VNTR Capital News Oct 16, 2022 - News, Events, VC Reads
Hello friends,
Happy Sunday!
VNTR Capital newsletter is delivered to 27k+ investors weekly to share the latest news, events, and articles from the global VC and startup ecosystem.
Scroll down for VNTR Capital Community News, Upcoming Events, and VC News/Reads.
VNTR CAPITAL COMMUNITY NEWS
Weekly Highlights
Dubai – We hosted our largest VNTR event in Dubai with 80+ investors who joined us on Oct 12 during GITEX Global in Dubai, see the video overview. Investors with cumulative available investment capital exceeding 1B USD and AUM of 4B USD gathered to discuss co-investment and collaboration opportunities.
New York – We launched our chapter in New York on Oct 13 with the addition of 17 new members to our investor community. We look forward to a dynamic chapter with regular events and roundtable discussions.
Los Angeles – The 2nd VNTR Breakfast in Los Angeles will be hosted on Oct 20 during Glendale Tech Week.
Tbilisi – The 3rd VNTR Breakfast in Tbilisi will be held on Oct 23 during DeGameFi, the first international Web 3 conference in the Caucasian Region.
Lisbon – We are preparing to host our global investors' community in Lisbon during Web Summit, when we will host two investor breakfasts on Nov 2 and Nov 3. Companies interested in connecting with investors can apply as a sponsor.
Partner Update – We are continuing to collect video answers to VC-focused questions to be published on our partner wisdom-sharing platform, WOIS. Experts and thought leaders from diverse fields are able to share their experiences, thoughts, and opinions with the WOIS global community for open, engaging, and insightful discussions. We encourage the VNTR Community to join WOIS as a venture capital thought leader.
Join Wois as a Venture Capital Thought Leader
Current Syndicated Deal – Series B FinTech company that is launching neobanks in emerging markets, already successfully operating in Azerbaijan, and launching in Vietnam, Nigeria, Pakistan, and India by the end of 2023. Deadlines: indicate interest by Oct 21; transfer funds by Oct 24.
Join VNTR Syndicate to learn more
Thank you to our partners for their valuable collaboration and support in hosting our event in Dubai:
TDeFi is a crypto incubator & lifetime-advisory firm which has been actively fostering & accelerating innovation in the blockchain & crypto ecosystem.
Cudos provides highly scalable decentralized cloud computing capacity, powering metaverses and the web3 economy. Cudos is ideally positioned to become the category leader for decentralized computing with the vision to connect all major blockchains and their developer communities to scalable computing resources.
Upcoming VNTR Capital events:
Oct 20 VNTR Capital Breakfast / Los Angeles (during Glendale Tech Week)
Oct 23 VNTR Capital Breakfast / Tbilisi, Georgia (during DeGameFi)
Oct 25 VNTR Capital Breakfast / Las Vegas (during Money2020)
Nov 2 VNTR Capital Breakfast / Lisbon (during Wow Summit)
Nov 3 VNTR Capital Breakfast / Lisbon (during Web Summit)
Nov 3 VNTR Capital Breakfast / Istanbul (during Istanbul Tech Week)
Nov 10 VNTR Capital Breakfast / London (during Token2049 London)
Nov 15 VNTR Capital Breakfast / Malta (during AIBC Europe)
Nov 18 VNTR Capital Breakfast / Helsinki (during SLUSH)
RSVP to Upcoming VNTR Capital Events
To become a VNTR partner or events sponsor, please reach out here.
The VNTR Capital Investors Community has a growing membership of 300+ qualified investors, actively investing in high-growth technology companies as VC/Crypto Fund managers, angel investors, and family offices.
Follow us on Social media: Instagram, LinkedIn, Facebook, and Twitter.
