VNTR Capital News Nov 27, 2022 - News, Events, VC Reads
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VNTR CAPITAL COMMUNITY NEWS
Weekly Highlights
Assure, one of the largest SPV providers will be closing shop at the end of this year. All clients (SPV organizers) are expected to take control of their Master Series LLCs, and SPVs and refunds will not be provided. Assure, and other SPV providers charge customers (SPV organizers) upfront fees ranging from $4k to $20k for the management for the lifetime of the SPV. According to industry insiders, Assure lost market share to emergent competitors due to an outdated tech stack and subpar customer service. The challenge is in choosing an SPV provider who will survive the lifetime of the SPV. Alternative SPV service providers in the US are Allocations, Vauban, Carta, Flow, Canopy, AngelList, Sydecar, Two12.
VNTR is currently evaluating how best to migrate from Assure to an alternative SPV service provider. Please contact us if you have any questions about Assure or VNTR’s migration strategy.
Last week we hosted another two Investors Breakfast Roundtables in Berlin and New Delhi, where 80+ investors met new co-investment partners and shared deal flow opportunities.
This week we will host our last offline event for the year on Dec 2 during Art Basel Miami, where art connoisseurs will gather to explore the latest trends in art and mingle at the side event.
VNTR Annual Sponsorship Program is currently accepting applications from relevant companies and brands. Companies that wish to partner with VNTR can apply and connect with investors and their portfolio companies through 40+ VNTR events in 2023, and the VNTR Weekly Newsletter.
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 to view opinions on iOS or Android.
Upcoming VNTR Capital events:
Dec 2 VNTR Breakfast Roundtable/ Miami (during Art Basel)
Jan 14 VNTR Breakfast Roundtable / Zurich (during World Crypto Conference 2023)
Jan 17 VNTR Breakfast Roundtable / Davos (during WEF 2023)
Feb 16 VNTR Breakfast Roundtable / Tel-Aviv (during OurCrowd Summit 2023)
We are scheduling 40+ events for 2023 as side events for large tech conferences.
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UPCOMING VC EVENTS
Nov 28-29 DCENTRAL Miami, USA
Nov 28-30 Decipher 22, Dubai, UAE
Dec 1-3 Art Basel Miami, US
Dec 20 3rd Annual Miami Gala with Andrea Bocelli by United Hatzalah of Israel
Jan 5-8 CES 2023, Las Vegas, USA
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
Feb 9-11 World Artificial Intelligence Cannes Festival, Cannes, France
Feb 27 - Mar 3 Mobile World Congress, Barcelona, Spain
Mar 10-19 SXSW, Austin, USA
Mar 13-16 AIBC Eurasia, Dubai, UAE
Mar 19-20 Crypto Expo Europe, Bucharest, Romania
Mar 20-24 Paris Blockchain Week, Paris, France
Mar 23-25 Art Basel Asia, Hong Kong
Mar 29-30 WOW Summit Hong Kong
Apr 11-12 Startup Grind, Silicon Valley, USA
Apr 26-28 Consensus by CoinDesk, Austin, USA
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
We Can't Rely on Venture Capital Funding to Build a Just and Thriving Entrepreneurial Economy. Here's What to Do Instead
The venture capital (VC) funding model is often portrayed as the new version of the American Dream — a plucky start-up founder invents a disruptive new technology, catches the eye of venture capitalists, sells the company for hundreds of millions, and spends the rest of their days sailing the Mediterranean. It's a nice story for the .01% of business owners who can — or want to — achieve that outcome. But the VC model is tremendously flawed. Simply put, it will never support a just, inclusive, or innovative economy. What's more? Most social entrepreneurs have no interest in starting the kind of business that meets VCs' definition of success. The many problematic issues with the VC model are well-documented. Most VC funders are white males, and startups funded by the top VCs are nearly 90% male and 72% white. Women entrepreneurs are at a particular disadvantage. While women-led enterprises are shown to drive more revenue, they receive less than 3% of VC funding. Women founders also receive less money when backed by VCs and often face higher scrutiny compared to their male counterparts. Even at the pre-VC stage, where angel investors jump in, women CEOs' percentage of the pie is steadily decreasing year over year from 2019 through 2021.
SPV for the price of a Big Mac
As some people may be aware Assure, one of the larger SPV providers in the US, gave notice to its clients that they will be closing shop at the end of this year.
That is pretty big news - going by their numbers we are talking over 8,800 investments and 50,000 investors affected. Assuming the Average SPV size ($1.49M as quoted in their State of SPV report), that is $13.2Bn of assets that are at risk of being liquidated.
