VNTR Capital News Sep 18th, 2022 - News, Events, VC Reads
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VNTR CAPITAL COMMUNITY NEWS
VNTR Capital is now active in 3 major tech hubs in India - New Delhi, Mumbai, and Bengaluru. We are sourcing our first Series A+ investment deals in India and will offer access to the deals to our global VNTR Syndicate members who can invest through the VNTR Investment Platform.
Available opportunities: Series B FinTech company that is launching neobanks in Vietnam, Nigeria, Pakistan, and India. It is operating successfully in Azerbaijan already. Join VNTR Syndicate to learn more.
In the past two weeks, we connected 80+ investors during our 5th VNTR Breakfast in Portugal, 6th VNTR Breakfast in Dubai, and the 1st VNTR Breakfast in Mumbai.
Thank you to our partners who helped us to host the events:
BitDegree is the world's first blockchain-powered, smart-incentive-based online education platform that revolutionizes global education and tech recruiting.
Learnoverse is a learning metaverse with a decentralized content body that is powered by the learn & earn token economy and uses NFTs for social status.
Shipfinex is a digital exchange revolutionizing the Trillion Dollar Maritime economy. Shipfinex is tokenizing maritime assets & simplifying investments, enabling Instant Payments & a Decentralised marketplace by using DeFi & Web3 technologies.
Join us at the upcoming VNTR Capital events globally:
Sep 19th - VNTR Capital Breakfast Tel-Aviv, Israel
Sep 21st - VNTR Growth Roundtable, Online (community members mastermind)
Sep 25th - VNTR Capital Sailing Experience, Lisbon, Portugal
Sep 28th - VNTR Capital Breakfast Singapore, during Token2049
Oct 4th - VNTR Capital Breakfast London, UK
Oct 12th - VNTR Capital Breakfast Dubai, UAE, during Gitex
Oct 21st - VNTR Capital Breakfast Vienna, Austria, during Wolves Summit
Oct 23rd - VNTR Capital Breakfast Tbilisi, Georgia, during DeGameFi
Oct 25th - VNTR Capital Breakfast Las Vegas, US, during Money2020
Nov 2nd - VNTR Capital Breakfast Lisbon, Portugal, during Web Summit
Nov 3rd - VNTR Capital Breakfast Lisbon, Portugal, during Wow Summit
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UPCOMING VC EVENTS
Sep 20-22 - Dreamforce, San Francisco, US
Sep 21-23 - Mainnet, New York, US
Sep 26-Oct 2 - Asia Crypto Week, Singapore
Sep 26 - 29 - Oslo Innovation Week, Oslo, Norway
Sep 28-29 - Token2049, Singapore
Sep 28-29 - Digital Bridge, Nur-Sultan, Kazakhstan
Oct 5-6 - CryptoExo, Dubai, UAE
Oct 5-6 - Sifted Summit, London, UK
Oct 8-14 - Wow Summit, Dubai, UAE
Oct 10-14 - GITEX Global, Dubai, UAE
October 10-13 - Future Blockchain Summit, Dubai, UAE
Oct 15 - World Blockchain Expo, Dubai, UAE
Oct 17-18 - World Blockchain Summit, Dubai, UAE
Oct 18-20 - TechCrunch Disrupt, San Francisco, 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 9-10 - Token2049, London, UK
Nov 10 - VNTR Capital Breakfast, London, UK
Nov 10-11 - Pacific Bitcoin, LA, US
Nov 14-18 - AIBC Europe, Malta
Nov 15 - VNTR Capital Breakfast 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, Switzerlan
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VC READS
Global venture capital investments fall more than half in August
The value of global venture capital-backed funding rounds fell 57.7% year over year in August to $21.31 billion, while the number of transactions was down 24.2%, according to S&P Global Market Intelligence data. The year-over-year values have continued to decline in recent months. The amount raised in August was also slightly lower than July, when $21.78 billion was pulled in, the data shows. Companies based in Asia-Pacific received $9.1 billion across 554 funding rounds. U.S. and Canadian companies drew $8.7 billion across 476 transactions, while Europe secured $2.0 billion in 234 funding rounds. The technology, media, and telecommunications sector accounted for the largest share of the capital raised in August at 44.4%, followed by the healthcare and industrial sectors at 16.6% and 13.9%, respectively.
