VNTR Capital News Sep 4th, 2022 - News, Events, VC Reads
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Happy Sunday!
Congratulations on the restart of the work season after a long summer vacation season.
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VNTR CAPITAL COMMUNITY NEWS
After a long summer break, we are restarting our investments in fast-growing startups. We focus on Series B+ investment opportunities where we invest on a deal-by-deal basis using SPVs managed by our partner SPV providers. You can learn about VNTR Syndicate and join the VNTR Investment Platform to participate in deals with checks of $10,000+.
We identified our next Series B FinTech investment opportunity, where we plan to deploy capital and co-invest with other funds from VNTR Community. We will share the deal details with approved investors.
VNTR Capital partnered with BitDegree to help them launch Learnoverse, a crypto learning in the Metaverse. We will travel together to Dubai next week to participate at Metaweek and meet with local partners/investors who are interested in EdTech and Metaverse. Please reach out if you would like to learn more or meet in Dubai.
Join us at the upcoming VNTR Capital events globally:
Sep 8th - VNTR Capital Breakfast Lisbon, Portugal
Sep 13th - VNTR Capital Breakfast Dubai, UAE, during Metaweek
Sep 13th - VNTR Capital Breakfast Mumbai, India
Sep 19th - VNTR Capital Breakfast Tel-Aviv, Israel
Sep 21st - VNTR Growth Roundtable, Online (community members mastermind)
Sep 28th - VNTR Capital Breakfast Singapore, during Token2049
Oct 4th - VNTR Capital Breakfast London, UK
Oct 12th - VNTR Capital Breakfast Dubai, UAE, during Gitex
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UPCOMING VC EVENTS
Sep 6-7 - Pirate Summit, Cologne, Germany
Sep 7-8 - YC Demo Day Summer 2022
Sep 12 - FO & HNWI Round Table Pitching & Dinner by Dunhill Ventures, Dubai, UAE
Sep 12-18 - Blockchain Week Berlin, Germany
Sep 12-13 - MetaWeek 2022, Dubai, UAE
Sep 11-14 - NEARCON, Lisbon, Portugal
Sep 13-15 - SaaStr 2022, SF Bay, USA
Sep 14-15 - TechBBQ, Copenhagen, Denmark
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 - Sifted Summit, London, UK
Oct 8-14 - Wow Summit, Dubai, UAE
Oct 10-14 - GITEX Global, Dubai, UAE
Oct 11-13 - Take Off Istanbul, Turkey
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 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
Want to submit VC-related events, please respond to this email or Telegram @byuric
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VC READS
Aramco VC Fund Turns to Global Investments in Saudi Startup Push
Saudi Aramco’s venture capital arm is turning to international investments as part of the kingdom’s push to diversify its economy and attract global tech startups. Wa’ed will invest about $100 million this year after spending around $50 million over the past nine years, Chief Executive Officer Fahad Alidi said in an interview. Its $200 million fund is planning 11 investments in the second half. On top of fintech and e-commerce, the firm will expand into sectors such as deep tech, space tech, the metaverse, and sustainability. “We are deploying funds really fast,” Alidi said. “The pipeline is extremely rich locally and globally. In the very near future, you might be hearing about two global investments that we hope to leverage for the benefit of Saudi Aramco.” In its first global foray, Wa’ed has invested in 5G internet of things satellite operator OQ Technology as part of a 13 million euro ($13 million) series A funding round.
Y Combinator Names Venture Capitalist Garry Tan As Its Next President
Y Combinator has tapped an outsider as its next president—sort of. The storied Bay Area-based accelerator has chosen venture capitalist and Y Combinator alum Garry Tan to serve as the fourth leader in its 17-year history. Come January, Tan will replace president Geoff Ralston, who took the mantle in 2019. “This is a community where people’s dreams, more or less, are fulfilled in a lot of ways,” Tan tells Forbes in an exclusive interview. “The chance to come back and help make that happen is a one in 10 billion lifetimes kind of thing.” When he takes over the top job at Y Combinator, Tan will step away from a full-time role at Initialized Capital, the firm he created with Reddit co-founder Alexis Ohanian in 2012. An early investor in cryptocurrency exchange Coinbase, grocery delivery service Instacart and supply chain software unicorn Flexport, Tan has appeared on the Forbes Midas List for the past four years, most recently ranking at No. 28. He debuted at No. 4 on the inaugural Forbes Midas Seed List in 2022.
