VNTR Capital News Sep 25th, 2022 - News, Events, VC Reads
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Happy Sunday!
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VNTR CAPITAL COMMUNITY NEWS
This week we are hosting a sold-out first breakfast event in Singapore on Sep 28th, where we expect 50+ active investors to network during Token2049, Asia’s premier crypto event. Our new community members in South East Asia will gain access to curated deal flow from around the world, access to funding from the VNTR Capital Syndicate for their top portfolio companies, and the opportunity to collaborate with us as Venture Partners to source deal flow and capital from the region.
We are building a global investors community that unites VC/PE/Web3 investors globally through events and Telegram groups where investors can connect and exchange feedback and support from peers. Partner companies can leverage our events and platform to connect with investors and portfolio companies to achieve their goals. To sponsor VNTR Capital events and Newsletter, apply here.
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. Join VNTR Syndicate to learn more.
Thank you to our partners who help make the events a success:
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.
Join us at the upcoming VNTR Capital events:
Sep 28th - VNTR Capital Breakfast Singapore, during Token2049
Sep 29th - VNTR Investment Committee (online)
Oct 12th - VNTR Capital Breakfast Dubai, UAE, during Gitex
Oct 13th - VNTR Capital New York, USA
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
Nov 3rd - VNTR Capital Breakfast Istanbul, Turkey, during Istanbul Tech Week
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UPCOMING VC EVENTS
Sep 28-29 - Digital Bridge, Nur-Sultan, Kazakhstan
Sep 28-29 - Science & Technology Convergence Conference, Yerevan, Armenia
Oct 5-6 - CryptoExo, Dubai, UAE
Oct 5-6 - Sifted Summit, London, UK
Oct 10-14 - GITEX Global, Dubai, UAE
October 10-13 - Future Blockchain Summit, Dubai, UAE
Oct 15 - World Blockchain Expo, Dubai, UAE
Oct 16-20 - Glendale Tech Week, LA, USA
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 2-4 - Istanbul Tech Week, Istanbul, Turkey
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 AIBC, 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
Jan 13-15 - World Crypto Conference 2023, Zurich, Switzerland
Want to submit VC-related events, please respond to this email or Telegram @byuric
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VC READS
Funding When Capital Isn’t Cheap
When capital becomes more expensive, how do you evaluate and decide on the best financing option for your company?
There is (or at least there should be) a VC industry saying: “Give me your headline price, and I’ll give you a deal.” The idea here is that founders tend to think in terms of valuation and dilution, while an investor might be more interested in knowing their minimum guaranteed return on the downside and the size of potential returns on the upside.
In a normal market, investors sometimes, but less frequently, use contract terms - such as liquidation preferences that are greater than 1x, warrants, and anti-dilution clauses - to invest at the valuation a founder wants but with terms that make sense for the investor. In a down market, when capital is more expensive, and valuations are down, these structured deals - that is, a deal with non-standard clauses - become more common, as founders look for ways to avoid raising money at a lower price per share than your previous round (i.e., a down round).
Crypto M&A Slows As Its Own Type Of Winter Sets In
After a fast start to the year, M&A deal-making in crypto has hit its own type of “winter.”
Earlier this month, one-click checkout company Bolt dropped plans to buy crypto and payment infrastructure company Wyre for $1.5 billion. The news came just more than three weeks after digital asset investment firm Galaxy Digital called off its proposed $1.2 billion acquisition of Palo Alto, California-based BitGo. The abandoned deals—with about $2.7 billion combined—help illustrate what appears to be a cooling M&A landscape as the crypto industry tries to find its level after hitting all-time highs last year. According to Crunchbase data, M&A activity targeting VC-backed crypto startups hit an all-time high in the first quarter of the year when 16 were announced. However, deal pace has reverted to barely a trickle, with just seven deals in the last nearly two full quarters.While deal count has slowed to a drip, there also have not been many large deals. Silvergate Bank’s purchase of the tech assets of blockchain-based payment network Diem—the stablecoin originally developed by Facebook engineers—for $182 million is the largest deal involving a VC-backed entity for the year.