Kim Kardashian becomes a private equity dealmaker in collab with ex-Carlyle partner
America’s favorite reality star is leveling up her repertoire and levering up businesses. Kim Kardashian, who passed the “baby bar” exam in preparation to become a lawyer last year, just added another job title to her lineup — private equity investor. Kardashian is launching private equity firm SKKY Partners in conjunction with ex-Carlyle consumer head Jay Sammons to invest in business across consumer products, hospitality, luxury, digital commerce and media, The Wall Street Journal first reported. SKKY will take both control and minority stakes in its target companies, according to the Journal. Sammons, who left Carlyle this summer after spending 16+ years at the top private equity firm, is known for his bets on brands including Supreme and Beats by Dre. A longtime friend of the Kardashians, Sammons apparently approached Kardashian and her mom-ager, Kris Jenner, with the idea to start the business. Jenner will be joining SKKY as a partner, the Journal reported.
Most Active US Investors In August: Big Names Continue To Slow Investment Pace
Last August, VCs, and startups were in the midst of the highs of the record-breaking funding market. This August is very different, and looking at the difference between some of the biggest named firms is an excellent illustration. In August 2021, Tiger Global participated in 20 deals that involved U.S.-based startups and led or co-led deals worth a total of $800 million. This past August, the hedge fund goliath participated in one deal and led or co-led none. Sequoia Capital participated in nine rounds that involved U.S.-based startups and led or co-led rounds worth $200 million in August 2021. This past August, Sequoia participated in four rounds and, like Tiger, led or co-led none. Similarly, General Catalyst participated in 17 such rounds in August last year and led or co-led eight. This past August it participated in five and led or co-led one.
Accel’s deal count dropped from nine in August 2021 to three this past month.
Europe sees worst year for PE-backed IPOs since debt crisis
PE-backed IPOs in Europe are down dramatically from last year—by over 90% according to PitchBook data. This is due to a toxic mix of macroeconomic and geopolitical uncertainty as well as bad experiences from those companies that did float last year. The fall-off in IPOs from 2021 is partly due to the fact that pent-up activity created by pandemic lockdowns led to outsized deal volume. Nevertheless, 2022 is on track to be the worst year since the peak of the European sovereign debt crisis in 2012. While the factors behind the decline in IPOs aren't the same as in 2012, PE firms are less confident they can achieve an attractive valuation for their portfolio investments via the public markets. On exit that seemed to buck the trend this year was Vår Energi—a Norwegian joint venture backed by energy giant Eni and PE firm HitecVision—which listed on Oslo's stock exchange in February.
The Ethereum Merge Finally Happened: So What?
Ethereum has been getting ready to "merge," creating temporary disruptions in some crypto trading and potentially new opportunities for investors. Now the Merge has finally happened.
But what does it really mean? In simple but perhaps poorly understood terms, Ethereum has gone from a cryptocurrency token backed by a proof-of-work blockchain to one supported by a proof-of-stake blockchain. This process required the help of a proof-of-stake chain called Beacon, which had been developing in parallel with the Ethereum blockchain since 2020. Though Beacon did not formerly process transactions, it had acted as a testing ground that allowed for a smooth transition to the PoS upgrade. Full transition to PoS required that Ethereum’s PoW mainnet, or Execution Layer, merge with Ethereum’s Beacon Chain, or Consensus Layer. “The best diagram I’ve seen looks sort of like what you see in subway stations,” said Richard Smith, CEO of fintech investing tool RiskSmith and a specialist on market risk and uncertainty. “You have maps of subway lines, and sometimes two lines run in parallel and one line kind of ends at a common station and everybody who was on that line has to move over to the line that continues on if they want to go further. That is, in a nutshell, what happens to Ethereum when the Merge occurs.”