UPCOMING VC EVENTS
Oct 16-20 Glendale Tech Week, LA, USA
Oct 17-19 World Blockchain Summit, Dubai, UAE
Oct 18-20 TechCrunch Disrupt, San Francisco, USA
Oct 18-19 IDEAS 2022, New York, USA
Oct 19-20 Future Innovation Summit, Dubai, UAE
Oct 21-22 Wolves Summit, Vienna, Austria
Oct 22-23 DEGAMEFI, Tbilisi, Georgia
Oct 23-26 Money2020, Las Vegas, USA
Nov 1-4 Web Summit, Lisbon, Portugal
Nov 1-3 Wow Summit, Lisbon, Portugal
Nov 1-3 LA Blockchain Summit, LA, USA
Nov 3-6 Smart Vision Investment Summit, Alexandria Cairo, Egypt
Nov 9-10 Token2049, London, UK
Nov 10-11 Pacific Bitcoin, LA, US
Nov 14-18 AIBC Europe, Malta
Nov 17-18 SLUSH 202, Helsinki, Finland
Nov 23-24 Next Block Expo, Berlin, Germany
Nov 23-24 Global Blockchain Congress, Dubai, UAE
Nov 24 VNTR Capital Breakfast Next Block Expo, Berlin, Germany
Dec 1-3 Art Basel Miami, US
Dec 6-7 NOAH Zurich 2022, Switzerland
Jan 16-20 World Economic Forum, Davos, Switzerland
Jan 18 VNTR Capital Breakfast WEF, Davos, Switzerland
If you would like to submit VC-related events, please respond to this email or Telegram @byuric
Follow us on Social media: Instagram, LinkedIn, Facebook, and Twitter.
Check out VNTR Capital upcoming events
We are launching the VNTR Investment Platform to streamline participation in VNTR investment opportunities. You can view the investment opportunities and co-invest in a few clicks.
VC READS
How Low Could Valuations Go?
The public software market continues to compress. Enterprise-value-to-forward-revenue multiples are now below 2016 levels for the first time in 6 in years.
The 25th percentile of companies trade at 3.3x today compared to 4.0x in 2016. The median or 50th percentile trade at 4.9x vs 5.6x. The 75th percentile have resisted the downward pull & retain their premium: 7.3x vs 5.8x.
Ukraine war sparks PE interest in European energy
PE firms are investing large amounts in European energy companies as impacts of Russia's invasion of Ukraine diminish the supply of much-needed resources, such as oil and natural gas, in the region. PitchBook data shows total deal value for the sector standing at €27.2 billion (about $26.6 billion) so far in 2022, resulting from 86 closed deals. While last year's total was slightly higher at €29.8 billion, it was spread among 158 deals. The €4.9 billion offer last month by US-based EIG of 25% for Spanish oil and gas company Repsol reflects the continued appetite for fossil fuels among PE firms. The deal comes despite a growing demand for ESG assets among investors. A source of encouragement for PE firms looking at energy companies may be this year's successful €6.9 billion IPO of Vår Energi in February. The company, one of the largest independent producers of oil and gas in Norway, was previously backed by Eni and PE firm HitecVision. It was one of the few IPOs to occur in a market impacted by negative investor sentiment and a decidedly risk-off attitude.
NFTs will be ‘as disruptive’ as Bitcoin was 10 years ago — Kraken exec
Non-fungible token (NFT) trading volumes may have dropped nearly 98% since January, but several industry executives tell Cointelegraph it's nothing to fear as the technology continues to develop and mature. Jonathon Miller, managing director of cryptocurrency exchange Kraken in Australia said “despite NFT market activity and sales volume having slowed down in September, we are still seeing positive adoption signals at an institutional level and continued growth in use cases.” He told Cointelegraph that the company remains “bullish on the NFT space” and believes it will be “just as disruptive and innovative as Bitcoin was 10 years ago," and said he was particularly intrigued by JPMorgan signing “a lease using the technology” as well as hearing the news that “the Vatican has opened an NFT gallery.” He, however, acknowledged that the NFT industry is still “in its infancy” and that the biggest barrier to mass adoption is “nightmare user experiences,” saying that it is “very hard to say to someone who wants digital art, that you have to install a wallet and you have to onboard with that exchange.