50 Startups That Rose as America Locked Down
The devastating toll of the pandemic is all too clear on our families, our cities, our nation. But we are now beginning to see an underappreciated side of the pandemic: a coast-to-coast surge in American ingenuity, drive and determination.
Even as the pandemic damaged or even destroyed many businesses, it also provided new opportunities and fostered creativity in unexpected ways. For some, it meant a recalibration of life priorities. For others, it provided the gift of time and attention to start something new or follow through on long-deferred dreams. More new businesses were created in 2020 than any other year on record, and 2021 wasn’t far behind. The one-year survival rate of those new companies topped 80% in 2021 for the first time since 1999, according to the Kauffman Indicators of Entrepreneurship.
Glass half full: VCs have reasons to be optimistic amid valuation declines
Dealmaking has swung in favor of venture investors since the start of Q2 2022, owing to high demand for capital and depressed valuation multiples of recent VC-backed listings, according to PitchBook's latest Quantitative Perspectives report. "While traditional VC firm dry powder available to startups grew in 2022 at a faster clip than any other year in the last decade and a half, the demand for that capital from startups grew even more quickly," said Parker Dean, a quantitative research analyst at PitchBook. "This, combined with dropping entry multiples for startups, poises savvy investors flush with cash to make lucrative growth plays."While the drawdown in public equities in the first half of 2021 has been significant and long-lived, the stock market declines have not been as severe as other downturns in recent memory. The bear market has also come with a silver lining for software investors: The price-to-sales multiples for many recent public listings of software companies have shrunk considerably since late 2021. Because these multiples are a reference mark for VC-backed software deals, this is good news for GPs deploying capital into new portfolio companies in the sector.
Venture Capital in 2022: A turning point & a silver lining
It is a well-known fact that, like all industries, the VC industry also goes through cycles. The VC industry has a distinct advantage in receiving high credit for its linkage to technological disruption. The promise of the new, fundamentally more digital world and a desire to participate in value creation has led to higher capital allocation to venture capital. This expectation was fueled by the 12-year bull market cycle and the massive digital adoption that occurred during Covid. Global Venture Capital deployment grew to $650B from $220B in 2017. In the last 5 years, around $1.8Tr were invested in early and late-stage startups. VC investments in India also saw a dramatic increase – from $4.7B in 2017 to $38B in 2021. Investment decisions made over a zoom call, party rounds with no real rights for any investors, elongated SAFE rounds, pressure to close in a week, seeds of $5M, lack of referencing, VCs emerging from the woodwork, and VC funds being raised and deployed in 18 months – all this became a norm rather than an exception.
They’re Just Not Into It: The Biggest US Tech Companies Aren’t Buying Startups
The four most valuable American companies have enough capital to acquire any startup they desire. But despite their deep coffers, Apple, Amazon, Google, and Microsoft aren’t doing a lot of buying. So far this year, the “Big Four” have made just five acquisitions of private, venture-backed companies, per Crunchbase data. Of those, none were known unicorns, and only one had a disclosed purchase price. That indicates the rest were smaller deals by tech giant standards. The largest startup purchase came in January when Google bought New York-based security automation and response provider Siemplify for $500 million. Founded in 2015, Siemplify previously raised $58 million in venture funding.
Asia's other giant: India lights up region's PE dealmaking
According to a recent report from Bain & Company and the Indian Venture and Alternate Capital Association, both Indian economic growth and a flight of capital from China - caused by political uncertainty - have spurred activity in the country. As such, India has increased its share of Asian deal activity. India has proven to be one of the world's fastest-growing economies against a bleaker global outlook. In Q2, the country's economy grew 13.5% year-over-year, according to a report from Reuters. However, its resilience could yet be tested, as soaring interest rates could cool economic activity. Among the top deals to be completed in India in 2021 were The Carlyle Group's $3 billion proposed acquisition of Baring Private Equity Asia-backed Hexaware Technologies - a deal which is said to have had competing bids from the likes of KKR and Bain Capital. Earlier in the year, Blackstone committed up to $2.8 billion - alongside the Abu Dhabi Investment Authority, UC Investments, and others - to acquire an additional 26% stake in Mphasis, an IT services company.
