VNTR Capital News Oct 30, 2022 - News, Events, VC Reads
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VNTR CAPITAL COMMUNITY NEWS
Weekly Highlights
Join us in Lisbon this week at our largest event yet, VNTR Breakfast in Lisbon on Nov 2, a side event to Wow Summit during Web Summit. So many summits! We expect as many as 100 investors who are traveling to Portugal from 30+ countries.
Join us in Istanbul as we launch our chapter in Turkey at the 1st VNTR Breakfast in Istanbul on Nov 3 during Istanbul Tech Week. We are pleased to co-host the event with our partner Finberg.
Our 9th event in India will host 50+ investment decision-makers at the VNTR Breakfast in New Delhi on Nov 23. Our advisory services for scale-ups will kick off in India, where we will invest in series B+ companies via our syndicate.
We are preparing for our events at Token2049 in London on Nov 10 and AIBC in Malta on Nov 16. We look forward to seeing you at the VNTR Roundtable events!
Thank you to our partners for their valuable collaboration and support:
Cudos provides highly scalable decentralized cloud computing capacity, powering metaverses and the web3 economy.
Kikimora Labs is a venture studio, and tech hub focused on incubating next-generation technological projects in web3, education, and other areas.
BitDegree is the leading Web3 Learning Hub, helping 20 million learners annually start their journey in crypto and discover awesome Web3 projects.
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.
Finberg is a corporate venture firm investing in fintech, retail tech, crypto business models, deep tech, B2B SaaS, and gaming sectors.
Upcoming VNTR Capital events:
Nov 2 VNTR Breakfast / Lisbon (during Web Summit and Wow Summit)
Nov 3 VNTR Breakfast / Istanbul (during Istanbul Tech Week)
Nov 10 VNTR Breakfast / London (during Token2049 London)
Nov 11 VNTR Breakfast / Tel-Aviv
Nov 16 VNTR Breakfast / Malta (during AIBC Europe)
Nov 18 VNTR Breakfast / Helsinki (during SLUSH)
Nov 23 VNTR Breakfast / New Delhi
Nov 24 VNTR Breakfast / Berlin (during Next Block Expo)
Dec 2 VNTR Breakfast / Miami (during Art Basel)
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UPCOMING VC EVENTS
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 Abu Dhabi FinTech Week, UAE
Nov 15-19 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 28-29 DCENTRAL Miami, USA
Dec 1-3 Art Basel Miami, US
Dec 6-7 NOAH Zurich 2022, Switzerland
Dec 20 3rd Annual Miami Gala with Andrea Bocelli by United Hatzalah of Israel
Jan 11-13 Crypto Finance Conference, St. Moritz, Switzerland
Jan 16-20 World Economic Forum, Davos, Switzerland
Jan 16-19 AIBC Africa, Nairobi, Kenya
March 13-16 AIBC EURASIA, Dubai, UAE
May 15-19 AIBC Americas, Sao Paolo, Brazil
May 31 - June 2 GITEX Africa, Morocco
June 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
IPO Returns Show Fashion Startups Were Not Runway Ready
Venture capitalists are not known for their fashion sense. Turns out, they haven’t been doing well lately with fashion-related IPOs either. A Crunchbase survey of six venture-backed companies in the clothing and accessories industry that went public last year shows an average post-IPO decline of 74%. The worst performer—subscription and rental outfit provider Rent the Runway—has seen its valuation slip 93% since making its market debut last October. Shares tanked a few weeks ago, after the company lowered revenue forecasts and announced a 24% cut in corporate staff. The New York fashion industry disruptor is hardly the only venture-backed company in the space to face troubles lately. For perspective, below we lay out six that went public last year, and how they’re faring now:Of course, the major market indices have seen steep declines since last year, with tech leading the way down. So newly public fashion players aren’t the only ones that headed lower.
How Crypto Traders Are Reinventing Venture Capital
“Crypto’s $3 trillion of liquid value creation in 10 years now rivals that of all other venture-backed startups combined.” – Messari.io Powered by blockchain technology, digital assets offer new trading and investing opportunities with more liquidity and speed. What we refer to as “liquid venture” – digital assets issued by early-stage companies or projects – expands the tradable landscape. Venture capital (VC) investments tend to generate net returns that outperform the S&P 500, but they are inaccessible and illiquid, with average fund lockup periods of seven to 10 years. Experienced traders who consider the unique nuances and risks of liquid venture can have novel alternatives to long-term, locked-up VC investing.