European Venture Funding Drops 44% as Early Stage Weakens
European venture funding for third-quarter 2022 continues to fall, sliding to its lowest point in nearly two years as early-stage investment shows clear signs of weakness. Funding for the third quarter in Europe totaled $16 billion, down 44% year over year from $28 billion and down 35% quarter over quarter from $24 billion, per an analysis of Crunchbase data. This downward trend for European venture funding in the past quarter is in line with global and North American funding trends. We find the largest quarterly decline on a global basis year over year since Crunchbase started tracking venture funding in the mid-2000s. Funding in Europe is at its lowest since the fourth quarter of 2020, which totaled $13.4 billion. The biggest dip quarter over quarter was at early-stage funding, while late-stage fell by a greater proportion year over year. The most significant shift in European venture in the third quarter was at early-stage funding which dropped below $5 billion for the first time since the beginning of 2021.
This venture capitalist has backed 40 unicorns by focusing on the things most VCs overlook
enture is all about the entrepreneur, says Danny Rimer, a partner at Index Ventures. “The rest is noise. Total available market (TAM) size is noise. Talking about what the exit is going to be is noise. Thinking about where the company should be based is noise.”
On this week’s Most Innovative Companies podcast, Rimer shares his investment ethos, his thoughts around the evolution of the venture capital industry (is venture still venture?), why he believes it’s a privilege to invest in someone else’s idea—and how, in return for that privilege, he promises to roll up his sleeves, get to work, and do everything possible to make that company as successful as it can be.
Web3 devs ‘more active than ever’ amid crypto winter
Web3 developers don’t appear to be fazed by the crypto bear market, with one Web3 platform suggesting they’re “more active than ever” - particularly on the Ethereum network. In a new Q3 2022 report on Oct. 13 by Web3 development platform Alchemy, the company said that 2022 could be the “biggest year yet” for Web3 developers. Around 36% of all smart contracts ever deployed and verified on the blockchain have been in 2022, a count of nearly 118,000 compared to the over 323,700 ever deployed, according to the report. This is despite the price of Ether falling by nearly 66% since the start of the year and the total value locked in decentralized finance (DeFi) protocols falling around 70% year-to-date, according to DappRadar. Nonfungible token (NFT) trading volumes have also taken a beating, decreasing by 98% since late January. Alchemy states the deployment of smart contracts increased by 40% from the first quarter of the year, with consecutive all-time highs hit every month over the third quarter peaking at 17,376 in September alone.
Why are Indian start-ups facing such a severe funding winter?
India’s most valuable start-up, Byju’s, is laying off nearly 2,500, or 5 percent, of its employees as part of its optimization plan. Other start-ups have also cut their headcounts in 2022. Blinkit laid off 1,600 employees, Unacademy 1,000, and Vedantu over 700. The layoffs are believed to be the result of a global funding slowdown that has also hit Indian start-ups this year, forcing them to conserve cash and discipline themselves. The slowdown has been more pronounced in India. Analysis by CB Insights showed that in the third quarter of the calendar year 2022, India’s share of total venture capital funding that went to Asia fell by nearly half to 14 percent, compared to 22 percent in the second quarter. During the same period, China’s share went up from 34 percent in the second quarter to 42 percent in the third, even though overall VC funding shrank in Asia.
Europe’s Plan to Beat Silicon Valley at Its Own Game
WIRED spoke with Skype cofounder Niklas Zennström about why the burgeoning European startup scene is poised to lead the technological revolution.
Skype was arguably the first breakout European tech company. Nearly two decades after its creation, cofounder Niklas Zennström reflects on the growth of the European ecosystem, posits that combining profit and purpose is critical—and explains why Europe is set to beat Silicon Valley at its own game.