What do start-ups expect from venture capital funds when it comes to ESG?
Venture Capital plays a transformative role in society given the nature of the disruptive business models, and companies VC funds invest in. Even though these funds take up minority stakes in companies, that typically gets diluted in subsequent rounds of funding. VC funds through their active-engagement model can set the foundation for long-term and sustainable value creating companies. In the past 18 months, many VC firms have realized this and are beginning to scrutinize their own Environmental, Social, and Governance (ESG) strategies. There are some who are suggesting or even requiring start-ups to embed these considerations into their business activities.
Unexpected Startup Investment In Congo, Iraq, Uganda, Bangladesh? You bet.
Startup entrepreneurship and investment is a famously risky business. But there’s one area where founders and VCs usually avoid risk: geography. Overwhelmingly, funded startups cluster in countries that are highly rated for ease of doing business. You rarely see them in nations known as more dangerous and difficult places for starting new ventures. This basic notion seems obvious, but we thought it would be interesting to see if there are unexpected places where startup funding is on the rise. To do that, we took a World Bank ranking of the 190 best and worst countries for doing business. We then used Crunchbase data to see how countries at the bottom of the list are seeing gains in startup investment. Turns out, there are quite a few nations for which this is the case, as seed and venture investment reaches more parts of the globe. For simplicity’s sake, we picked four countries which have never been startup hubs but are seeing sharp growth in funding.
It’s no secret that the venture market has seen a decline in investment over the past few months and that many companies who were expected to go public have put those plans on hold. But with the end of the fiscal year in sight, late-stage companies have spent the summer with an eye toward profitability and bulking up their balance sheets. Most often viewed through the lens of layoffs, we’ve seen startups reduce spending when it comes to sales, marketing, and R&D and instead shift their energy toward existing products and subsequent profit to ensure they are going out with at least single-digit-positive profit. With this renewed focus on sales, we shouldn’t be surprised to see a big shift in fundraising toward the end of September. Not only does September end the fiscal year across the Fed, but we’ll also start to see the impact of startup sales cycles coming out of the first half of the year.
Why Traditional Investors May Not Love DAOs
While venture capital’s interest in crypto continues despite the bear market, it might well be undergoing a critical test. Episodes such as the sanctioning of Tornado Cash throw light on the friction between the law of the land and the law of decentralization. While this has caused great debate in the crypto community, it has steadily created deeper concerns among venture investors, albeit quietly. A watershed event occurred (and passed without much fanfare) amidst the contagion, which exemplified these cracks.On June 9 of this year, the community of Merit Circle DAO voted out Yield Guild Games (YGG) as their seed investor. By doing so, the community canceled the SAFT agreement binding Merit Circle Ltd., its parent entity, and its investor, YGG. This vote was the first incident where decentralized autonomous organization (DAO) governance overturned a legal agreement, and in its aftermath sent shockwaves across the investor ranks.
Investors up allocation to secondaries as GPs seek alternative liquidity sources
With the slowdown of M&A activity and the IPO market grinding to a halt, GPs and LPs are increasingly looking to the secondaries market for liquidity. One of the portfolio management tools they use with growing frequency is the so-called continuation fund, which allows private equity sponsors to hold onto their portfolio companies for an extended period—oftentimes by bringing in new investors including secondaries funds, family offices, pension plans and sovereign wealth managers. Such GP-led secondary transactions have risen in popularity in recent months. Not only have investors pumped more capital into these funds than they expected, but they are also looking to increase bets for the rest of the year, according to a newly released survey of 64 secondaries investors by fund advisory firm Eaton Partners. More than half of respondents—55%—said that in the first half of 2022 they put more than $100 million to work in GP-led secondaries, which are primarily single- and multi-asset continuation funds, and 11% have invested in excess of $500 million. That stands in sharp contrast with investors' expectations earlier this year.