Succession plans emerge as a key part of GP stakes investing
Behind the scenes of the recent wave of investment in GP stakes in PE firms, some partners bringing in new capital have another crucial concern in mind: succession planning. The market for buying minority stakes in money managers has grown rapidly over the past few years, with more investors attracted to steady revenue streams generated by managers with investing success. As the demand heats up, more firms are warming to the idea of carving out an ownership stake to bolster their balance sheet. In addition to fund expansion and growth initiatives, PE firms oftentimes seek minority capital to prepare for a smooth succession. At the same time, some investors mulling a stake in a firm want to see a solid succession plan in place before making a commitment. Earlier this month, Kudu Investment Management acquired a minority stake in Escalate Capital Partners, a boutique asset manager known for its private credit and growth equity focus. The investment came as Escalate's co-founders, Tony Schell and Ross Cockrell, decided it was time to plan for new leadership within the firm.
If History Repeats, Glory Days of Early-Stage VC Ahead
Many of the leading, household-name VCs earned their reputation (and their returns) by investing during the 2008 crisis. Startup valuations were lower, giving VCs great terms to invest, and amid a macroeconomic slump founders were envisioning and building a whole new future. This included ridesharing (Uber, Lyft), messaging that finally improved upon email (Slack), and much more. Some of the companies they funded at that low went on to be multibillion-dollar, behemoth publicly traded companies over the following decade. It was the best-case scenario as far as those investors are concerned, and their willingness to invest in the face of a recession and economic collapse generated returns that have secured their places in VC history.
History repeats itself, and I think we are on the verge of this story repeating itself. The entire essence of venture capital is to invest on long time horizons in paradigm-shifting companies. If you’re able to do that at a discount during downturns, your returns can be accelerated dramatically.
Blockchain venture capital funding fell to a 12-month low in August
The crypto market downturn continues to impact private funding, but one fund is bullish about the future of Web3. Data from Cointelegraph Research reveals that in August 2022, the blockchain industry saw $1.36 billion of venture capital invested in the blockchain industry — a 12-month low and the fourth consecutive month-on-month decline in capital inflows. August’s inflows represent a 31.3% drop from July’s $1.98 billion, and the 101 deals closed in August had an average capital investment of $14.3 million — a 10.1% decline from July. The data was drawn from the Cointelegraph Research Terminal’s Venture Capital Database, which contains comprehensive information on deals, mergers and acquisition activity, investors, crypto companies, and funds.
3 Alternatives to Venture Capital Funding for Startups
Whether you want to change the world or just be your own boss, the entrepreneur bug is spreading fast. Bootstrapping is a noble cause, but an infusion of capital in any business venture will help a company scale, gain credibility and even tap into resources beyond money. It is no secret that startups and small businesses have difficulty accessing venture capital funding. Even though venture capital funding is seen as an early-stage investment opportunity for small businesses, it's not generally recommended as an option, since the expectations of venture capital businesses don't naturally align with those of the startup's founders — due to the "burn and turn" model. In this article, we will explore other avenues any startup business can utilize when beginning its business venture. For the right business, a VC brings a tremendous amount of resources through finances, marketing, and sometimes, a supporting team. The issue lies in the difference between the mindset, which creates challenges that most startup entrepreneurs are not prepared to face.
A Call to the SEC: Treat Crypto Assets as if Clients Matter
Last week marked an exciting moment in technological innovation. The Ethereum blockchain – a global, decentralized computer that anyone can use – changed the way it verifies transactions in a long-anticipated update called the Merge. Despite opening additional opportunities for innovation, this dramatic change highlights legal uncertainty for crypto investors and asset managers. Strict adherence to the U.S. Security and Exchange Commission’s (SEC) “custody rule” would suggest asset managers, acting on behalf of investors, stay away from crypto staking. This is at odds with the fiduciary duty asset managers owe their clients by denying a legal and potentially lucrative revenue stream. It’s a catch-22. What the law dictates is clear: Registered advisers must comply with the SEC’s custody rule, which is designed to reduce the risk of misappropriation of investor holdings. More specifically, this rule usually requires that advisers place client assets (funds and securities) with a “qualified custodian” (often a bank or broker-dealer), and that an independent public accountant periodically verify the assets.
How Crucial Is Venture Capital to the Climate Fight?
