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Last year saw the lowest level of startup funding in five years, witnessed valuations fall drastically, and offered little hope for IPO contenders. But is that all now in the rearview mirror?
That’s certainly the hope from many of the startup investors and entrepreneurs we’ve spoken with recently, who say that even if things don’t come roaring back in 2024, they’re at least looking forward to a year of relative calm and predictability. READ MORE
Suppressed valuations and an uptick in private credit financing could fuel a wave of take-privates in 2024. But such deals face headwinds nonetheless.
By historical standards, 2023 was a strong year for private equity-led take-privates. Although activity didn’t reach the highs of 2021 and 2022—when global deal value totaled $259 billion and $301 billion, respectively—there was still $170 billion invested across 133 take-privates. READ MORE
The first article, opens new tab in this two-part series (“The times for private equity and venture capital transactions are a-changin’: 2024 challenges,” Reuters, Dec. 19, 2023,) explored the impact of the Corporate Transparency Act's new reporting requirements and increased antitrust enforcement by the Federal Trade Commission (FTC) and U.S. Department of Justice on private equity (PE) and venture capital (VC) funds. Read on for more key items that should be on the radar of PE and VC funds and their portfolio companies for 2024 and beyond, including changes in the law relating to enforceability of restrictive covenants and legal issues surrounding artificial intelligence. READ MORE
Nearly two years after first proposing new rules related to special purpose acquisition companies (SPACs), the U.S. Securities and Exchange Commission (SEC) has adopted final rules aimed at enhancing investor protections in initial public offerings by SPACs and in subsequent de-SPAC transactions. The final rules require new enhanced disclosure requirements related to SPACs, and include new procedural protections in de-SPAC transactions. The SEC also provided guidance regarding underwriter status in de-SPAC transactions and analysis of a SPAC's potential status as an investment company under the Investment Company Act. READ MORE
A provision in the tax code is threatening hundreds of early-stage, research-intensive firms. Fortunately, Congress finally seems prepared to fix the problem. But lawmakers will have to act quickly to save startups like mine.
The dilemma stems from a seemingly innocuous provision in the 2017 Tax Cuts and Jobs Act, which, among many other things, adjusted Section 174 of the tax code. Previously, that section allowed businesses to deduct the full cost of their research and development (R&D) expenses in a single year. READ MORE
IPOs generate a lot of buzz. Acquisitions by private equity firms, not so much.
After all, most founders don’t start out with the vision of selling their startup to a leveraged institutional buyer looking to profitably offload it again in a few years. It arguably lacks the narrative appeal of, say, a sale to a tech giant or a smash public debut. READ MORE
Private equity and other illiquid private market investment funds have become increasingly relevant to pension fund investors in recent years as they have sought to diversify a minority proportion of their portfolios away from public market securities. Some pension funds may now find that they are over allocated to private funds because of declining values in public markets. Private fund valuations have held up better than valuations in the public markets with the result that some investors have found themselves holding a greater proportion of private investments than they intended. READ MORE
What if, as a startup founder, you got an unbridled window into the mindset of a venture capitalist who could set your dreams in motion or politely show you the exit? Absent a certain level of clairvoyance, this might be a pipedream.
But there are ways to simulate the process of pitching, raising and deploying capital that might prove instructional for when you eventually get your foot in the door. It starts with a computer game. READ MORE
2023 was a challenging year for startups. Rising interest rates squeezed the market, leading to overly cautious investors and a dwindling pool of funding. Crunchbase notes that investment across all startup stages fell from $230.5 billion in 2022 to $144.3 billion in 2023 — a pronounced decline of 37%.
However, there are reasons to be cautiously optimistic about 2024. READ MORE
Of the millions of startups founded each year, only a fraction will become valuable enough to make a profit for investors. Venture capital, a type of private investment into new or expanding businesses, provides much of the funding for startups, and is well named; it’s the epitome of risky business.
Venture capitalists make these risky investments because they’re chasing a precious and rare beast: the unicorn. READ MORE
The VC bubble has subsided and last year marked one of the most difficult on record to raise a Series A funding round.