Looking for Funding for Your Business? You Should Know About Venture Debt.
Whether you're a small business owner or an aspiring entrepreneur, you've probably heard of venture capital. This popular private equity financing strategy is typically employed by investors looking to capitalize on the growth potential of lucrative startups and emerging companies. However, most people haven't heard about its loan-based counterpart — venture debt.
In the post-pandemic age, venture capital is rapidly becoming the go-to tool for entrepreneurs seeking financing for their business to boost their cash flow. It's also used to support their provider with minimal equity dilution. Venture debt is essentially a type of debt financing that startups and emerging companies choose to complement their equity venture financing. Unlike traditional methods, this form of debt financing requires no collateral as lenders (banks and other financial institutions) understand most entrepreneurs and startups don't own substantial assets.
KKR makes its PE fund accessible to individuals via a tokenized fund
KKR has become the latest private fund manager to tap blockchain technology to further open its private equity strategy to individuals. The firm is making part of its $4 billion Health Care Strategic Growth Fund II, which closed in January, accessible to individual investors through a tokenized fund offered by Securitize on the public blockchain platform Avalanche. The move, a first for KKR, comes as private fund managers experiment with new ways to expand their footprint to an unconventional class of investors: wealthy individuals. On one hand, regulatory changes and advances in technology in recent years have made it easier than ever for these nontraditional clients to gain access to PE funds. For their part, individual investors have upped their bets on alternative assets as a way to manage the risk and volatility of public market downturns. While private markets have traditionally been the domain of pensions, endowments, and other institutional investors, tech innovations such as blockchain have opened up the access of private-market strategies to retail investors. Last March, Hamilton Lane tokenized its $1.85 billion Global Private Assets Fund on Singapore-based digital securities exchange ADDX. Other managers to test the strategy include Partners Group, Investcorp, and Temasek-backed Mapletree.
8 things to remember as the U.K. considers new crypto property laws
The U.K.’s new proposals are a step toward better protection of digital assets, but it may take time for crypto assets to enjoy full de facto legal protection.In July 2022, the Law Commission of England and Wales published a set of proposals aimed at protecting purchasers of digital assets like nonfungible tokens and cryptocurrencies. Citing the rapid growth in ownership and trading of NFTs and cryptocurrencies, the commission worked with legal experts, technologists and crypto users to develop a set of recommendations that includes the creation of a new, unique category of personal property for digital assets and clarifications to existing laws around ownership, control and transfer of digital assets. The goal, the commission says, is to “deliver wider recognition and legal protections for digital assets, allowing a more diverse range of people, groups and companies to interact online and benefit from them.” Most crypto leaders agree that the industry needs more regulatory oversight to grow, and many view this move by the U.K. as a step in the right direction.
Need to take gender out of the VC investment evaluation matrix: Titan Capital
About 20% of the businesses in the country are owned by women, says the Google Bain report, which approximates the absolute numbers between 13.5 -15.7 million enterprises. The numbers look good, but the underlying reality is that a significant proportion of these enterprises are neither ‘owned’ nor ‘controlled’ by women. The Mastercard Index of Women Entrepreneurs presents a better picture when it estimates that out of 100 entrepreneurs in India, only seven are women. Despite women making inroads into the entrepreneurship ecosystem in the country in the last decade, the scenario remains bleak because women continue to face daunting roadblocks, which can be notches higher compared to their male peers. For an entrepreneur, raising funds is always an issue, but for women founders, the task can be even more daunting. Women-led businesses often struggle to access investor funds because of the deep-rooted gender biases and prejudices of investors, among other factors. A study by researchers Dana Kanze, Laura Huang, and team says that VCs pose different questions - investors tend to ask men about how they will promote success and women about how they will prevent failure, which in turn affects how much funding they get.
