes, one of the fastest-growing global index providers. "In today's market, investors are increasingly looking to nontraditional asset classes like private markets for portfolio diversification and investment opportunity," said Ron Bundy, president, Morningstar Indexes.
As Maryland And Missouri Legalize Marijuana, Challenges Remain Over Cannabis Industry Payments
Thanks to the recent midterm elections, it’s now legal to use marijuana in Maryland and Missouri for recreational purposes. With these two new additions, recreational marijuana use is now allowed in 21 U.S. states. While using it may have gotten a little easier, paying for it still remains a headache for both customers and sellers. Startups have been in the cannabis business for a while, with funding to the sector surpassing $1 billion for the first time in 2018.
This came as legalization ushered in a slew of companies that owned everything from testing bushels of flower, facilitating regulatory guidelines, performing critical logistics tasks, and marketing products. What was once a well-known underground industry has turned into a sophisticated billion-dollar market. This is not new news. But cannabis still functions very differently from other niches in the retail industry and doesn’t operate with the same level of efficiency. The reason? Paying for cannabis is slow, cumbersome, and wrought with legal issues.
Venture Capital funds reverse as private firms are hit by headwinds
Private equity and venture capital funds have reversed and begun losing investors cash in the past quarter as the market is buffeted by a cocktail of interest rate hikes and a looming recession, according to a new report. Private capital delivered a 1.1 percent loss to investors in the second quarter of 2022 globally as the “macro environment shifted”, a new report from investment analysis firm Pitchbook found. PE and VC strategies led the fall globally as they shed on average 3.2 percent and 2.3 percent, respectively, analysts at the firm found. It comes as the volatility that has rocked public markets spills over into private firms and sends valuations tumbling this year. Pitchbook said that the bumper gains made in the preceding year had now begun to reverse. “Preliminary figures for [the second quarter] do show a recognition that the macro environment has shifted, as private capital is indicating a -1.1 percent return,” said Hilary Wiek, lead analyst, fund strategies & sustainable investing at Pitchbook.
“In the preliminary figures, PE and VC trailed the other private fund strategies in Q2 2022, with the highest fliers of 2021 having further to fall back to recognize the new normal.”
However, Wiek said that private market volatility had dodged the scale of turbulence that has sent public markets into a spin.
These FTX Investors Stand To Lose The Most From The Crypto Exchange’s Implosion
As the crypto exchange ballooned in size, it became a huge draw for venture capitalists eager to get in on the Bitcoin boom. In June 2021, FTX raised $1 billion at an $18 billion valuation from venture investors such as Paradigm, SoftBank, and Sequoia Capital. Three months later, FTX brought in a $421 million haul, pushing its valuation to $25 billion, from investors like Singapore-government-owned investment firm Temasek, Tiger Global Management, and the Ontario Teachers’ Pension Plan. By January of this year, crypto prices were on the decline, but FTX charged ahead. Investors, many of whom had also pumped money into the earlier rounds, put another $400 million into FTX–at a $32 billion valuation.
White Venture Capital to back executives, former founders to build startups
White Venture Capital (WVC), a venture capital firm started by Pine Labs chief Amrish Rau, his wife Sweta Rau, and neobank Jupiter founder Jitendra Gupta, on November 10 announced a new programme for executives and former startup founders who want to build a new venture.
“In our fund, we have launched an interesting concept to fund executives and senior startup folks who want to quit and build their startup. We will give (them) incubation support, $500K, our networks in fintech and market knowledge,” said Sweta Rau. The move comes at a time when the startup ecosystem in India has been rocked by layoffs as funds dry up, leaving more than 17,600 people without jobs. According to White Venture Capital’s LinkedIn post, applications for the "Call to Adventure" programme were now open. On its website, the VC firm said it was looking for "accomplished executives or ex-founders ready to leave their jobs", who have "an idea with a well-defined market and problem".
Market Map: Internet of things falters amid economic uncertainty
Despite ongoing market volatility and declining venture investment, the internet of things market continues to grow. PitchBook analysts expect double-digit growth in the IoT market out to 2025, led by smart building and smart home technology. Meanwhile, smart cities and connected vehicles stand to benefit from the public's desire for digital urban planning and transportation. The market map below outlines the global IoT VC ecosystem. Explore the industrial IoT segment by clicking on the green tile. Industrial IoT companies fall into three subsegments: Agriculture: Agricultural planning by monitoring weather, field conditions and crops. Energy & Utilities: Measuring energy generation, usage, and extraction. Manufacturing & Supply Chain: Tracking and maintaining equipment as it moves through the supply chain.
