VNTR Capital News Oct 9th, 2022 - News, Events, VC Reads
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VNTR CAPITAL COMMUNITY NEWS
Week’s Highlight – We are attending GITEX Global in Dubai this week, where we are hosting investors from around the globe at our VNTR Breakfast on Oct 12 in partnership with our co-host, TDeFi, at the TDeFi Pavilion at Dubai World Trade Center. Complimentary GITEX Investor passes are provided to approved investors by TDeFi. Investors interested in joining us are encouraged to RSVP as soon as possible, as space is limited.
We are pleased to announce that we have partnered with WOIS to lead their Venture Capital focused Q&As. WOIS is a wisdom-sharing platform based on a Q&A format where experts and thought leaders from diverse fields share their experiences, thoughts, and opinions on the WOIS platform and start an open dialogue with the WOIS global community. Learn more
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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.
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.
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Upcoming VNTR Capital events:
Oct 12 VNTR Capital Breakfast / Dubai (during Gitex)
Oct 20 VNTR Capital Breakfast / Los Angeles (during Glendale Tech Week)
Oct 21 VNTR Capital Breakfast / Vienna (during Wolves Summit)
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 Web Summit)
Nov 3 VNTR Capital Breakfast / Lisbon (during Wow 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)
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UPCOMING VC EVENTS
Oct 10-14 GITEX Global, Dubai, UAE
Oct 10-13 Future Blockchain Summit, Dubai, UAE
Oct 13-15 VC Weekend, Dubai, UAE
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
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\VC READS
How Venture Capitalists Make Startup Investment Decisions
Investment is one of the key resources for startups to grow. India’s startup ecosystem is the fastest growing in the world, and it is now the third largest globally. With high-quality startups emerging across sectors, VC funding in the country is also growing rapidly. According to Bain & Company’s India Venture Capital Report 2022, 2021 marked a milestone for India as VC funding touched $38.5 Bn. Startup founders typically start their businesses by bootstrapping and then raising “FFF” capital, primarily from friends and family. Loans are not an option at this stage of the company because loan providers need to look at the company’s hits, which do not exist in a “startup”! Startups require capital without any kind of security or collateral; investors who provide funds take the same risk as the founders, essentially betting on the company’s future. As a result, the filters for an investment decision rely less on data and more on other factors.
Global VC Pullback Is Dramatic In Q3 2022
The big global venture capital pullback we were all expecting is truly here. Venture and growth investors in private companies scaled back their investment pace significantly as the slump in the public markets stretched into the third quarter. Venture funding for the third quarter of 2022 totaled $81 billion, down by $90 billion (53%) year over year and by $40 billion (33%) quarter over quarter, according to a Crunchbase News analysis. While funding for the most recent quarter will increase a little in the coming months as stealth fundings are announced, this is a huge drop in funding compared to prior quarters. This past quarter is the lowest quarterly funding amount since the first quarter of 2020, with $70.6 billion in venture funding. In defiance of recent funding trends, the largest acquisition in venture history—should it pass regulatory scrutiny—is Adobe’s acquisition of Figma for $20 billion, a price that is double its last private valuation of $10 billion in June 2021. We find a further 67 companies valued above $10 billion or more on The Crunchbase Unicorn Board, with Shanghai-based ByteDance being the most highly valued private company.
Elon Musk moves to kill the upcoming Twitter trial
After Elon Musk agreed to buy Twitter after all, his legal team is now motioning for the court to cancel the upcoming trial with Twitter, slated to begin on October 17. But, as Judge Kathaleen McCormick pointed out yesterday, the trial cannot be called off until both parties agree. So, the trial is still technically moving forward unless Twitter also motions for a stay. Twitter has not yet lowered its guard, though, because Musk still needs to come up with $44 billion. The letter from Musk’s legal team states that they expect the acquisition to close around October 28, assuming that all goes according to plan. “Twitter will not take an answer,” the letter reads. “Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with stockholders interests. Proceeding with this trial is not only an enormous waste of party and judicial resources, it will undermine the ability of the parties to close the transaction.”
Musk was supposed to be scheduled for deposition last week, but he was able to delay the event, citing a potential COVID-19 exposure. His testimony was originally rescheduled for today, but he managed to delay it again. It seems that his team is pulling out all of the stops to prevent the business mogul from having to testify under oath.