Love it or hate it, there is no denying that venture capitalists have played a role in shaping the world over the past few decades. It’s just that most of the venture money in that period has gone towards funding software and internet companies. That’s now starting to change. As the climate crisis worsens and governments look to reshape markets, venture capitalists are beginning to pour increasing sums into startups that will provide some of the solutions to cutting emissions. Throw in $374 billion into climate- and energy-related government spending included in the new US climate bill, and you can expect a startup supercharge. “People are beating down our doors,” says Gabriel Kra, co-founder of the venture capital firm Prelude, in a discussion on Bloomberg Green’s Zero podcast. “The market size has just increased.”
Deep Tech Funding Slows As ‘Tourist’ Investors Retreat
As venture funding poured into nearly every sector last year, from enterprise software to delivery apps, some investors started to take a deep and hard look at just that - deep, or hard, tech.
However, as venture investment continues its substantial pullback, the money that flowed into the area—known for things like quantum computing, robotics, and space tech - in the past few years has started to dwindle. “I think there were a lot of funds looking for outside returns,” said Avidan Ross, founding partner of Root Ventures, a deep tech early-stage firm with nearly 80 investments. “There were a lot of people chasing [investments] last year.” Those who specialize in deep tech - also called “frontier” and “hard tech” - say there has been a leveling out of investors looking into areas that still can be years, if not decades, from the market. “This is just a tighter period,” said Peter Hebert, co-founder and managing partner at New York-based Lux Capital, which closed nearly $1.5 billion worth of funds last year to invest in deep tech.
“There’s been a retreat by ‘tourists,’” said Hebert, meaning those investors who normally had not invested in hard tech and typically come in at later stages.
This Week in European Tech: big funding rounds in France, the buzz around Instabee, another €1.5 billion+ worth of VC 'dry powder', Glovo gets fined, and more
French insect protein startup InnovaFeed has raised $250 million in a Series D round of financing. Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, led the investment.
Britain's Intermediate Capital Group is investing €240 million in Zeplug, a French firm specialising in electric vehicle (EV) charging services in multi-occupant and office buildings.
French startup Bump has signed a multiyear financing partnership with DIF Capital Partners in order to roll out more charging stations for electric vehicles and double down on growth in general. It is an equity and quasi-equity $180 million deal that will be progressively unlocked from 2022 to 2030. Helping SMEs and corporates navigate this reality, Munich-based data privacy, information security and compliance platform DataGuard has brought in €61 million in funding.
Why funds are flocking towards South-East Asian start-ups
South-East Asian start-ups are enjoying a boom in fundraising exercises by venture and buyout funds that are chasing bigger returns and turning away from regulatory turmoil in Chinese markets, even at the risk of slower growth. Companies such as Insignia Ventures Partners and SoftBank-backed East Ventures are among those that have raised a combined total of billions for start-ups over the past year, as the region's 650 million people take to digital platforms.
"Some of the world's largest institutions are coming up with strategies now to invest and deploy capital into regions like South-East Asia, which six to seven years ago may not have even had the ability to absorb cheques of a large enough size," said Vishal Harnal, managing partner at venture fund 500 Global, with $2.8 billion in assets.
Appetite for venture capital-backed companies in the Middle East and North Africa region has remained strong this year, with capital raised on track to match last year's figures. Since the beginning of 2022, a total of $12.6 billion has been invested in the region across 874 deals, according to PitchBook data. At this pace, the region could see another record year in terms of deal value, although the number of deals may fall short of last year's total as VCs place fewer bets. Strong government support has been a key driver behind MENA's strengthening VC market, with sovereign wealth funds like Saudi Arabia's Public Investment Fund and the Abu Dhabi Investment Authority offering an abundance of local capital. The region's close proximity to the rest of Africa and Asia, as well as its predominantly young population, also benefits its startups. Israel continues to be the region's biggest VC destination thanks to the maturity of its ecosystem, strong ties with the US and a highly skilled workforce—according to PitchBook, the country is ranked second in the world in terms of VC investment per capita. The UAE has also seen significant growth this year, with $2.4 billion invested, a near 200% increase from 2021.