Recent VC trends of UK, Ireland in five charts
Venture capital deal activity in the UK and Ireland has remained robust in the first half of 2022 as both countries weather a cost-of-living crisis and the prospect of a long recession. While investors continued to pour capital into the region, current market conditions are expected to flatten dealmaking activity toward the end of the year. Here's a look at five VC charts from PitchBook's UK & Ireland Private Capital Breakdown, illustrating key trends across deals, exits and fundraising. Capital raised by VC-backed companies in the UK and Ireland matched the pace set last year with £15.4 billion (around $15.3 billion) invested in H1—just over half of 2021's £28.2 billion total. The region has seen a slowdown in deal volume with the number of rounds falling short of 2021's halfway mark—1,879 in H1 2022 compared with 3,857 for the whole of last year. This deceleration in deal count is expected to continue, as the effects of rising inflation, which hit a 40-year high in July, and the worsening condition of the overall economy become clearer for the asset class.
Biden's big climate bill isn't a venture capital fund
The Inflation Reduction Act, signed into law last month by President Biden, includes around $370 billion for clean energy development and adoption. But it is not a venture capital fund, despite viral tweets to that effect. Why it matters: $370 billion is a ton of taxpayer money, and it will deserve a rigorous review that begins from a place of common understanding — rather than from atop a strawman. Over $200 billion of the $370 billion is tax credits over the next decade, including for solar energy farms, electric vehicle purchases and purchases of energy-efficient home appliances. Some of that includes extensions of existing tax credits. There also are additional earmarks for such things as agriculture conservation programs ($20 billion), wildfire management ($2 billion) and coastal protection and restoration ($2.6 billion). Yes, tax credits can help boost the fortunes of private companies, such as those developing EVs or microgrid hardware. But they aren't in the same vein as equity investments in specific companies, either structurally or philosophically.
The metaverse is the future — but are current platforms failing users?
The metaverse has potential to transform the way we work, socialize, party and even do business — but looking at the infrastructure that exists right now, and some would accuse this industry of running before it can even walk. Many virtual worlds are making bold promises about what they plan to achieve in the years to come, yet lack a tangible product people can try out now. Even those that have launched often suffer from poor graphics, a disappointing user experience, or a lack of quality content. This is a bigger problem than meets the eye. If a customer's first impression of a metaverse is one of disappointment or frustration, they probably won't be back in a hurry. As things stand, many big brands and A-list celebrities are scrambling to get involved with the metaverse — but the platforms in the market are failing to meet the moment. For a sign of the momentum that this industry is enjoying, look no further than MTV's VMAs, which even had an award category for best metaverse performance.
VCs Step Back: Global Funding In August Hits Lowest Point In 2 Years
Global venture funding reached $25.2 billion in August 2022, the lowest monthly funding amount recorded in the two years since August 2020, according to a Crunchbase News analysis.
This past month is down 52% year over year and down around 10% month over month.
Fewer startups are raising funding at every stage. And with that comes a slowdown in hiring, more layoffs and companies shutting down. Companies with layoffs announced this past month include Snap which laid off 20% of its workforce—around 1,300 employees. And Robinhood laid off 23% of its workforce with about 800 team members losing their jobs. Shutdowns include two companies in real estate: home sale management company Reali, and community space for women The Wing. And for companies that need to raise funding, extension rounds are on the rise as companies look to raise bridge financings to extend their runway.
Crypto And Compliance Help Some Cyber Firms Double Value
This year’s venture market pales in comparison to the salad days of last year. That’s even true for one of the hottest sectors of 2021: cybersecurity. Last year, VC-backed cybersecurity firms raised nearly $23 billion in funding—a record—according to Crunchbase data. This year’s numbers are trending to be well south of even $20 billion. However, that doesn’t mean some companies haven’t snagged large rounds and valuations. This year cyber has minted 16 new unicorns. A couple of those new unicorns saw massive valuation increases just from last year. Not surprisingly, those startups are in a couple of the hottest sectors in security. Platforms that help analyze and secure blockchain data—including crypto transactions—have seen significant interest in the market, as mentioned previously. Web3 and blockchain security-focused startup CertiK was able to ride some of that investment interest to unicorn level. The New York-based company just missed hitting a $1 billion valuation in December when it raised an $80 million Series B from Sequoia Capital. However, it increased that valuation by 120% just four months later when it added another $88 million to that Series B, led by Advent International and Insight Partners.