Meet The New Unicorns Minted In October 2022
Fourteen companies joined The Crunchbase Unicorn Board in October as late-stage funding plummeted worldwide. The new unicorns together added $36 billion in value to the board, according to an analysis of Crunchbase data. Financial services led the way with three new companies joining the list. Web3 and artificial intelligence startups were runners-up by company counts. Of the 14 companies, seven raised funding in 2021. Risk insurance platform Vesttoo announced seed through Series B funding in 2021. And AI content creation company Jasper was founded last year as well, making the startup the youngest company among this cohort.
Here are the newest companies valued in private financing at a billion dollars or more in October 2022. Tokyo-based online brokerage company Rakuten Securities, a subsidiary of e-commerce company Rakuten, raised $552 million at a valuation of $2.8 billion from Mizuho Financial Group. Indonesia-based FinAccel, parent of buy now, pay later startup Kredivo, raised a $140 million Series D valuing it at $1.7 billion. FinAccel raised the round, led by India-based global asset manager Mirae Asset, in lieu of going public via a special-purpose acquisition company.
LPs seek refuge in secondaries market
Amid a period of weakened performance in the first quarter of the year, secondaries funds proved the most resilient of private capital fund strategies. But the full effects of 2022's macroeconomic environment on private market returns aren't yet apparent. Secondaries funds fell slightly in the first quarter compared to the last three months of 2021, but they still outperformed overall private capital returns by 15.1%, according to PitchBook's 2022 Global Fund Performance Report. While complete Q2 2022 returns for the private capital fund universe aren't yet available, preliminary data shows that, as of March 31, secondaries had an average rolling one-year IRR of 42.1%, the highest of all private capital strategies. Secondaries' resilience through Q1 2022 is a product of limited partners' need for liquidity in the challenging market environment. In recent months, investors grappled with the denominator effect as public equity investments decreased drastically in value, which dragged down the overall value of institutional portfolios. That upped the value percentage of higher-performing investments—namely private market allocations—in those portfolios.
FTX's Fall Will Lift the Next Generation of Bitcoin Maximalists
The collapse of FTX has caused yet another destructive wave to wash over crypto – the world of altcoins, crypto exchanges and overleveraged entities. It’s impossible to say at this point how much collateral damage the loss of what was once the third-largest crypto exchange – whose founder had a foot in the door in Washington, D.C., his face plastered on sports stadiums and subway stations as well as his fingers in untold financial pies – will bring. BlockFi, which was rescued by FTX just months ago, has paused withdrawals; Genesis, a CoinDesk sister company, needs another lifeline, and rumors are circulating that many Solana-based projects are facing insolvency. (Bankman-Fried was a notable supporter of SOL.) The lesson to sufferers and outside witnesses alike is the same, and it is simple: Self-custody your bitcoin. Do not fall to the temptation of staking rewards, harebrained tokenomics schemes, or the simplicity of using an exchange. Bitcoin maximalists are called “toxic” for being so hardlined about this issue, but they've been proven right time and time again. A new generation of ardent bitcoin maximalists will be born from FTX's implosion.
Is bigger always better when it comes to VC funds?
This week came with some big fundraising news as EQT Ventures closed its third fund on roughly $1.1 billion, a 66.7% increase in size from its predecessor. While 2022 has seen the venture ecosystem take a turn for the worse—with fewer and smaller deals and exits—fund sizes continue to get bigger as LPs seek out experienced managers to help them weather the storm. The median size of US VC funds has grown 38.9% from last year to stand at $50 million in Q3 2022. While some of these vehicles began fundraising before the downturn, the numbers suggest that capital commitments have yet to dry up. As the saying goes, the bigger the better. But does that necessarily hold true for VC fund returns? US vehicles under $250 million have significantly outperformed those above that threshold over the past four quarters, according to PitchBook's 2022 Global Fund Performance Report. One reason for this is that it is simply more difficult to generate big returns with a large fund. Say you have $100 million to invest and you divide it equally among 10 startups, with a 10% stake in each. To generate 3x—returning $300 million—each portfolio company would need to provide an individual exit value of at least $300 million for you to get your return of $30 million from each company. In all likelihood, half of those investments will fail, so the exits for those remaining need to be even bigger.