Get ready for a prolonged downturn that’s worse than 2000 or 2008, billionaire VC Doug Leone says
American venture capitalist Doug Leone doesn’t think the tech wreck is going away anytime soon. The Sequoia Capital partner gave a gloomy outlook for the global economy, warning that today’s downturn was worse than recessions in 2000 and 2008. “The situation today I think is more difficult and more challenging than either ’08, which was really a protected financial services crisis, or 2000, which was a protected technology crisis,” Leone said, speaking onstage at the Slush startup conference in Helsinki.
Elon Musk’s hardcore playbook
Elon Musk isn’t exactly shy about squeezing the most out of his employees, and at Twitter he’s using approaches he’s already employed at Tesla and SpaceX. Let’s dive in.
So, you’ve gone ahead and shown about two-thirds of your staff the door. The ones that remain have signed up to work “long hours at high intensity.” Now, it’s time to show them what that looks like.
Elon Musk has a reputation for his love of “hardcore” working conditions. This isn’t his first rodeo, as The New York Times points out in a piece that identifies some key trends through his approaches at Tesla and SpaceX.
Energy efficiency sector stays hot in cool dealmaking climate
The decline in private equity and venture capital dealmaking is widespread across sectors of the global economy, with just a few exceptions. One of them is energy efficiency. Private equity-involved deals in the sector had an announced value of $31.79 billion as of mid-November, nearly twice the $16.36 billion full-year total for 2021. But there's a caveat, and it's a big one. That year-over-year jump in deal value is contingent on one mega-transaction that has yet to be completed: a proposed take-private deal for Japan's Toshiba Corp. from a consortium of domestic buyers. With an estimated value of $16.23 billion, the Toshiba sale would nearly equal in value all the private equity-backed dealmaking in the energy efficiency sector last year. So, forget about Toshiba for a second. Even without that transaction adding to this year's total, dealmaking in the energy efficiency sector would be on track to roughly equal the 2021 total, and that's notable amid private equity's slump.
American regulators to investigate Genesis and other crypto firms
Cryptocurrency lending firm Genesis Global Capital and other crypto firms are under investigation by securities regulators in the United States, according to reports on Nov. 25.
Joseph Borg, director of the Alabama Securities Commission, confirmed that its state and several other states are participating in inquiries regarding Genesis’ alleged ties to retail investors, including if Genesis and other crypto firms might have violated securities laws, Barron’s reported. It is still unclear what other companies are being investigated. Borg noted that the investigation focuses on whether Genesis and other crypto companies influenced investors on crypto-related securities without obtaining the proper registration. The investigation is another chapter in the Genesis saga since the company revealed it had around $175 million worth of funds stuck in an FTX trading account. On Nov. 16, Genesis announced it had temporarily suspended withdrawals, citing “unprecedented market turmoil” following FTX’s collapse on Nov. 11.
Ukraine war sparks slowdown in Central and Eastern Europe PE fundraising
Russia's invasion of Ukraine has greatly diminished private equity investment in Central and Eastern Europe in 2022, but the region continues to attract capital. Even in peacetime, fundraising in the region was lower than in the rest of Europe. This is partly due to the underdevelopment of many countries in the region, such as Albania, Kosovo, and Moldova, and the PE industry's relative immaturity in the region's developed economies, such as Poland. According to PitchBook data, the total capital raised by CEE-focused funds, and the number of them, reached a peak in 2017 and 2018, respectively. In 2018, 12 funds with a specific CEE focus—including country-specific funds—raised €1.22 billion combined. A look at the top five fund closes since 2016 shows that three funds emanated from either Russia or Ukraine—with the former being home to the largest fund in the region, the €811 million Russia-Turkey Investment Fund, managed by the state-owned Russian Direct Investment Fund, which launched in 2018.
2022 Technology Fast 500 winners Recognizing growth and innovation
Now in its 28th year, the Deloitte Technology Fast 500 honors the most innovative, fastest-growing public and private companies from all over North America. The awards program was created to recognize the passion and dedication it takes to be an industry disrupter across the technology, media, telecommunications, life sciences, fintech, and energy tech sectors.
By joining this elite group, companies receive increased visibility, brand recognition, and growth opportunities. The rankings are compiled based on submitted applications and public company database research, with winners selected based on their percentage fiscal-year revenue growth over a three-year period.
Billions Of Dollars Roll Into AI-Enhanced Cybersecurity
The use of AI by cybersecurity startups is nothing new, but as applications for the technology in the sector have grown, so has investor interest. Cybersecurity firms were early adopters of AI — those in the industry use as many tools as possible to stop the bad guys — but increased processing power has expanded AI’s security uses, and investors have taken note by investing billions of dollars in recent years. Last year saw a record $2.1 billion roll into VC-backed startups that use AI in cybersecurity, according to Crunchbase data. That was the second consecutive year investors stuffed more than $1 billion into the coffers of such startups. While this year, in general, has been a downer compared to last for fundraising — including in cybersecurity overall — cyber startups that use AI are still on pace to secure about $1.2 billion of investment. Even in a down year, there have been a handful of nine-figure rounds for cyber startups using AI in their tech. In February, Palo Alto, California-based Salt Security, an API protection platform that prevents attacks using machine learning and AI, closed a $140 million Series D round led by Alphabet’s CapitalG at a $1.4 billion valuation.
