Venture Capital's New Era

In the ever-evolving landscape of venture capital, artificial intelligence (AI) has emerged not just as a tool but as a transformative force, redefining the parameters of investment strategies and operational efficiency. At the heart of this revolution lies the insightful perspectives of thought leaders like Dr. Mohammad Rasouli, an AI researcher from Stanford University and a consultant in guiding institutional investors through the intricacies of AI for alternative investments with his Bay Area tech company AIx2. READ MORE

4 charts: 2023's VC investor pullback

VCs and their portfolio companies took a bruising in 2023. From Silicon Valley Bank collapsing—and with it a vital lifeline for startups—to a frozen IPO environment closing off exit activity, this past year was one of the most challenging to date.

In response, investors pulled back, leading to chilling effects on the startup market, the latest PitchBook-NVCA Venture Monitor shows. As more investors opted to sit out 2023, companies contended with less favorable deals.

These four charts highlight the effects of the investor exodus. READ MORE

From Batteries To Building Materials, Green Manufacturing Startups Are Raising Billions

Modern humanity’s carbon-spewing ways probably have their roots in manufacturing. If it’s not the things we mass-produce, then it’s likely the processes used to make them. Or, in many cases, both are to blame for emitting copious quantities of CO₂.

Given this state of affairs, it’s not surprising that founders and venture capitalists have taken an interest in greener manufacturing. The space emerged as a popular theme, even amid a toned-down funding climate last year, with more than $10 billion invested globally across the larger rounds, per an analysis of Crunchbase data. READ MORE

Large Backers of Private Equity Are Asking For Their Money Back

Sovereign wealth funds and state pension providers are among investors telling money managers they’ll only commit in their upcoming fund raises if their capital tied up in old funds is released, according to people with knowledge of the matter.

Additional requests range from fee discounts and more co-investment opportunities, to greater information rights and representation on committees, the people said, asking not to be identified because the requests are private. Some are even asking for a cut of the fund’s management fee or an opportunity to buy a stake in the fund manager, the people added. READ MORE

A 5-Step Survival Guide to Fundraising for a Niche Industry

The global venture capital (VC) market is going through an undeniably rough phase caused by a seemingly unending stream of economic and geopolitical issues, simultaneously occurring across all corners of the globe. According to KPMG's "Venture Pulse Q3 2023" report, worldwide VC investment dropped to a sixteen-quarter low in Q3 2023. Many market players feel concerned by the historically high number of down rounds, the overall slowdown in the speed of VC deals and the protracted lack of exit opportunities.

Based on CB Insights' "State of Venture Q3 2023" report, 9M of 2023 showed the lowest results in the amount of funding received by startups since the same period in 2019. The number of deals is also slightly lower: 21,216 deals during 9M of 2023 versus 22,992 deals within the same time frame in 2019. READ MORE

A16z Tops Active Investor Ranks In Slow Year

Overall, startup investors put far less money to work in 2023 compared to the prior two years. They also did far fewer deals.

However, some investors slowed down much less drastically than others. The result is that these firms, which include prominent cross-stage investors such as Andreessen Horowitz (a16z), Lightspeed Venture Partners and Bpifrance, reigned as the most-active venture investors of 2023, per Crunchbase data. READ MORE

The VC Funding Party Is Over

“It might be the best time for any kind of business in any industry to raise money for all of history, like since the time of the ancient Egyptians,” an excitable Stuart Butterfield, CEO of Slack, told Farhad Manjoo in The New York Times in 2015.

This was no exaggeration. While interest rates remained close to zero, venture capital funds raised more money than ever and exited their investments at some of the highest valuations ever witnessed. READ MORE

The search for better unit economics prompts consumer tech investors to shift focus

A slew of consumer tech and companies focused on consumer packaged goods (CPG) have gobbled up venture capital in the past year. Keychain, Harmonya, Highlight, Ramani, SupplyPike, Vividly and Turing Labs, just to name a few, captured investor attention for their technologies.