Can Starbucks Bring Web3 Into the Mainstream?
For companies looking to dip a toe into Web3 – or take a cannonball plunge – it can be difficult to know where to start. Underlying technologies such as protocols, wallets, and exchanges are still nascent compared with existing financial systems. New types of tokens are introduced on a seemingly daily basis. Web3 adoption has spiked over the past few years but is still far behind the ubiquity of Web2. The industry has a long way to go to match the functionality of current systems, particularly for consumer purchases in developed economies with stable currencies. How long will it be until using crypto for standard consumer purchase, such as buying a cup of coffee, is a joy rather than a gimmick? Enter Starbucks. The launch of its new non-fungible token (NFT)-based reward program, Starbucks Odyssey, may bring us one step closer to making this a reality, or at least provide some suggestions of which direction to head in.
Why the venture debt market is bubbling?
As the macroeconomic environment sours and venture capital (VC) investors slow their pace of writing cheques, startups have turned to venture lenders who provide debt financing. “Earlier we used to strike one out of 10 deals. Now, we are assessing 20 companies before closing a deal,” says Apoorva Sharma of Stride Ventures, one of the six key venture debt providers in the Indian market. Last year, the New Delhi-headquartered company deployed Rs1,100 crore (approximately $134 million) over 60 transactions. This year, the figure is already Rs1,300 crore ($159 million) till September. In fact, the amount of debt disbursed through venture debt in India doubled in 2021 to $538 million, up from $271 million in 2019, according to Stride Ventures’ India Venture Debt Report 2022. One-hundred-and-eleven companies raised venture debt, including Mensa Brands, Urban Company, and Licious, with ticket sizes ranging from $2 million to $25 million.
Most Active US Investors In September: Gaingels And A16z Lead A Slow Month
Every month there seems to be even starker contrasts between the venture capital worlds of last year and this one. In September 2021, a dozen firms made 10 or more investments in U.S.-based startups. Fast-forward to last month, and only two firms—Gaingels and Andreessen Horowitz—made double-digit investments. Alumni Ventures saw its total investments in U.S.-based startups drop from 22 to nine year to year. General Catalyst made 12 deals in the U.S. in September 2021, but only two last month. Everyone appears to be slowing as the year winds down, and there seems to be no indication the fourth quarter will change that. New York-based Gaingels is always near the top of this list, as it has made investments in at least 11 rounds every month this year. It also usually invests in a diverse set of companies, which includes last month when it took part in a $2.6 million seed round for Empower3d. The New York-based startup provides athletes with the tools, resources and network to prepare for a world outside of athletics. It offers workshops and seminars covering a range of business and finance topics for athletes, college athletic programs, professional teams, leagues and other sports organizations.
Charting private debt fundraising trends
Global private debt fundraising has slowed down slightly this year, tailing off from last year's record-setting pace. In the first six months of 2022, 66 private debt funds raised a total of $82 billion - compared with the roughly $93 billion collected across 130 vehicles in the same period a year ago, according to PitchBook's H1 2022 Global Private Debt Report. Direct lending, the largest private debt category, represented over a third of capital raised in the first six months of this year. Other strategies - in particular credit special-situations and real-estate debt - also received strong investor interest during that period. Private-credit managers raising new capital have had to contend with challenges arising from monetary policy tightening and the brutal stock sell-off. While the interest-rate hikes have made existing floating-rate debt instruments more appealing to investors, they also offer incentives to investors to raise their allocation to more liquid credit investments such as corporate and government bonds. This will be even more prevalent as rates continue to go up.
Colorado is accepting crypto for tax payments — it could be a mess or a shining example
Colorado is accepting crypto as payment for any taxes owed to the state as of Sept. 1. It was the result of a promise made earlier in the year by Colorado Governor Jared Polis, who has proven his commitment to establishing the state as pro-cryptocurrency. Colorado isn’t the only U.S. state trying to incentivize cryptocurrency investment within its borders, as legislatures in Arizona, Wyoming, and Utah have all previously introduced bills to accept tax payments in the form of digital currencies in varying degrees. There is much to gain economically for states who embrace blockchain technology and the crypto sector. Savvy governments are beginning to pitch their locale as the next center of the crypto economy, hoping to attract new businesses and intelligent, young, wealthy constituents involved with crypto. Taxpayers should be warned, however, of the tax consequences of making payments with crypto, as making such a payment is a taxable event that has the potential to further increase the amount of taxes one has to pay.