Going Beyond Capital: Why Portfolio Management Is Mission Critical For Micro VCs
As India’s startup ecosystem has matured, the investor pool has grown significantly and become diverse. From a small pool of angel investors, private equity players, and mammoth VC funds a few years ago, today, the startup ecosystem has avenues such as micro VC funds, family offices, corporate venture capital, and syndicated funds. Given the current economic slowdown, however, most of these investor classes are playing the wait-and-watch game. We say most because seed and pre-seed funding has continued to buck the trend of funding slowdown, and this is best seen in the number of micro VC funds emerging in the past 12-18 months and the increased activity. What early-stage founders want is more than the conviction that funding brings. They also need these investors to engage with the portfolio often at all early phases of the business. Unfortunately, large VCs cannot always take these bets or are not in the position to spend too much time in portfolio management, which is why we are seeing so many micro VCs emerge.
Startups are an act of desperation
Startups are hard. For the first few years of a company, forward momentum is largely due to founders pushing every day. The weight of the company rests on their shoulders - including the financial well-being and success of everyone they hired and the promises they made to their customers and investors. Founders often sacrifice aspects of their personal life for this work. Given that startups have a high cost to doing them, most great startups tended to have been an act of desperation by the founder. Usually, there are a few forms of desperation. Each founder tends to have a mix of the below in different ratios.
Slump puts more startups on path to acquisition by other startups
These are challenging times for venture capitalists hoping to eke out a palatable exit from a struggling portfolio company. Many venture-backed companies could soon be facing an undesirable yet straightforward decision: go out of business or be acquired at a fraction of their last valuation. Investors expect all types of M&A to pick up next year. Acquirers could be publicly traded companies, PE firms or even other startups that are well-funded and, in many cases, profitable. Although every acquisition is different, investors say that they generally prefer selling to a public company because it provides them with a path to liquidity right away. But for companies that end up selling to another startup, those exits may feel especially disappointing for shareholders. That's because VC-backed businesses seldom pay with cash and instead offer a stock swap as currency. Startup-to-startup deals are more difficult to get done because the target and the buyer need to figure out how much they are worth relative to each other, said Emily Anderson, managing director at Union Square Advisors, a tech-focused investment bank.
Here’s How Far Fintech Funding Has Fallen
Last year, financial services were the leading sector for venture investment, with at least $131 billion globally going into startups in the space. This year, the industry still ranks among the largest recipients of venture capital funding. However, investment in startups in the space has been dropping every quarter this year, with Q4 likely to be the lowest yet. Even with the steep year-over-year decline, financial services funding is still high by historical standards. Currently, 2022 is on track to deliver the second-highest funding total of the past five years. For perspective, we chart out investment and round count totals below: Shifting public market sentiment looks like a major driver of change in venture appetite for fintech deals. So far this year, virtually every venture-backed company that took advantage of the wide-open IPO window last year is down sharply from its peak. This applies to at least 20 companies listed, which made debuts on U.S. exchanges, including high-profile offerings from Coinbase, Robinhood, and SoFi.
Indian Startups see a rise in VC deal volumes in Jan-Oct; funding value dips
The Indian startup ecosystem saw a 7.5% year-on-year rise in the number of venture capital deals during January-October, but the total value of these deals declined 29.8% y-o-y during the period under review, as per a report. According to an analysis by London-based management consultancy GlobalData, Indian startups raised $19.3 billion across 1,456 deals in venture capital (VC) between January and October, against $27.5 billion across 1,355 deals in this period. Citing global macroeconomic factors, including rising interest rates and public market volatility, the report stated that VC firms have pivoted to a cautious approach towards startups and their business models amid a funding crunch throughout this year so far.
Let's Stop Regulating Crypto Exchanges Like Western Union
The collapse of cryptocurrency exchange FTX has been gut-wrenching for its customers, not only those who used its flagship offshore exchange in the Bahamas but also U.S. customers of Chicago-based FTX US. But there is a silver lining to the FTX debacle. It may put an end to the way that cryptocurrency exchanges are regulated – or, more accurately, misregulated – in the U.S. U.S.-based cryptocurrency exchanges, including Coinbase, FTX US, and Binance.US, are overseen on a state-by-state basis as money transmitters. Money transmitter regulation first emerged in the early 1900s with so-called "immigrant banks." Agents would collect funds from local immigrant communities in places like New York City and forward it by steamship to their families back in Europe and elsewhere. To protect immigrants from fraudsters, states began to impose licensing requirements on money transmission agents. Each state (except Montana) has evolved its own set of money transmitter laws.