VCs go outside their comfort zone with bets on defense tech
After years of shunning investments in military and security-related technology startups, VCs are raising their profile in the sector as part of the US effort to gain a technological upper hand against new threats from adversaries like China and Russia. More investors have also flocked to portfolio companies whose satellite, robotics, and software tools can do double duty as military and commercial "dual-use" technologies. This year has seen $7 billion invested in VC-backed US aerospace and defense companies through Oct. 13, according to PitchBook data. That puts the sector on track to surpass last year's record deal value of $7.6 billion. VCs' growing appetite for those deals stands in contrast to their slowing pace of investment in most other sectors as the market slogs through a broad-based downturn. The war in Ukraine is just one of the latest factors that put the spotlight on technologies that can protect critical national infrastructure and help deter attacks. In addition, companies focused on defense and security are considered recession-proof. With the global economy drifting toward a possible recession, future revenues of SaaS-focused startups are under pressure as many corporate customers cut back their software spending.
Andreessen Horowitz’s Flagship Crypto Fund Takes A Beating
Venture capital firm Andreessen Horowitz, one of the early movers into the crypto and blockchain market, has been hit with a blizzard in this crypto winter. The Wall Street Journal reported Wednesday the firm’s flagship cryptocurrency fund lost 40% in value in the first half of the year, according to people familiar with the matter. Andreessen Horowitz’s debut $300 million crypto fund raised in 2018 had been on track for a 10x return, The Information previously reported. One investment from that fund includes Coinbase, which went public last year. Coinbase shares have tumbled 77% since its debut. The drastic drop in value comes as crypto is facing several headwinds. Crypto prices have sunk from their November highs, with Bitcoin losing more than 60% since then. That decline was brought about by economic concerns ranging from ballooning inflation and rising interest rates to a wobbly public market. The private market also has faced its own tumult. After a record-setting 2021, venture capitalists and growth investors have pulled back significantly, as they look to rebalance portfolios and codify their current investments through rocky economic times. Even Andreessen Horowitz, which has evangelized crypto at every turn, has slowed its investment cadence in crypto and blockchain in recent quarters, according to Crunchbase data. After making 53 deals in those sectors from Q4 2021 to Q2 of this year, the firm made only nine deals in the recently completed third quarter.
The UK has a new name for stablecoins and a new bill to regulate crypto
The United Kingdom moved forward on the Financial Services and Markets Bill on Oct. 25, hardening its vision for Bitcoin cryptocurrency and “digital settlement assets” in the country. The suggested bill proposes “a range of measures to maintain and enhance the U.K.’s position as a global leader in financial services, ensuring the sector continues to deliver for individuals and businesses across the country.” The bill reasserts the U.K.’s intention to become a global cryptocurrency hub, comments echoed by Lisa Cameron, member of parliament and the chairperson of The Crypto and Digital Assets All-Party Parliamentary Group. In an exclusive interview with Cointelegraph over the weekend, she explained that crypto is on the lawmakers’ radar, although there is a lot of education to be done. The bill builds upon existing measures to broaden regulations of stablecoins and mentions “Digital Settlement Assets” (DSA) as a new term, moving away from the use of “crypto assets.” According to the U.K. government, “crypto assets use some form of distributed ledger technology (DLT),” whereas DSA includes stablecoins, “given their potential to develop into a widespread means of payment.”
The rise of sports as investment
"Sports" is often narrowly defined: you're either an athlete or you're a fan. In reality, the sports world extends far beyond that — and investors are increasingly taking notice. Driving the news: Will Ventures, a Boston-based early-stage venture capital firm, just closed a new $150 million fund to continue investing in sports and sports-adjacent businesses. The firm, founded in 2019, has already invested in Future (personal training), Street FC (pickup soccer marketplace) and Candy Digital (digital collectibles), among other startups. They have 17 pro sports team owners on board and they also have an exclusive deal with OneTeam Partners that allows them to leverage athletes to promote their portfolio companies. State of play: A few decades ago, the idea of a sports-centric VC firm was a foreign concept. But as sports grow more intertwined with media and technology, "investing with a sports focus" is now a powerful thesis.
The billion-dollar tech unicorn is becoming rare again
The hot social media network BeReal — which is gaining steam with young people as a casual alternative to Instagram — recently raised money, a key milestone on the path of any successful start-up.