Bitcoin’s Correlation With Gold Hits Highest Level in Over a Year
Bitcoin’s reduced tendency to move in tandem with U.S. stocks has refocused analysts on a correlation that’s suddenly strengthening: the cryptocurrency’s connection to gold.
The two assets’ merging paths follow a recent trend, branching away from stock prices, which have sunk dramatically this year, and buttressing arguments by bitcoin evangelists that so-called digital gold offers the same safe-haven advantages as the real stuff. But the correlation remains only mildly strong, leaving open the question whether BTC and gold will continue to travel in sync. “We could be seeing a slight decoupling of crypto and equity markets, which is reflected in BTC's rising correlation with gold,” said Clara Medalie, head of research at crypto research group Kaiko. Bitcoin was recently trading just above $20,000, a nearly 3% gain over the past seven days, while gold was changing hands at $1,700, up more than 3% during the same period.
Fast Unicorns Frequently Fade
Startups that quickly rise to unicorn status commonly don’t sustain their high valuations. While some rise to bigger heights, a large constituency in sectors like scooters and instant grocery delivery haven’t lived up to high, early expectations. To get a sense how becoming an early unicorn correlates with future success, we took a sampling of companies that passed the $1 billion value mark less than two years after founding. We then categorized them based on their ability to sustain high valuations and market growth. Below, we look at the cohort across three categories: fast faders, public market flops, and those for whom the verdict still awaits.First off, it’s obvious that many startups that were quick to join the unicorn herd also flamed out rather rapidly. The poster child for this phenomenon is probably Clubhouse, the audio-based social networking platform that became a thing in early 2021 for the pandemic work-from-home crowd. As Clubhouse’s invite-only downloads soared, so did its cache among investors. The app, launched in 2020, landed a Series B in April 2021 at a reported $4 billion valuation.
Q3 2022 PitchBook-NVCA Venture Monitor First Look
Deal activity across all stages is showing more signs of distress, recording the third consecutive decline in completed deals. US VC fundraising has set a new annual high through only three quarters of 2022. With just $14.0 billion in exit value generated across an estimated 302 exits in Q3, there were few bright spots for the VC exit market.
From seed to series E, companies cut staff after raising millions
Fintech startup Bolt was one of the first tech companies to slash jobs, cutting 250 employees, or a third of its staff, in May. For some workers, the pain of layoffs was a shock not only because they were the first, but also because the cuts came just four months after Bolt had announced a $355 million series E funding round and achieved a peak valuation of $11 billion.
An analysis by Protocol of layoffs and funding rounds by more than 400 startups between seed and series E revealed that, on average, firms conducted layoffs just three months after publicly announcing funding rounds. While most firms fell into the range of cutting staff two to three months after making funding announcements, a handful of companies waited two weeks or less after going public about funding rounds before making layoffs.
European tech must learn to embrace failure
A decade or so ago, much was written about the stigma attached to failure in European culture. The theory was that this curiously regional fear paralysed ambition and prevented great talent from starting companies at all. To produce a Google or Amazon, Europe needed to develop a mega risk appetite. By 2021, we appeared to have overcome this and European tech had grown to a start-up pipeline that equalled the US.
Today’s downturn presents Europe’s first real test since the global financial crisis. Real value is entirely dependent on continuing to develop a functioning ecosystem. And central to any ecosystem is resilience — the ability to withstand the broader macroeconomic environment.
Amazon to Invest $150 Million in Funds That Provide Underrepresented Entrepreneurs with Access to Capital
Amazon (NASDAQ: AMZN) announced Amazon Catalytic Capital, a new initiative to invest $150 million in venture capital (VC) funds, accelerators, incubators, and venture studios that provide funding to entrepreneurs from underrepresented backgrounds, primarily at the pre-seed/seed stage of venture capital funding. The company will invest in funds that focus on Black, Latino, Indigenous, women, and LGBTQIA+ founders. Amazon expects to support more than 10 funds and over 200 companies through the next year. In addition to capital, the companies in the funds’ portfolios will receive mentorship from Amazon executives and gain access to resources to support their business and technical strategy. Amazon teams will also work with the startups to identify partnership and product collaboration opportunities that could accelerate their growth.