Companies weren’t the only ones getting funding. Investor firms focused on consumer and CPG were, too. That includes VMG Catalyst, Alethia and Humble Growth. READ MORE

Venture Debt: Poison For Startups Or The Antidote To The VC Drought?

“Do you think companies in Silicon Valley should take more debt?” Chamath Palihapitiya, Founder of Social Capital, asked me bluntly during an interview in Mountain View a few months ago.

We were at the headquarters of one of Chamath’s most promising climate tech startups – Mitra Chem – perched awkwardly around a table on the factory floor surrounded by millions of dollars of state of the art equipment. We were discussing Mitra Chem’s eye-watering $40 million Series B. READ MORE

After A Turbulent Few Years, Venture Should Steady In 2024

For the past handful of years, the venture market has been on a wild ride. From the cheap money days of 2020 and 2021 to the market recalibration in 2022 to some rocky times in 2023, the private market has had its ups and downs.

However, venture capitalists view 2024 pretty optimistically — although with caveats — with funding likely already hitting its low, the exit markets coming back, and a coming to terms with the new normal of work. READ MORE

1031 Exchanges In The World Of Private Equity Commercial Real Estate

Commercial real estate investors are understandably interested in pursuing strategies that reduce or even eliminate tax liabilities. It’s no surprise that some of the most common questions investors ask are related to deferring taxes upon the profitable sale of a commercial property, and for many of these investors, a 1031 exchange is a great option. A little-known but important fact in the commercial real estate industry is that investors can work with a private equity sponsor to complete a 1031 exchange. READ MORE

Hedge funds take on private equity in battle for distressed companies

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Hedge funds are challenging private equity firms over restrictions that dictate who can lend to or buy the debt of buyout-backed companies, weighing legal action to capitalise on a surge in corporate distress. Private equity portfolio companies can be particularly exposed to interest rate rises because of buyout firms’ reliance on debt to buy businesses. The firms draw up “whitelists” of approved lenders to stop potentially troublesome credit investors from using a position in the companies’ debt to steer the business’s strategy. READ MORE

2024 M&A Outlook: PE Comes Off the Bench

2023 brought a relatively sluggish year for M&A as macroeconomic conditions kept many key players on the sidelines. However, S&P’s latest analysis predicts that several factors may spur dealmakers into action in 2024.

The decline in deal announcements and total value, observed since 2022, has been attributed to the impact of a rising interest rate environment, leading to increased financing costs and decreased equity prices. While expectations suggest that interest rates will remain somewhat elevated, an end to the Federal Reserve’s hiking cycle will improve the M&A outlook. READ MORE

Industries Without Investors

Venture-capital backed startups almost all cluster in the same handful of industries, mostly various types of software. This leaves a variety of large and economically important sectors with almost no venture-capital backed startups. That means those industries see fewer new companies and new ideas; they must rely on either growth from existing firms, which are unlikely to embrace disruptive innovation, or on startups that bootstrap and/or finance with debt, which tend to grow slowly. READ MORE

2024 Commerce Predictions, According to Top Venture Capitalists

Commerce, or the buying and selling of goods globally, is one of our economy’s largest drivers and continues to see rapid evolution. At the dawn of 2024, we are living through continued geopolitical tensions, more war, and rising deglobalization; a seemingly-averted recession, stabilizing inflation, and a new (higher) cost of capital; and, of course, the mass adoption of consumer-focused AI. What is in store for commerce? And what are investors paying attention to? READ MORE

US startup funding drops 30% in 2023 despite AI frenzy

U.S. investors injected $170.6 billion into startups in 2023, a decrease of nearly 30% from the $242.2 billion recorded in 2022, as the venture capital funding market continues to grapple with valuation resets amid rising interest rates, according to PitchBook data released on Thursday.

The latest data, from a year in which megadeals in artificial intelligence captured the imagination of investors, shows a persistent decline from the peak of U.S. venture funding in 2021 when startups raised $348 billion. READ MORE