China PE deal activity lags after record high
Private equity appetite for deals in China has cooled considerably in 2022 as the region faces a barrage of economic headwinds ahead of President Xi Jinping's expected reappointment this week. According to PitchBook data, there have been 573 PE deals in the region—which comprises China, Taiwan, and the special administrative regions of Hong Kong and Macao—worth more than $53.5 billion. While 2022 remains one of the busiest years for private equity in the last decade, it still represents a significant slowdown when compared to last year's peak of 726 deals worth about $88.6 billion. Buyouts have also accounted for a smaller share of overall deal activity. Of the 573 deals recorded so far this year, only 34 - just under 6% - are control deals. This represents the smallest share of any year in the past decade. The drop in activity comes at a time when China's economy is slowing down. Earlier this month, the International Monetary Fund lowered China's growth forecast for next year to 4.4%, citing its weakening property sector and continued lockdowns as part of its "zero COVID" policy.
Asia Funding Plummets In Q3
Venture funding in Asia sank to its lowest level in 10 quarters as the region felt the full effects of the current private market pullback. Mirroring what is going on in the public markets, investors slowed funding to private companies, with only $21.2 billion for startups in the region. That is a 26% decrease from the second quarter and an astonishing 56% from the third quarter of last year. As with the global numbers, the total funding amount marked the lowest investment since the first quarter of 2021, when the world was just entering into a pandemic, and only $19.6 billion was raised by startups in the region. Not surprisingly, deal flow also suffered, hitting its lowest level since the fourth quarter of 2020. Only 1,417 deals were announced in Q3, down 18% from last quarter and 22% from a year ago. While all types of rounds were down from last quarter, the biggest drop was seen in late-stage and tech growth rounds. That trend is not unique to Asia, but it was certainly pronounced. Large late-stage and growth rounds fell 42% from last quarter to $9.2 billion. That number also represents a 71% drop from Q3 last year when the total hit $32.2 billion.
US VC firms pull back from late-stage deals amid stormy markets, valuation concerns
Startups seeking late-stage funding in the United States are failing to attract investors as dour sentiment in the public markets, and dull exit conditions make it tougher to justify higher valuations. US venture capital investments in late-stage deals have plunged 62% to $24.9 billion in the third quarter, according to a report by PitchBook and the National Venture Capital Association (NVCA) on Thursday. "Right now, the late stage is a much more treacherous market relative to how it has been in the past," Pitchbook's lead VC analyst, Kyle Stanford, said, adding that companies seeking late-stage funding have been relying much more on public market investors. Late-stage dealmaking activity correlates strongly with the public markets, which have been hurt by rapidly rising interest rates and geopolitical turmoil this year. Companies seeking such deals also face higher chances of a down round, prompting VC firms to take a more cautious approach.
Software won’t solve the climate crisis: Deep tech investment is needed
In 2011, Marc Andreessen famously wrote that “software is eating the world,” predicting that software companies would disrupt nearly every industry. His prescient projection has held true over the past decade. Software has had a widespread impact, ushering in dramatic efficiencies in business, transforming healthcare, and introducing countless conveniences into our daily lives.
However, while software has provided undeniable benefits, it’s not a panacea for society’s biggest challenges, including the largest of all: The current climate crisis. Software alone will never solve the myriad of issues contributing to the dire state of our planet. Hardware solutions and engineering-led innovations in the deep tech space will enable some of the most significant climate action.
Active Investor Ranks Shift In Q3 As Tiger, SoftBank Scale Back
The past few months have brought significant shifts in the ranks for the most active global investors. SoftBank Vision Fund and Tiger Global—the two firms that used to regularly top our most active and spendiest venture investor rankings—cut back sharply in the third quarter. Both firms face well-publicized woes, with Tiger reeling from declines in its public tech portfolio and SoftBank cutting staff in the face of steep losses. That leaves Andreessen Horowitz and Insight Partners in first and second place, respectively, for most active global lead venture investor in Q3. While both those firms also cut back dealmaking activity in the quarter, they did so at a less dramatic pace. To see how firms and recent quarters compare, below we lay out the ranking for the most active venture and growth lead investors in 2022, comparing for Q1, Q2, and Q3 of 2022. Notably, there wasn’t a single firm on the list above that increased its lead deal pace in Q3. That’s not too surprising, given the general investment environment. Global venture funding for the third quarter, which totaled $81 billion, was down 53% year over year and 33% quarter over quarter, according to a Crunchbase News analysis.