AI Is Making Its Way Into Drug Discovery. What Does It Mean For Biotech?
Entrenched in academia, chemist Jacob Berlin spent a decade making small molecules to treat the world’s biggest diseases. He wondered: How can this process be more efficient?
Very little about drug development is efficient. The failure rate for drugs making their way to commercialization is 90%, after which more than around $1 billion and 10 years is sunk into each one on average. But technological advancements in data collection are propelling artificial intelligence in drug discovery, which may unlock the ability to find cures for diseases that evaded the scientific community for centuries. So far this year, startups in drug discovery raised more than $1.4 billion, according to Crunchbase data. One of these startupsthem is Terray Therapeutics, an AI drug discovery platform founded by Jacob and Eli Berlin in 2018.
“There are thousands of problems sitting out there that we don’t know the answer for. Thousands and thousands,” said Berlin. “So having a platform that lets us go faster, be precise and scale can really transform the opportunities in front of us.”
As the market cools, aggressive Tiger Global looks to raise a fund that’s half the size as its last
In recent years, assets under management at the investment firm Tiger Global have exploded. Now the firm is taking stock and winnowing down its operations, per a new investor letter first seen by Axios and obtained subsequently by TechCrunch. Most significantly, whether for lack of other options or - just as likely - in reaction to the changing market landscape, the firm just let its limited partners know it plans to raise $6 billion for its newest fund, for which it expects to hold a “first close” at least by mid-January. (As an added sweetener, investors in the first close will receive a discounted management fee of 1.75%, states the letter.) While still a lot of moolah, $6 billion is less than half the $12.7 billion that Tiger Global secured from investors back in March of this year, money it began investing last fall and tore through quickly. A source familiar with the firm says it is still investing out of that vehicle. Also shrinking is the capital that Tiger Global employees will be committing to the new fund. Whereas employees contributed $1.5 billion to Tiger’s $12.7 billion fund, or 12% of the total amount, this time, they are committing to invest a minimum of $500 million to the $6 billion effort, or a little less than 9% of the total amount.
Govtech startups reimagine software for a post-pandemic future
The transition from analog to digital processes by local governments across the US gained momentum after the pandemic forced public services online. This led to new opportunities for govtech startups creating SaaS tools that engage communities, schedule virtual town hall meetings, mitigate ransomware attacks, and more. "The SaaS selling model for software doesn't look the same in government, as there is a ton of inertia," said Stephanie Beer, senior director at OpenGov, a developer of cloud computing software for public agencies. "Governments will not buy without proof points that the software is being utilized by governments like them." But the rise of remote work, a massive inflow of federal stimulus funds, and an increase in ransomware attacks have led to a growing need to deliver a safe digital experience to local businesses and residents, Beer said.
The Supply Chain Keeps Eating Venture Capital
A few years ago, if you heard someone talking about supply chains, chances are they actually worked in the logistics space. No more. Ever since the pandemic first disrupted global trade in early 2020, everyone seems to be complaining about supply chains. Why did new cars become so expensive and scarce? Supply chains. Why are there no parts to fix the washing machine? Supply chains. Why is there no toilet paper? Supply chains (and yeah, maybe some panic buying). If only someone could fix that darn supply chain, the thinking goes, then these problems might go away. Can’t some genius startup founders find a way? Obviously it’s not that simple. But to look at the vast sums of venture capital going into supply chain-focused startups, it’s clear investors see an enormous market for next-generation platforms to ease various logistics pain points. And based on recent funding numbers, they’re not backing down.
The Climate Economy Is About to Explode
A new report suggests that the Inflation Reduction Act could be even bigger than Congress thinks. Late last month, analysts at the investment bank Credit Suisse published a research note about America’s new climate law that went nearly unnoticed. The Inflation Reduction Act, the bank argued, is even more important than has been recognized so far: The IRA will “will have a profound effect across industries in the next decade and beyond” and could ultimately shape the direction of the American economy, the bank said. The report shows how even after the bonanza of climate-bill coverage earlier this year, we’re still only beginning to understand how the law works and what it might mean for the economy.