Michael Saylor got wrecked, but Bitcoin investors needn't panic
As cryptocurrency investors know, the market moves in cycles. We had the up-cycle when Bitcoin and Ether hit their all-time highs, and now the bears are back in town. One of them mauled MicroStrategy founder and executive chairman Michael Saylor this week. In this case, it was a very powerful bear - Washington, D.C. Attorney General Karl Racine - suing the Bitcoin evangelist for allegedly owing $25 million in unpaid taxes. MicroStrategy’s stock price has fallen more than 13% on the news, from $251 on Aug. 29 to less than $220 on Sept. 1. Still, now isn’t the time for investors to panic. It’s been roughly three months since the now-infamous crash of the Terraform ecosystem - which ended the greatest bull party known to man - and the sky still isn’t falling. The world isn’t ending, and blockchain is as immutable as ever. Does that mean industry leaders should stop viewing market downturns as existential threats to cryptocurrency as an enterprise? Perhaps not, considering $2 trillion in value was erased from cryptocurrency’s market capitalization after Terraform’s collapse. Such extreme market events can’t be dismissed as volatile swings that we should expect going forward. Not all the factors playing into them are healthy.
In A Tepid Market, Extension Rounds Are On The Uptick
As the venture markets contract in 2022, startups that raised at high valuations in 2021 face a huge hurdle. If they run out of cash and do not meet the milestones required to raise the next funding stage, what are their options? “We’re seeing a ton of extension rounds,” said Guru Chahal, an early-stage investor at Lightspeed Venture Partners. “Most startups and their investors prefer advancing from one funding round to the next, but when the market reception is tepid, extended rounds can buy a startup another four to six quarters to grow revenue and try to raise funds again,” he said. Chahal, an investor in cloud infrastructure and cybersecurity at Lightspeed, was previously on the founder's side of the table. He co-founded Avi Networks, which was acquired by VMWare in early 2019. Chahal said that in the hot market of 2021, startups had so much interest at such high valuations that having more capital from a strategic institution could be helpful and were often supplemented after funding closed.
Extensions in this market climate are very different.
High Valuations and Large Fundraises Still Exist—We Tell You Who
Venture capital funding may be slowing worldwide, but some later-stage startups are shrugging off the gloomy numbers and raising funding at higher valuations. These companies are outperforming their peers in specific sectors, and garnering a larger proportion of funding dollars. We analyzed Crunchbase data to find startups that are raising at significantly higher valuations compared to their funding in 2021. Immediately we struck gold: Eighty-plus companies that increased their valuations by 100% or more since the beginning of second-quarter 2022. As we reviewed this list of companies, the hottest sectors quickly rose to the top. We found leading companies beating the odds in the future of work, e-commerce, health care, DevOps, delivery, security and Web3. These startups’ steady upward performance is all the more remarkable these days. Global venture funding doubled in 2021 from the year before, only to slide down again this year by around 25% in the second quarter. Over the next few days, we’ll be examining these late-stage winners by sector, identifying the strongest players, and exploring what makes them so consistently valuable.
CZ hits back at claims Binance is a Chinese company
Binance CEO Changpeng “CZ” Zhao has hit back at critics and conspiracy theorists who claim Binance to be a Chinese-based “criminal entity” that “secretly [belongs] in the pocket of the Chinese government.” CZ’s response to critics came from a Thursday blog post via Binance, and stems from a Twitter spat with a former Washington Post journalist who asked him, “While I have you here, who’s Guangying Chen?” He explained that the question is in reference to a conspiracy theory alleging that his personal friend and Chinese national Guangying Chen is the secret owner of Bijie Tech (a company he founded in 2015) and possibly also Binance.
However, CZ explains that Chen is a colleague of his that he met through a friend, which he hired to “manage the back office” at Bijie Tech before re-hiring her again at Binance, adding that conspiracy theorists then linked her as a secret owner of the firms given that she was one of the few to have initially remained in China.
