House committee takes aim at U.S. venture capital firms for investments in Chinese A.I.

The House Select Committee on the Chinese Communist Party sent letters to four separate U.S. venture capital firms, including Qualcomm’s venture arm, expressing “serious concern” about their investments in Chinese tech startups.

The letters, which were made public on Wednesday, were sent to GGV Capital, GST Ventures, Qualcomm Ventures, and Walden International. They were written by and Wisconsin Republican Mike Gallagher and Illinois Democrat Raja Krishnamoorthi, the top two members on the committee. READ MORE

Global private equity exit activity slumps in Q2 2023

The total number of global private equity exits in the second quarter was 391, down 9.7% from the same period in 2022, according to data from Preqin Pro.

The valuation gap between buyers and sellers and the rising cost of credit are among the headwinds slowing such exit routes as IPOs, trade sales and secondary sales, which were all down year over year. READ MORE

U.S. antitrust regulators eye private equity takeover

U.S. antitrust regulators are zeroing in on private equity, after mostly ignoring the industry for decades. READ MORE

Dimon says private equity giants are ‘dancing in the streets’ over tougher bank rules

Executives warned Friday that tougher regulations in the wake of a trio of bank failures this year would raise costs for consumers and businesses, while forcing lenders to exit some businesses entirely.

When asked by Wells Fargo analyst Mike Mayo about the impact of changes proposed by Federal Reserve Vice Chair for Supervision Michael Barr in a speech earlier this week, JPMorgan CEO Jamie Dimon said that other financial players could end up winners. READ MORE

Venture Capital Funding Plunges in Wake of Bank Failures

Venture capital lending to startups has declined substantially in the wake of bank failures that slashed financing options, though the second half of the year could appear somewhat more promising for startups trying to obtain funds.

Santa Clara, Calif.-based Silicon Valley Bank, a key venture capital provider, slowly has ramped up lending to startups again.1 North Carolina's First Citizens Bancshares bought the bank after the Federal Deposit Insurance Corp. (FDIC) seized it in mid-March. READ MORE

No, startups are not facing a ‘mass extinction event’

“The Mass Extinction Event for startups is under way,” a partner for a well-known venture capital firm warned in a recent article in the Wall Street Journal. Capital from venture investors and bank loans is “scarce and expensive” and “venture-backed startups are running out of money and facing hard choices”.

The numbers support this: venture capital funding in the first quarter of 2023 was only at 40% of the levels seen in the fourth quarter of 2021. But mass extinction? READ MORE

Gold rush over: what happens to biotech now that venture capital is out of reach?

If you were to look back just a little over two years ago to the start of 2021, then putting money into a biotech company seemed like a pretty safe bet. After all, the COVID-19 pandemic had shined a positive spotlight on the biopharmaceutical industry, and initial public offerings (IPOs) were booming.

But the last two years have seen venture capital and overall funding within the industry dry up due to the economic downturn, which has heavily impacted many biotech companies. READ MORE

North American Startup Funding Fell Across All Stages In Q2

The good times are not back for North American venture funding. 

Sure, there may be upbeat signs, like the mounting AI buzz and some resurgence in the IPO and M&A markets. But when it comes to the actual funding tallies, the totals are unequivocally trending lower. READ MORE

Private Equity’s Fundraising Woes Aren’t Over Yet

Investors plan to put slightly more capital to work in private equity this year after commitments bottomed out in 2022. But don’t call it a comeback.

Rede Partners — a consultancy that advises private equity firms on primary fundraising, general-partner-led secondary transactions, and other projects — surveyed 149 limited partners this spring about their plans for capital earmarked for private equity funds. Among the investors surveyed, 26 percent of investors plan to decrease their capital deployment, 26 percent plan to increase it, and 48 percent said their deployment would remain unchanged. READ MORE

The Private Equity Machine Will Be Tough to Unjam

High finance has hit a low. Investment banking work has all but dried up and the private equity industry bears a lot of the blame. The bad news for those involved is that managers of buyout funds might struggle to get their flywheels spinning again even when the current economic uncertainty starts to clear up. 

Private equity has been a huge driver of investment banking revenue over the past 10 years because of its regular cycles of buying, selling and refinancing companies. At Goldman Sachs Group Inc., for example, more than 30% of global investment banking fees came from private equity related work in recent years, compared with less than 20% a decade ago. READ MORE

VC finds its footing as headwinds weaken

The venture capital market has started to stabilize after a sharp correction that began last year. But investors have yet to regain the optimism that fuels startup bull cycles, despite a fervor around generative AI and a comeback for large tech stocks. READ MORE

Founder reflects on lessons learned after closing startup: ‘Jump in, test a lot, don’t quit your day job’

Lalo, a Seattle startup that helped families create digital memorials for loved ones by storing digital content, is shutting down after two years.