It had all the elements of a buzzy start-up, like Snapchat, Clubhouse and Pinterest before it. It was popular with college students and even beat out social media video rival TikTok on Apple’s App Store. But when a report this month confirmed how investors valued the company, it was reportedly worth in the ballpark of $600 million — far short of the “unicorn” status of more than $1 billion many of its predecessors earned in frothier times.
A billion dollars may seem to be a big bet, but unicorn status for years has helped young companies attract employees and media attention, as well as offer founders runway to pursue new ideas and cachet with potential partners. Many now-established start-ups such as Airbnb and Uber that have shaken up long-standing industries depended on deep-pocketed investors to cover losses while they struggled to compete.
But BeReal’s experience is representative of a new reality in Silicon Valley.
Funding To Latine-Founded US Companies Falls Sharply In 2022
Funding to U.S.-based Latine-founded companies plummeted more than 80% in the third-quarter 2022, both quarter over quarter and year over year. The quarter saw $250 million invested in Latine-founded companies, compared to $1.3 billion in the second quarter, and $2.3 billion in the third quarter of 2021. This pullback in funding to Latine founders in the U.S. took a sharper downward turn than the broader slowdown in venture capital in the U.S. market, which was down more than 50% year over year for funding this past quarter. Since the number of Latine-founded startups funded in a year is counted in the hundreds of companies, this group’s funding can fluctuate from quarter to quarter. Plus, minority founders who might not be in the right networks could find raising funding more challenging. Tracking funding to Latine-founded companies comprehensively is challenging. This community in the U.S. is diverse and includes first- through fourth-generation Latines whose ancestors hail from many different countries. We also include companies that have relocated from Latin America and Spanish-speaking countries to the U.S. in order to raise funding and address the U.S. market. Companies are tagged in the Crunchbase dataset as having a Latine founder from organizations and news coverage, as well as founder and venture community contributions.
Venture Capital Funding In India Down By 22.4% YoY To $18.5 Billion During Q1-Q3 2022, Finds GlobalData
Aurojyoti Bose, Lead Analyst at GlobalData, comments: “The decline in value despite a growth in volume suggests that investors have become more cautious in committing big investments amid the volatile market conditions.” An analysis of GlobalData’s Financial Deals Database reveals that September 2022 witnessed a setback in VC funding activity. While the VC deal volume decreased by 10.1% in September compared to the previous month, deal value too fell by 28.4%. Bose adds: “India, despite being one of the leading startup ecosystems, is going through a funding winter and witnessing a subdued VC funding activity with the total VC fundraising remaining below $1 billion in September.” In fact, the monthly VC fundraising for India was at its lowest level in September. India saw the announcement of 124 VC funding deals worth $741.3 million during the month.
Venture Capital Is Ripe for Disruption
A world where a billion is a drop in the bucket
Figma was one of the largest software acquisitions of all time at $20B—a staggering, Scrooge-McDuck-swimming-in-a-pool-of-gold sum of money. More remarkable than the money is the possibility that this deal is a failure for many of the VCs who backed Figma. All it would take is for the investors to have used capital out of their current funds.
At the time of exit, Index Ventures owned ~13% of Figma, for a stake worth about $2.6B. The firm led the seed round of the company in 2013 and almost certainly defended its ownership over the intervening years by injecting additional capital. Depending on timing and volume of deployment, they likely got 30-90x their capital. That’s great—but it isn’t enough.
European PE trends for Q3 in six charts
European private equity deal activity has remained steadfast through Q3 despite worsening economic conditions. Here is a look at some of the key themes from PitchBook's latest European PE Breakdown that shows how private markets have navigated a more challenging macroeconomic context. Dealmaking activity saw a significant drop in Q3 2022 when compared to the previous quarter, indicating that the current economic malaise may have finally caught up with PE in the region. Aggregate deal value and volume were down by 31.6% and 9.6%, respectively. Meanwhile, on a year-over-year basis, the total deal value is flat, while the number of deals is up by 16.9%. The business products and services sector continues to dominate the 2022 deal flow through Q3. The sector is set to have its best year in terms of aggregate value since 2006, with €176.3 billion accounting for 37.8% of European PE deals. Even with the region facing a recession forecast for the first half of next year, the sector could continue to attract attention.