Europe's young workers become more disillusioned with tech
Over half of young European tech workers are considering leaving the sector as dissatisfaction with tech intensifies amid the downturn. The tech world often seeks to attract young talent, but a new report from HR platform provider HiBob and VC Eight Roads shows that people in their 20s are becoming more disillusioned with the sector. The survey of 2,005 workers between the ages of 20 and 30 across seven European countries found some 54% of tech workers are seeking a career change. A further 35% said they feel unhappy in their roles, and only 29% of respondents intend to stay in their current jobs for the foreseeable future. "There is an entire generation of people entering the European tech workforce for the first time, or taking their first steps in their career, while attempting to navigate huge instability—economically, politically, and socially," Eight Roads managing partner Davor Hebel said. "At a critical moment for European economies, our survey finds that the hopes and aspirations of many young people in tech are not being fully addressed."
Climate tech in India is ripe for global venture capital inflows
One of the world’s biggest greenhouse gas emitters is trying to clean up. Global venture capitalists looking to put their money to work should keep an eye on it. The Indian capital region of Delhi is abuzz with activity. Rusty metal signs that tout “Electric Charging" stand out, along with stations that power electric two-and-three wheelers. Startups building technology to drive sustainability are in a hustle for funding. Corporate activity is chugging along, while capital expenditure has risen sharply in recent months and rail freight volumes reached record highs. India’s big companies, like Wipro, UltraTech and Reliance, are increasingly talking to shareholders about green-tech and sustainability. Private capital is looking to back climate action-related technology. Of the almost $27 billion of such investment globally in the first half of 2022, close to $2 billion went to India’s firms.
The unicorn funding slump is worse than you thought
It’s easy to forget how quickly the venture capital market for late-stage startups exploded in recent years. Per Crunchbase’s unicorn dataset, unicorns raised just $11.4 billion in 2014. (Adding the routine disclosure that I used to work for Crunchbase and retain a small stake in it from my time there.) That figure scaled to $21.4 billion in 2015 and $24.8 billion in 2016.
Then the numbers start to really climb. Unicorns raised $39.7 billion in 2017 and $101.1 billion in 2018. From that point, investors took a breather, putting a comparatively modest $76.1 billion into unicorns in 2019 and $98.3 billion in 2020.
EU votes to force all phones to use same charger by 2024
The European parliament has voted to introduce a single charging port for mobile phones, tablets and cameras by 2024 in a move that presents difficulties for Apple, whose iPhones use a different power connector. The vote confirms an earlier agreement among EU institutions and will make USB-C connectors used by Android-based devices the EU standard, forcing Apple to change its charging port for its devices. Among big providers of electronic devices to European customers, Apple is expected to be among the most affected, but analysts also expect a possible positive impact because it could encourage shoppers to buy the company’s latest gadgets instead of ones without USB-C.
The US venture capital slowdown doesn't look that bad
According to PitchBook, the United States saw 11,871 known deals, a figure that the company extrapolates to 13,636 estimated total deals through Q3 2022. Those deals were worth a known $194.9 billion. Breaking down the information into quarter-sized pieces, here’s what the year looks like in the United States:
Q1: $80.0 billion/4,740 deals
Q2: $71.9 billion/4,055 deals
Q3 $43.0 billion/3,076 deals
From the above, you can see that deal and dollar volume are down in Q3 compared to prior quarters.
The IPO Market Is on Track for Its Worst Performance in 30 Years
Move over crypto, meme stocks, and SPACs — the IPO market is also in the tank. The third quarter of 2022 was the worst one for initial public offerings in more than a decade, according to a new report from Renaissance Capital, which analyzes IPOs. In fact, the 2022 U.S. IPO market is on track to raise the least amount of money in more than 30 years, the report said.
The IPO market followed the rise of other speculative assets in recent years, but that is over. So far this year, the Renaissance IPO ETF is down almost 50 percent, compared with a little more than 22 percent for the broader market. “Returns were once again skewed by volatile pop-and-drop issuers, and only four IPOs (16 percent) finished above offer,” Renaissance Capital said in its report.