The Most Important Bear Market in Crypto History
Every bear cycle in crypto is greeted with a degree of relief by founders, engineers, and other insiders because they’re freed from the hamster wheel of chasing deposits, users, and mainstream attention and instead able to focus on building for the long term, both technologically and strategically. Mainnet offered a few glimpses of where projects are focusing their off-season energy this time around. One major theme is the financial and engineering push for more capital efficiency in decentralized finance (DeFi) and other on-chain services – that is, finding ways to safely get more leverage or liquidity out of less collateral.
Looking at 320 pitch decks, here’s what science tells us works best
Investors are spending 24% less time looking at pitch decks in 2022, compared to 2021. On average, you have just under three minutes to convince them to take a meeting with you. In fact, for decks that fail to raise funding, investors give up in just 2 minutes and 13 seconds. That’s not a lot of time to make a first impression, so you’ve got to make it count.
It’s pretty rare that I get to talk to someone who is as big of a pitch deck nerd as I am, but when I was finally able to nerd out with the research lead at DocSend, how could I not? We go deep into what the data tells us about what makes a pitch deck successful, and indicators for what works less well.
Unsexy, Overlooked Startups Are Poised To Thrive In The Downturn
This summer has been stressful for investors and entrepreneurs alike. The market adjustment that’s happening in equities, especially tech, and crypto is having a material impact on investing in and building technology businesses. Valuations have already come down significantly. It is much more difficult for most companies to raise money. It is harder to get a job for someone who wants to work at a tech company, and it’s harder for fund managers to raise capital. It seems like everything is harder, and it may be the case in the near-term for most, but there is a bright side. Many investors I’ve spoken to recently, despite their exasperation, see what is happening now as a much-needed correction. In bull markets, there’s a lot of noise. Valuations operate like a game of hot potato, and a company’s ability to fundraise becomes largely divorced from business progress. Many investors and entrepreneurs become extremely wealthy during a bull cycle, but often at the expense of the entrepreneurs building the less flashy, but more substantive, businesses. Many unsexy businesses, such as accounting and logistics, struggled to fundraise relative to their peers during the bull cycle, but now are in the spotlight as investors resort to betting on business fundamentals.
Jerome Powell is prolonging our economic agony
Can we all agree that the Federal Reserve has a plan to combat runaway inflation? It does. Chair Jerome Powell has all but admitted it. After tempering his comments before previous rate hikes, allowing wiggle room which gave way to market rebounds, Powell has left no bones about this one. It is necessary to wreak some havoc on the economy and put downward pressure on the labor markets and wage increases to stop the creep of inflation. Whether you buy into that logic or believe, like Elon Musk, that such movements could result in deflation doesn’t matter. All that matters is what those voting on the rate hikes believe, and there’s plenty of evidence that they won’t stop until the rate is over 4%. Wednesday’s rate increase of 75 basis points only moves us in that direction. This is the third such adjustment of 75 basis points, and we’ve been all but told that it won’t be the last. While these rate hikes have been historic, they prolong the economic pain associated with them. It’s time for the Fed to be brutally honest about where the economy is and where it is heading. Powell has said that he aims to give the economy a soft landing. However, he’s also said, “Our responsibility to deliver price stability is unconditional.”
PE appetite surges for European asset managers
This year has seen an elevated amount of PE activity in the European asset management sector, with an increase of more than 33% for deal value over the whole of 2021 before Q4 2022 has even started, according to PitchBook data. In the largest deal this year, Cinven bought a majority stake in UK-based True Potential, a platform that provides retail investors with access to funds and other investment tools, for more than €2 billion (about $1.97 billion). Another large deal was Genstar-backed Apex Group's August acquisition of UK-listed fund administrator Sanne Group for about €1.8 billion. The company provides services to professional investors in the alternative asset class range, including private debt, private equity, real assets, and hedge funds. Keen to broaden its range to more peripheral parts of the market, TDR Capital took Arrow Global private last year in a deal worth £563 million (about $633 million). The firm invests in nonperforming loans and noncore assets across Europe. While there have been well-publicized moves by large listed traditional asset managers to gain exposure to private markets, PE firms also appear to have a thirst for other strategies.