Is it time to thin the unicorn herd?
Nearly a decade after the term "unicorn" was coined, venture capital's best and brightest companies may have finally outgrown what the ecosystem can sustain. Their rise was a product of business models that engineered growth with cheap money, and the financial conditions that made this model possible have changed profoundly. Flush with cash from recent boom times, unicorns have avoided down rounds and are extending financial runways by cutting costs. Serious damage has been limited to a small handful of companies, but Klarna's 85% valuation haircut earlier this year showed how tenuous these former valuations can be. For now, these companies are in a kind of limbo, increasingly shunned by the crossover investors they rely on for cash and unable to access public markets. A new suite of indexes from PitchBook and Morningstar captures how resilient unicorns have been, but all signs point to a coming reckoning. The population of unicorns, which symbolizes a fantasy of perpetual growth, may soon shrink.
Venture Capital, Private Equity Continues to Pour Into Senior Care
Venture capital and private equity firms are still putting their dollars into the senior living and long-term care industry. That’s according to Axios, which aggregated data from a study by the Journal of the American Medical Association (JAMA). The study shows venture capital investments outpaced private equity investments in 2022. Last year, the margin was nearly identical for both investment types in senior care. The value of investment in 2022 by both venture capital and private equity is far lower, under $1 billion, than the deal value reported in 2021 when venture capital invested in deals worth well over $2 billion. But the overall rate of investment was comparable between 2021 and 2022 as private equity outpaced venture capital investment last year and venture capital outperformed private equity investment this year.
Blockchain VC funding halves in October despite some strong raises
Blockchain venture capital inflows sharply decreased in October from the previous month. According to Cointelegraph Research, the number of individual deals dropped from 93 to 69 monthly. The Cointelegraph Research Terminal VC database, which compiles comprehensive details on deals, mergers and acquisition activity, investors, crypto companies, funds, and more, shows venture capital inflows plummeted 48.6%, totaling $843.5 million in venture capital (VC) investment, down from $1.64 billion in September. It’s not all bad news. Signals that there is still active interest by VCs in the blockchain industry are flashing daily. In the decentralized finance (DeFi) sector, Uniswap Labs — the team behind the largest decentralized exchange (DEX), Uniswap — secured $165 million in a Series B round led by Polychain Capital, with participation from investors such as Andreessen Horowitz, Paradigm, SV Angel and Variant. The series B funding round for the DeFi protocol brings Uniswap’s total valuation to $1.66 billion.
The FDA Called Cultivated Meat Safe To Eat. Funding May Take Time To Catch Up
Long ago, fact-checking website Snopes.com had to clarify an internet rumor that, no, fast-food restaurant KFC does not use lab-grown, genetically modified eight-legged lumps of pulsating chicken flesh devoid of feathers and beaks in its food. Fast-forward to today: In November, the Food and Drug Administration announced Upside Foods’ lab-grown chicken is safe to eat.
It’s been a long road for Upside Foods, the first company in this space to receive venture funding back in 2015, per Crunchbase data. But the reality of a bustling, highly competitive lab-grown meat startup system is not dissimilar from the horrifying visual of KFC internet lore. Scientists can grow lumps of meat in Petri dishes that can mimic chicken breast, steak, ground meat, and even filets of salmon with just a few stem cells.
Venture Capital Investment Market New Pathways for Research and Innovation are Being Opened by Trends
As per the report published by Allied Market Research, the global venture capital investment market generated $173.5 billion in 2021, and is projected to reach $1,068.5 billion by 2031, registering a CAGR of 20.1% from 2022 to 2031. The report provides an in-depth analysis of top segments, changing market trends, value chain, key investment pockets, competitive scenario, and regional landscape. The report is an essential and helpful source of information for leading market players, investors, new entrants, and stakeholders in formulating new strategies for the future and taking steps to strengthen their position in the market.
Research shows increased ESG disclosures linked to stronger PE fund performance
While private equity firms aren't required to disclose their environmental, social, and governance practices, they have increased their transparency voluntarily over the last two decades, and it has led to better returns for investors. Over the last two decades, private equity firms have increased their ESG disclosure, regardless of the firms' investment strategy, listing status, size, location or industry focus, according to a London Business School research paper by Jefferson Abraham, Marcel Olbert and Florin Vasvari. The paper, which used a count of ESG-related words on private equity firms' websites to gauge disclosure rates, found that from 2000 to 2020, the usage of these words on PE firms' websites grew 200%. The authors found that this increase in ESG disclosure was associated with a 4.9% increase in the net IRR of a fund. The increased disclosure is a spillover effect of increased mandatory disclosure among public firms onto unregulated private equity firms. In other words, the industry has started to voluntarily self-disclose ESG information to keep up with public competitors, the paper said.