Who are VCs kidding with their phony fund sizes?
This original take on Eminem’s Lose Yourself was inspired by a real story that happened this year to an emerging European VC fund manager. All joking aside, the anecdote reveals the worrying state of transparency and clarity in European venture, especially when it comes to misleading announcements of new funds raised. I’ve seen everything from funds announced in the media that aren’t even incorporated yet, pre-first close funds announcing the target size of the fund as being raised or, to make it a bit more concrete, firms announcing their fund size when they only have like 0.02% of the capital effectively raised. I love the hustle mindset; truly. But I also love transparency and honesty. And I dare say I love integrity above all. This behaviour has real consequences on our beloved venture ecosystem — most of them negative. I’ll go into those in detail below, and talk about how we need more clarity around capital raised in Europe, while still staying ambitious.
Cybersecurity Funding Continues Slide In Q3
For the fourth straight quarter, funding to VC-backed cybersecurity startups decreased—as even one of the most resilient industries showed it is not immune to the venture capital pullback.
The recently ended third quarter saw only $2.6 billion go to startups in cyber, the lowest total since the same quarter in 2020, which saw $1.6 billion invested, according to Crunchbase data.
“The market’s fluctuations have affected all tech sectors in the past six months,” said Ofer Schreiber, partner and head of the Israel office for cyber venture firm YL Ventures. “We’ve definitely seen reactions in the cybersecurity sector that coincide with the general wariness of both investors and vendors.” Deal flow diminished in the quarter, which saw only 124 funding deals announced—the lowest since the third quarter of 2014. Despite the downward trend in venture funding for the sector, several companies saw big rounds in the third quarter. The three biggest rounds of the quarter were: In July, San Francisco-based cyber insurance startup Coalition closed a $250 million round at a $5 billion valuation. The new cash comes less than a year after Coalition raised a $205 million Series E at a $3.5 billion-plus valuation.
Venture debt lending dips as borrowing costs rise
When public markets began to sell off earlier this year, VCs urged their portfolio companies to extend their cash runway by any means possible. As a result, many startups turned to venture debt. But after an initial surge, their appetite for debt has waned in recent months. In Q2, US startups borrowed $9.7 billion in venture debt, the second-highest quarter on record. But in the third quarter, venture debt deal value fell by half to $4.7 billion, the lowest quarterly volume since Q3 2017, according to our latest PitchBook-NVCA Venture Monitor. Startups rushed to secure venture debt at the beginning of the downturn and were done with fundraising by mid-year, according to Howard Morgan, chair and general partner at B Capital Group. "We did a lot of venture debt during Q2 for [our] companies but almost none in Q3," he said. Another reason for the recent decline in the value of venture debt is the increasingly higher borrowing costs. In addition to the US Federal Reserve rate hikes, spreads on venture debt jumped on average 150 to 300 basis points for enterprise software and well above 300 basis points for eCommerce and consumer businesses, said John Markell, a managing partner at venture debt advisory firm Armentum Partners.
North American Startup Funding Shrank Over 50% In Q3, Led By Late-Stage Declines
North American startup investment for the third quarter totaled less than half its year-ago levels, driven by an even steeper drop in late-stage financing. That was the broad finding from our latest tally of Crunchbase data for U.S. and Canadian venture funding. It shows the pullback that commenced earlier this year has intensified in recent months, as tech valuations in public and private markets contract and the IPO window remains largely shuttered. Overall, investors put $39.7 billion to work in seed-through growth-stage deals in Q3, down 53% year over year and down 37% from Q2. The year-over-year decline was most pronounced at the late stage, which was down 63% in the just-ended quarter. For perspective, we lay out North American funding totals, color-coded by stage, for the past 11 quarters: The latest numbers appear less alarming when looking across a two-year time horizon, rather than solely comparing to 2021’s record-breaking tallies. By historical standards, funding totals are still pretty high. Early- and seed-stage dealmaking, for instance, is actually above 2020 levels. Below, we look at the latest quarterly numbers in more detail, focusing on investment by stage as well as major exits.