Elon Musk Has Taken Twitter: Day Zero
Monday, an open letter signed by an unknown number of Twitter employees “leaked” to TIME. With Elon’s Friday legal deadline for the Twitter deal fast approaching, his maybe-future employees had a list of demands: 1) you shall respect us, 2) you shall fire no one, and 3) you shall let us work from home. Cartoonishly divorced from reality in the familiar, entertaining, almost comforting manner America has come to expect from the most privileged employees in human history, the letter was also an interesting tell. Why were these employees nervous? The months-long clusterfuck Twitter deal couldn’t possibly be happening.
Could it?
VC-Funded China-Based Companies With Recent US IPOs Down Over 90%
Even before this past week, shares of China-based companies that went public on U.S. exchanges in recent years were performing terribly overall. But China’s President Xi Jinping’s latest moves to consolidate power haven’t helped things. A Crunchbase analysis of 17 venture-funded companies from China that went public on Nasdaq and the New York Stock Exchange in the past two years showed an average decline of 91% from IPO price to now. In the process, they’ve wiped out over $145 billion in collective market capitalization. For some, the declines are much steeper than the average. Shares of Beijing-based Missfresh, a fast grocery delivery service backed by Tiger Global, for instance, are a staggering 99% since going public on Nasdaq in June 2021. To help stem the slide into delisting territory, Missfresh recently implemented the equivalent of a 1 for 30 reverse stock split. Since then, shares have slipped further. On Tuesday, they fell 32% to hit a market cap of just $13 million — well below the $2.5 billion capitalization cinched at IPO time. Ucommune, a coworking space provider that’s been called the WeWork of China, has also seen its market cap obliterated in recent months. The company, which debuted with a $769 million market cap nearly two years ago, is now valued at just $14 million. Smart Share Global, a mobile device charging service that operates under the brand Energy Monster, has also struggled since going public on Nasdaq in April 2021, with shares having sunk 95% since their debut.
Investors are sitting on mountains of cash: Where will it be deployed?
Bessemer in September raised about $3.85 billion for early-stage startups, the largest vehicle in the firm’s 50-year existence. Insight Partners in February raised over $20.0 billion, double its predecessor fund (closed in April 2020 at $9.5 billion). Lightspeed in July raised more than $7 billion across four funds for seed to Series B rounds. Battery Ventures in July raised over $3.8 billion with a broad mandate. Founders Fund in March raised over $5 billion across venture ($1.9 billion) and growth ($3.4 billion) funds. a16z in May raised about $4.5 billion in its fourth fund targeting blockchain, bringing its total funds raised for blockchain-related companies to more than $7.6 billion. a16z separately closed $9 billion in fresh capital in January, with $1.5 billion allocated to biotech investments. Tiger Global is rumored to be raising PIIP 16 in what could be around a $10 billion vehicle and its second-largest fund ever.
The underestimated factor - Luck
I’ve just had the honour of seeing my third unicorn as an investor, and this has made me realize I still fundamentally believe that luck plays a major role in venture capital.
This month, Factorial joined Jobandtalent and Flywire in the list of companies I have invested in professionally that have surpassed a €1bn valuation. The first two I was lucky enough to invest in when I was at Fundación Jose Manuel Entrecanales (today, JME Ventures), while Factorial has come during my time at K Fund.
None of these businesses were obvious successes at the time we invested. All three were high-risk companies — more so than other investments usually done by Spanish VCs.
Venture capitalists are betting on a part of China’s chip industry safe from U.S. bans
China is so far behind the U.S. in semiconductor technology that some investors are betting on startups to fill that gap. The U.S. this month imposed new restrictions to maintain a lead over China in advanced chip technology. While the rules immediately cut into U.S. and Chinese business revenue, they only affect firms selling the most advanced semiconductor technology, analysts pointed out. The bulk of Chinese demand is for chips with far simpler tech, they said, and Chinese companies are still small players right now. That gap leaves a large market opportunity far more insulated from U.S. restrictions — and one that Chinese startups can tap, some venture capitalists said. Vertex Ventures China is one firm that’s raised money from overseas investors to buy into the idea. The firm has raised nearly $500 million for a new China tech fund set to close by early next year — more than earlier plans for $400 million, said Tay Choon Chong, managing partner and head of Vertex Ventures China. “In China right now, what is the disruption?” he said. “The biggest disruption is the West is not going to give technology to China. We see this as the best opportunity for us.” Chinese chips businesses can see double-digit growth annually since the market is worth tens of billions of dollars, Tay said, noting China imports about $400 billion worth of chips a year.