Investors salivate for distressed debt opportunities
After years of slim pickings, distressed debt investors are preparing for more abundant times. Following an extended period of low interest rates, rising valuations and easy access to borrowing, many companies have amassed big piles of debt. The massive fiscal and monetary stimulus launched during the pandemic, which masked underlying financial stresses at debt-laden companies, only exacerbated the situation. Now those companies are grappling with a series of headwinds including a slowing economy, falling corporate earnings and rising costs of raising debt financing. These shifting market conditions, which make it harder and more expensive for businesses to raise new capital or refinance debt, are likely to leave many corporate borrowers that have heavy debt loads in financial distress. In short, these are exactly the conditions in which distressed debt investors thrive.
How Big Tech Revenue and Profit Breaks Down, by Company
In the media and public discourse, companies like Alphabet, Apple, and Microsoft are often lumped together into the same “Big Tech” category. After all, they constitute the world’s largest companies by market capitalization. And because of this, it’s easy to assume they’re in direct competition with each other, fiercely battling for a bigger piece of the “Big Tech” pie. But while there is certainly competition between the world’s tech giants, it’s a lot less drastic than you might imagine. This is apparent when you look into their various revenue streams, and this series of graphics by Truman Du provides a revenue breakdown of Alphabet, Amazon, Apple, and Microsoft.
The longest bull market in history began in March 2009 and, roughly, ended 13 years later at the start of 2022. While this primarily refers to public equity markets which soared year after year following the financial crisis’ c.50 per cent plunge in 2008, a tandem ever-surging phenomenon of venture capital financing of private startups accompanied it. No category benefited from this explosion of cheap money more than fintech. With the world in the grip of rising interest rates, soaring inflation and an array of geopolitical strife, is the party over?
VC fundraising looks to ‘new normal’ in 2023
After raising record levels of venture capital last year, the number of funds doing so this year looks set to plummet. In Q2, global VC fundraising was down year-on-year and the number of funds closed was the lowest seen in the past five years once the Covid-19 panic months of Q2 2020 are excluded, according to Preqin data. With only 560 fund closes in H1, even if the same number return during the second half of the year, the 2022 total would be a staggering fall from last year’s peak of 1,790 funds closing.
Venture capital healthtech funding drops 41.2% as firms brace for economic decline
The global fall in VC activity follows a surge in investment in the years before and amid the pandemic. Venture capital financing within healthtech has fallen 41.2% compared to the same time last year. The Asia-Pacific region had the largest year-on-year decrease (-64.8%), followed by Europe (-45.8%), and North America (-38.7%). In contrast, funding for the Middle East and Africa, and South and Central America markets grew by 158.7% and 16.4%, respectively. North America remains the largest funding market, accounting for approximately 70% of all VC deals in healthtech.
What did VCs do before they became VCs?
European VCs talk a good talk about being “founder friendly” and “hands on”. But the vast majority of them have still never actually run a startup — or worked in one.
New data from Vauban, a platform which helps investors raise, structure and then manage their funds, suggests that European VC ranks remain heavily filled with former bankers and private equity investors — and are low on former startup operators.
VCs will need deeper technical due diligence capabilities
Venture capital firms are going to need to develop new skill sets and diligence processes to determine which startups and founders deserve capital.
In 2011, A16Z cofounder and general partner Marc Andreesen famously said, “Software is eating the world.” He was right; 11 years later, it has completely devoured it. Now, investors are wondering what the next megatrend is going to be that completely changes the way we live. With advances in computing power and global crises accelerating the need for innovative new technologies, startups commercializing scientific breakthroughs in energy, transportation, infrastructure, agriculture, manufacturing, and human augmentation are poised to be the next wave of companies that “eat the world.”