European fintech enters new normal as funding cools
An increase in consolidation is expected to hit the European fintech sector as venture investments continue to cool off. Fintech has been one of Europe's top-performing sectors over the past few years, with VC activity reaching a peak in 2021. But according to Finch Capital's State of European Fintech report, the sector is transitioning into a new normal of less funding and lower valuations. "After many years of impressive growth, perhaps overheated, there is no doubt that a worsening macroeconomic situation and tightening money supply are weighing on the fintech sector," Finch Capital managing partner Radboud Vlaar said in a statement. "This doesn't mean that funding has dried up, simply that investors are becoming more discerning and price sensitive." The report, citing PitchBook data, found that Europe's fintech ecosystem has stagnated as macroeconomic conditions drive investors to be more cautious with their capital. The number of new fintech startups created in the region has dropped 80% since 2021 due to the lack of liquidity in the market. The report also estimates that the number of fintech deals will fall by 60% between 2021 and 2024.
Will Indian VC’s $16Bn Dry Powder Fuel A Startup Funding Revival In 2023?
After a landmark year in 2021 that saw record fundraising and 44 new unicorns, the startup ecosystem in India is now firmly in the grip of a funding winter. The current state of affairs is gloomy. Startup funding is sliding back to 2020 levels, layoffs continue to pile up, while revenues have dipped and losses deepened. Looming down rounds and deal reversals are becoming the new normal. Worse still, many founders and businesses have become caught up in income tax and other government probes. The pain points have left stakeholders across the ecosystem in a state of uncertainty and flux. But there is also some hope. Although the funding winter is expected to last for the next two to three quarters at least, things are expected to start looking up around June 2024. Investors are estimated to be sitting on dry powder worth $16Bn based on data around new funds launched and raised in 2022. This will need to be disseminated in the next 12-18 months, according to most estimates. Simply put, dry powder is nothing but the corpus raised by VCs and other investors but not yet disbursed for funding. Beyond the funds raised by investors this year, one must not forget the 62 new funds launched in 2021 that raised $6Bn in fresh capital, a big portion of which is yet to be invested.
September’s hottest seed rounds
September was a bounce-back month for European seed investors. There were 333 seed rounds across the month, up from an average of 222 rounds a month for the three months prior.
The companies brought in a collective €510m, way ahead of August’s €340m.
The largest round of the month went to Sequence, a British fintech which offers B2B firms ways to streamline billing and pricing. It secured $19m in a round led by Andreessen Horowitz, as well as investment from Salesforce Ventures and firstminute capital.
If it’s AgTech, it’s climate change: How the crisis is shaping investors’ strategies
To state the (painfully) obvious: The fates of agriculture and climate change are inextricably linked. The weather dictates what grows where and when, but as the Earth warms beneath a wool blanket of excess carbon, agriculture is especially vulnerable in ways you might not expect. Record-setting heat and droughts fry grasses that farmers depend on to feed cattle, warmer temperatures are a boon for pests and fungi that harm crops, smoke from wildfires taint harvests, and extreme weather and rising seas make it more difficult to move everything (including food) around. The threats to food security and livelihoods go on and on. Undoubtedly, this has some deal-makers in tech salivating. As startups look for ways to adapt the global food system to the chaos of today, we reached out to seven AgTech investors to get a better understanding of how the climate crisis has informed their strategies to date. “Climate challenges are not new to anybody operating in the broader food and agriculture space, so our approach is to invest in solutions that can help mitigate and adapt to climate change,” Yield Lab partner Camila Petignat told TechCrunch. Themes the firm looks at “include soil and water conservation, improved use of crop inputs, the shift from chemical to biological crop protection solutions and reduction of food waste,” Petignat said. “We could argue,” Petignat added, “that the increased awareness of carbon markets in recent years has triggered new opportunities at the intersection of AgTech and fintech, a space that we are interested in.”