Space tech aims for the stars with VC's continued funding
Space tech is on track for another record year of venture investments as a ballooning number of startups—with offerings such as commercial space launch services, geospatial intelligence and satellite communications—drive commercial opportunities across the space industry. So far in 2022, VC funding for global space-tech companies has reached $6.2 billion across 112 deals, roughly on par with record capital raised in 2021, according to PitchBook data.Several recent deals highlight investors' appetite to support diverse space technologies. SpaceX has raised multiple deals for a total of more than $3.6 billion this year, according to PitchBook data. The company is reportedly preparing for the maiden orbital flight of Starship, its rocket meant for eventual travel to Mars, in November. ICEYE is an operator of the world's largest constellation of synthetic aperture radar satellites, capable of imaging the planet. Based in Finland, the geospatial intelligence company plans to further develop its product line in natural catastrophe detection and add to its fleet in orbit. In February, ICEYE raised a $136 million Series D led by Seraphim Space.
Google Introduces Cloud-Based Blockchain Node Service for Ethereum
Tech giant Google said Thursday it will be launching a cloud-based node engine for Ethereum projects. The company said its Google Cloud Blockchain Node Engine will be a “fully managed node-hosting service that can minimize the need for node operations,” meaning that Google will be responsible for monitoring node activity and restarting them during outages. A node is a type of computer that runs a blockchain’s software to validate and store the history of transactions on a blockchain’s network. At the time of launch, Google will be supporting only Ethereum nodes.
Google’s announcement signifies the growing attention that technology giants are giving toward blockchain, crypto and Web3 projects. “Blockchain is changing the way the world stores and moves its information,” Google said in its announcement. Earlier this month, Google formed a partnership with crypto exchange Coinbase to provide crypto payments for its cloud services, and in September, Google Cloud and BNB Chain announced a partnership to support the growth of early-stage Web3 startups.
British VC deal volume at lowest level since 2016
The number of VC deals completed in the UK has plummeted to its lowest level since 2016 as investors take a ‘wait and see’ approach to the global economic downturn and impending recession. According to a report by professional services firm KPMG, there were just 575 venture capital deals in the third quarter this year, a level not seen since the same quarter six years ago. It’s also a notable drop from the quarter prior when investors completed 865 VC deals. Overall deal value was also markedly down compared to the preceding quarter. KPMG’s Q3 Venture Pulse report found that $4.6bn (£4bn) of VC capital was invested in UK businesses across the quarter, down from the $9.2bn (£8bn) invested in the quarter prior and the lowest since Q3 2020. Warren Middleton, lead partner, Emerging Giant Centre of Excellence, KPMG said: “VCs are becoming increasingly cautious about where they invest, choosing to put their funds into less risky asset classes. More than half of the investments made in the quarter were to early-stage and seed businesses, which is good news for the longer-term health of the innovation ecosystem.”
PayTech takes centre stage in this week’s deals
This week was a relatively strong week for FinTech deals, with some high-value deals taking place. Taking the top spot this past week was soon-to-be launched InsurTech Oona. Global growth investor Warburg Pincus invested $350m to set up the Southeast Asian digital insurance platform, that is also known and Aseana Insurance. The company will be based in Singapore but will operate across Southeast Asia. Recent research from FinTech Global revealed that there were 20 FinTech seed deals raised by Singaporean companies in the third quarter of 2022, a 54% increase from Q2 2022. As such, FinTech seed deal activity in Singapore is now expected to reach 68 deals for the whole of 2022 based on deal activity from Q1 – Q3 2022.
Taking a look at the top ten deals, the PayTech sector represented five of the top ten spots. Among those five were US-based Connex Pay. The PayTech company, which took third place with $110m raised, integrates payments acceptance and issuance inside a single platform.
Analogies v.3 — what do VCs, book publishers and movie producers have in common — cut losses, double down on winners
VC investment business model is similar to the book publishing and movie industries — it is dominated by betting on “blockbusters” and the power law. A few stars in the portfolio will create the vast majority of your returns, while the rest of the portfolio loses money. This is why all of these industries focus investments on their winners and add more follow-on investments to those that show signs of becoming blockbusters while cutting their losses on all other investments.