Lalo founder Juan Medina told GeekWire that the company attracted thousands of users and millions of TikTok views but ultimately wasn’t able to convince customers to pay for its product or raise enough venture capital. READ MORE

Maybe the second half of 2023 will have greater capital flowing into crypto, but maybe not

Looking at the first half of 2023, funding for crypto startups continued to grow more scarce. In Q2, venture capital flowing into the industry dropped for the fifth consecutive quarter since Q1 2022 to $2.34 billion globally as investors withheld their checkbooks, fearing risks from a severe regulatory stance and an uncertain economy.

The second quarter’s $2.34 billion tally was raised across 382 deals, according to PitchBook data, but it’s a stark decline from the $12.14 billion peak the industry hit in the first quarter of 2022. The biggest raises during Q2 2023 were LayerZero’s $120 million Series B round and Worldcoin’s $115 million Series C round. READ MORE

Venture capital funding plunges globally in first half despite AI frenzy

Venture capital funding globally almost halved in the first six months of 2023, data from research firm PitchBook showed, highlighting a lack of enthusiasm on the part of investors as well as less demand amid sharply higher interest rates.

The 48% decline in investment to $173.9 billion and the 19% drop-off in deal numbers comes despite huge interest in artificial intelligence startups sparked by the success of OpenAI's ChatGPT. READ MORE

AI Was Q2’s Big Hope To Reverse The Global Venture Funding Slowdown. It Wasn’t Enough

Startup investors globally continued to scale back their pace in the second quarter of 2023 despite large funding and M&A deals in the artificial intelligence space.

Global venture funding in Q2 2023 fell 18% quarter over quarter to $65 billion, Crunchbase data shows. That’s down 49% compared to the second quarter of 2022, when startup investors spent $127 billion. READ MORE

The Myth That Drives Private Equity

The economy runs on narratives.

Those supportive of the status quo offer narratives – stories, essentially – about the benefits of existing arrangements. If those narratives are widely believed, the status quo typically endures. Changing the economy requires successfully changing the narrative. READ MORE

CFOs Challenged to Meet Sponsors’ Investment Goals

Private equity (PE) fund managers will deprioritize new deals and bolt-on acquisitions in the next six months in favor of helping existing portfolio companies, per a BDO survey released on Tuesday.

The shift could benefit portfolio company CFOs having difficulty delivering the financial performance PE owners expected when they bought the business. READ MORE

Pounding the Table on Private Equity

The poet and journalist Carl Sandburg is most often credited with this bon mot for attorneys: If the facts are against you, argue the law. If the law is against you, argue the facts. If the law and the facts are against you, pound the table and yell like hell.

The problem with Gretchen Morgenson and Joshua Rosner’s These Are the Plunderers: How Private Equity Runs – and Wrecks – America is that while their moral and factual indictments of private equity operations find their mark, their pound-the-table-and-yell-like-hell tone detracts from its credibility. The book’s authors seem unaware that when you have the morality, law, and facts on your side, a quiet understated tone serves you better than hyperbolic overkill. READ MORE

The 'Emerging Manager' Needs A Rebrand

I’ve long been a champion of emerging managers. They see opportunities others don’t and often yield the best returns despite market conditions.

But the term “emerging manager” has lost its utility.

When it was first coined back in the 1980s, industry insiders used it to refer to managers with funds smaller than a certain size. But it soon became synonymous with funds run by women, by managers representing racial and ethnic minorities, and by other groups that are underrepresented in VC. READ MORE

A new Paradigm? The crypto VC fund insists it’s not pivoting to A.I., but some investors and founders are frustrated

You’ve probably seen the memes of the “pivot from Web3 to A.I.,” jesting that venture capital investors have ditched the old hot new thing, crypto, for the new hot new thing, artificial intelligence. For some crypto-focused VCs, like Paradigm, the allure of A.I.—and a potential shift in their interests—has sparked some backlash.

The firm, started by Coinbase cofounder Fred Ehrsam and former Sequoia Capital partner Matt Huang, recently erased all mention of crypto or Web3 from its website homepage—branding previously touted front and center—as crypto news site The Block spotted in late May. The report caught the attention of my colleague Leo Schwartz and me, and we decided to dig a bit deeper. We discovered that it wasn’t just Twitter users who were raising eyebrows over the changes. READ MORE