Coming out of COVID, investors lose their taste for board meetings
Two weeks ago, longtime venture capitalist Chris Olsen, a general partner and co-founder of Drive Capital in Columbus, Ohio, settled into his seat for a portfolio company’s board meeting. It turned out to be a maddening exercise. “Two of the board members didn’t show up, and the company had a resolution on the agenda to pass the budget,” recalls an exasperated Olsen. A “junior person was there for the venture firm” - a co-investor in the startup - but that individual was “not allowed to vote because they’re not the board member. And so we had this dynamic where all of a sudden, the founder is like, ‘Well, wait a minute, so I can’t get my budget approved because people aren’t showing up to my board meeting?'” Olsen calls the whole thing “super, super frustrating.” He also says that it isn’t the first time a board meeting hasn’t happened as planned lately. Asked whether he is routinely seeing co-investors showing up less frequently or canceling board meetings altogether, he says, “I’ve definitely seen that. For sure I’ve seen other venture firms where participation is definitely reduced.” Why are startup board meetings happening less and less? There are a whole host of reasons, suggest industry players, and they say the trend is an alarming one for both founders and the institutions whose money VCs invest.
European VC deal sizes defy downturn
European venture deal sizes are continuing to grow larger despite increased pressure on dealmaking. In the first six months of the year, round sizes across all stages rose compared with 2021, and not by an insignificant amount, according to PitchBook's Q2 2022 European VC Valuations Report. The median early-stage deal size increased by 32% to €2.5 million, while the median late-stage deal size grew 38%, despite the stage being the most affected by public market volatility and concerns about the asset class's overvaluation. While the well-known lag in private market data may be obfuscating the full impact of the downturn on European venture deal sizes, other factors could be helping to keep them elevated. VCs are still sitting on a considerable amount of capital that needs to be deployed regardless of the economic climate. Globally, venture investors have $562.4 billion in dry powder destined for startups. With the bar set higher for companies seeking investments, VCs could be deploying more into the companies with the most promise, bumping up their round sizes.
Venture Capitalists are Pouring Money into Web3. Here's Why.
Venture capital investment into the Web3 sector has been on fire this year, with several established VC firms launching a Web3 and crypto arm. Paradigm's $2.5 billion fund and Electric Capital's $1 billion fund are just a few examples. So why are these firms so optimistic on Web3 investments? The token economies that underpin many web3 projects can result in outsized returns compared to Web2 investments. This is especially true in the current climate of soaring inflation, interest rate hikes, startup valuation markdowns, and market volatility. While the cryptocurrency market has seen its share of ups and downs in 2022, its total market cap grew by nearly 200 percent in 2021, with Bitcoin and Ethereum returning roughly 60 percent and 400 percent, respectively. Other cryptocurrencies posted impressive returns like Avalanche, up by approximately 3,300 percent, and Solana, up by about 11,000 percent. Being more sector-specific, DeFi (decentralized finance) had a market cap of just $2 billion in 2020 and opened with a $160 billion market cap in 2022 — an 80-time growth in just two years. Many prominent investors and institutions are making the bold prediction that DeFi, which currently represents an immaterial percentage of the S&P500 traditional finance market, could be worth 100 times more in just five years.
Bitcoin, Ether Consolidate as Traders Eye U.S. Jobs Report to Gauge Next Fed Rate Hike
It's nonfarm payrolls (NFP) Friday, and prominent cryptocurrencies are trading in established ranges ahead of the critical U.S. jobs data that may help determine the scale of the impending Federal Reserve (Fed) rate hike. Once largely ignored by the crypto market, the report has gained prominence this year as it reveals the state of the labor market and wage growth in the world's largest economy and helps the Fed determine the amount of liquidity tightening – or how much money to withdraw from the economy – needed to cool inflation. The tighter the labor market, the stickier inflation and the more pro-tightening, or hawkish, the Fed will be. Risk assets, including cryptocurrencies, are addicted to cheap liquidity and have taken a beating this year, mainly because of the Fed's interest-rate-hike cycle. This year, the central bank has raised rates by 225 basis points.
Are we entering a new era of PE oversight?
In August, US President Joe Biden's Inflation Reduction Act (IRA) was signed into law, and it was a significant political win for the private equity industry. The act had originally threatened to remove a tax loophole on carried interest - a major source of profit for GPs - but instead, investors walked away with tax relief. Carried interest is the cut - normally around 20% - that GPs get on the money returned to investors. Under current law, a loophole allows these gains to be taxed at the long-term capital gains rate, which is capped at 23.8%. Previous acts have extended the required holding period for some assets before this rate can be claimed. The IRA originally had provisions to remove the loophole altogether, but they were removed at the last minute after Democratic senator Kyrsten Sinema—a beneficiary of successful PE lobbying—refused to back the bill until it was amended. For now, at least, the loophole is safe. But the attempt to close it is just one pitched battle in a larger war being fought by regulators and lawmakers to rein in an industry that now has an outsize influence on the global economy.