As interest rates climbed and global uncertainty became pervasive, the growth-at-all-cost mindset evaporated and investors pivoted rapidly to favoring startups with strong revenue, capital efficiency and strong gross margins. This left a lot of companies in the wind with 2023 seeing the highest number of startup bankruptcies in a decade. READ MORE
Perfectly calibrated to slap an exclamation point on last Wednesday’s 581-page SPAC release (see this PubCo post), this new SEC Order, posted the following day, reflects settled charges against Northern Star Investment Corp. II, a SPAC, for misleading statements in its SEC filings in connection with its SPAC IPO and failed de-SPAC transaction. In the SPAC release, the SEC noted concerns from commentators regarding the adequacy of the disclosures provided to investors in SPAC IPOs and de-SPAC transactions. In this case, the SEC charged that Northern Star stated in its SEC filings that, prior to filing its S-1 for its IPO, it had had no substantive discussions with any potential target; in reality, however, Northern Star had had several discussions with the ultimate target regarding a potential SPAC business combination. According to the Director of the SEC’s Philadelphia Regional Office, “Northern Star’s failure to disclose discussions with its merger target kept investors in the dark about its future plans, information that would have been important in deciding whether to invest in this SPAC….Given that the purpose of a SPAC is to identify and acquire an operating business, SPACs should be transparent about any pre-IPO discussions with potential acquisition targets.” Northern Star was ordered to pay a civil money penalty of $1.5 million for violation of the antifraud provisions of the Securities Act. READ MORE
The SEC approved a new set of rules for special-purpose acquisition companies (SPACs) this week, long after the damage was done by the recent mania.
Why it matters: It remains to be seen what effect they'll have on the future of blank-check companies.
The big picture: Following the SPAC mania of 2020–2021, the SEC proposed rules nearly two years ago to curb what it saw as loopholes in regulations for blank-check companies. READ MORE
Generative AI was the dominant theme of venture capital in 2023 and will likely continue to be this year. However, investment in the sector is likely to become more specialized.
A record $29.1 billion was invested across 691 generative AI deals last year, according to PitchBook data. This represents a 268.4% increase in deal value over 2022’s total. READ MORE
Last year, 2023, will be remembered in the tech world for massive losses, as 3,200 startups and over $27 billion in venture funding evaporated, not to mention the most significant U.S. bank collapses since 2008.
At the same time, venture investment into early-stage businesses declined significantly, with VCs undertaking greater due diligence and displaying reticence toward founders unable to signpost a clear pathway to profitability. READ MORE
Startup founders are facing a brutal environment. While never easy to secure, venture funding is more scarce, valuations are down, exit options are dwindling, and shutdowns, fire sales, and hard pivots are happening everywhere. Even VC firms are laying off employees — something that was practically unheard of until now.
So what is a startup founder to do? READ MORE
As Big Tech investments proliferate across emerging startups—advancing everything from AI to crypto to biotech—markets brim with promise of human progress through innovation. But when titans extend tentacles into rising potential competitors, what whispers echo from conference rooms with two-way mirrors? Emerging trends around influence through minority board positions should spur regulators to reassess antitrust frameworks developed long before today's complex web of strategic investments between dominant platforms and startups. READ MORE
US venture capitalists are sitting on $311bn in unspent cash, as they shy away from risky bets on Silicon Valley start-ups and concentrate on finding ways to return capital to their own backers.
American VC groups have deployed just half of a record $435bn they raised from investors during the pandemic-era boom between 2020 and 2022, according to private markets data company PitchBook. READ MORE
Despite small glimmers of hope, the market turnaround has not yet materialized, putting startup founders in a challenging position as they decide how to optimize resources.
The vast majority of the founders I talk to are focusing on slashing costs to extend their runways — they’re in survival mode. While this is certainly the default option, there are drawbacks to it, and I’m not seeing enough founders pushing to consider the viable alternatives. READ MORE
A wave of bankruptcies and restructurings is always on the horizon, depending on who you ask. Whether it materializes is another thing entirely. 2024 is showing some signs that the wave might crest. READ MORE