Blurring the line between crypto and TradFi could redefine global finance
Despite the current struggle in the global economy, the gap between traditional finance (TradFi) and crypto seems to be closing with each passing day. For example, earlier this month, Vienna-based fintech unicorn Bitpanda announced that it was adding commodities to its list of investment options, thus allowing investors to rake in profits from short-term price fluctuations related to traditional instruments such as oil, natural gas and wheat. In a recent interview with Cointelegraph, the company’s CEO, Eric Demuth, noted that the bear market had had no major impact on investor demand. He claims that more people are now looking for solutions that can bring the world of TradFi and decentralized finance (DeFi) together. Not only that, there are lessons to be learned about what works out best for consumers operating within both realms. For example, while TradFi platforms can improve their accessibility and transparency mechanisms, DeFi ecosystems can learn a lot about risk mitigation from traditional finance entities.
Japanese Banking Heavyweight Nomura to Launch Crypto-Focused Venture Capital Arm
The investment banking giant from Japan, Nomura Holdings, is stepping into the world of crypto assets, and in the coming months, the new venture will reveal a slew of “new services and product lines.” Nomura is one of the largest investment banks in Japan and one of the oldest in the country. The investment company established itself 97 years ago in Osaka in 1925 as Nomura Securities. The new Laser Digital Holdings is a Switzerland-incorporated holding company that aims to establish three vertical product offerings, including secondary trading, venture capital, and investor products. The new venture will be led by Jez Mohideen as CEO and Steven Ashley as Laser Digital’s chairman. Switzerland was chosen for the country’s established and “robust regulatory regime,” Nomura’s press release discloses. “Staying at the forefront of digital innovation is a key priority for Nomura,” the investment bank’s president and CEO Kentaro Okuda remarked on Wednesday. “This is why, alongside our efforts to diversify our business, we announced earlier this year that Nomura would be setting up a new subsidiary focused [on] digital assets.”
Therapy, Music And Spas: The Non-Drug Startups In Psychedelics
When Iter Investments formed in 2020, drug startups in the psychedelics space were seeing huge valuations, and the market was reaching the point of oversaturation. So the firm turned to ancillary services for its portfolio—tech companies on the periphery of psychedelic drug development that will be necessary to administer psychedelic-based therapeutics.
And it’s not the only firm to do so—19% of funded psychedelics startups in 2020 went to companies that weren’t drug-related. A year later, that number jumped to 38% per Crunchbase data. “We also think about the whole value chain that’s required to develop in the psychedelic industry,” said Roberto Velarde, co-founder and managing partner at Iter Investments. “We are investing in companies that need to be built in order to ultimately deliver the care and therapeutics to patients and customers. So we also think about the tech industry.”It’s the perfect confluence of a tight market and public policy. For decades, scientific researchers have been toiling away in research facilities, building a library of knowledge around psychedelics even while the U.S. shuttered publicly funded research projects and instigated the War on Drugs. Early studies showed that psychedelics were a prime candidate to address treatment-resistant depression, anxiety and PTSD for people who didn’t benefit from current antidepressants or SSRIs.
Indian startups raise over $995 million VC funding in August
Amid the funding winter, 128 Indian startups have raised over $995 million (around Rs 8,000 crore) in venture capital funding in August, GlobalData said on Thursday. The funds raised in August are 9.7 per cent more than that in the previous month, the data and analytics company said in a statement. Aurojyoti Bose, Lead Analyst at GlobalData, said: "Although the total VC funding amount still remains below USD 1 billion akin to July, August managed to reverse the decline in fundraising, despite a 2.3 per cent fall in deal volume." The growth has come at a time when fundraising in other key global markets such as the US and UK witnessed decline. "China and India were the two notable exceptions to this trend," Bose said. An analysis of GlobalData's Financial Deals Database revealed that India saw the announcement of 1,239 VC funding deals during January to August 2022, while the disclosed funding value in the year-ago period stood at USD 17.7 billion.
The Best Managers Are Leaders - and Vice Versa
Most of the long-running debate over “leaders” vs. “managers” focuses on nouns when it should focus on verbs. Everyone needs both “leading” and “managing” in their work, and the best executives balance the two. Over the last 15 years, the author asked a thousand executives about the difference between leading and managing, recording their responses. The distinction remains interesting and important, but it’s healthier as a balance that every individual tries to strike instead of as two distinct skillsets or roles within an organization.