Why Venture Capitals (VCs) are still backing Indian startups despite growth stocks crashing
The startup market has witnessed some hiccups in the past few months, as revenue and profits have seen a downfall. In fact, ever since the outbreak of corona, these startups have not clocked impressive figures. Earlier, the covid-19 caused restrictions and lockdowns, made the business suffer. Just when things were expected to get better, the Russia-Ukraine war worsened the world economic situation. On top of that, inflation has hit the roof across world markets. Economies like Sri Lanka have totally collapsed, while Pakistan is witnessing one of the worst monetary crises in the history of the nation. All these developments have created a negative sentiment in the market. On top of that, the Government in India has imposed GST on essential items such as packaged milk, curd etc. The cost of operation for small startups has skyrocketed, and major startups such as Paytm and Zomato are witnessing their worst performance in the stock market. Indian startup funding has halved from its peak level, currently at ~49% of the total funding activity.
Cash-rich family offices of small towns are buying into the India startup story
The Indian startup story has not just gone global, it’s going deep into the hinterlands too. And it’s the high networth individual (HNIs) investors in tier 2 towns of industrial belts who are driving this rush of investments in new-age companies. A number of private equity (PE) and venture capital (VC) firms Business Insider India spoke to said that these HNIs, especially from the second generation, had discovered the value of the alternate investment ecosystem and were steadily deploying funds into these investments. “With continuous exposure, the startup ecosystem has got evangelised among potential investors across India. We are seeing investors coming from cities like Nagpur, Vadodara, Surat, Bhubaneshwar, Cochin, Coimbatore to name a few. The list is long,” says Anil Joshi, managing partner at Unicorn India Ventures, an early stage-focused tech fund.
LP Spotlight: Sapphire Partners on how emerging VC managers can stand out
2022 is proving to be a record year for venture fundraising. But not all funds are receiving equal treatment from limited partners. While mega-funds may have raised their largest vehicles ever, the proportion of US VC capital going to emerging managers—that are investing out their first, second, or third funds—hit a decade low in Q2, according to the latest NVCA-PitchBook Venture Monitor. We spoke with Laura Thompson, a partner at Sapphire Partners, an LP arm within Sapphire Ventures, about the current fundraising environment, how emerging managers can grab LPs' attention, and why there is no one-size-fits-all strategy for marking down VC portfolio companies. Sapphire Partners, which operates out of an evergreen vehicle, invests in early-stage established and emerging venture funds based in the US, Europe, and Israel.
Why We'll See More New Types of Web3 Apps in the Next Year
The summer of 2021 marked an influx of dollars & interest into web3. Since then, the fourth crypto winter has dropped snow atop web3, but the revenue decline isn’t equal across web3 software.NFT marketplace revenue collapsed 62% since the beginning of this year. This chart shows the decline in monthly revenue from January to August. L1s’ monthly revenue has followed NFT marketplaces downward, falling 57%. The parallel revenue drop suggests L1 revenue skews to NFTs today, likely upwards of 75% concentration.
Predicting the technology that will define the next era of innovation
In 2015, Benedict Evans wrote a very influential piece called “The smartphone is the new sun”. By the middle of the 2010s, it was pretty clear that that decade would be defined in many ways by the mobile computing platform that Steve Jobs unveiled in 2007. For regular people, smartphones became the locus of their lives - an ever-present tether constantly connecting them to the digital world and allowing them to navigate the physical one. For industry, smartphones and the applications they enabled became a massive opportunity for investment and profit. Now, however, it seems like we might be reaching the end of that rainbow. The basic reason is that with smartphones, IT companies have now harvested essentially all of people’s surplus attention and time. A new Pew survey of teens’ social media habits found that almost half of young people are online “almost constantly”, up from a quarter in the mid-2010s. And smartphone penetration in rich countries is around 80%. So it’s natural for both consumers and investors/entrepreneurs to be looking around for what technologies might enable another Cambrian explosion of innovation in the next decade.