Hope for a resurgence during 2024 in Venture Capital fundraising, investment, and returns was strong at the beginning of this year, with optimism fueled by the recovery in 2023 of U.S. stock markets (lead by the performance of large tech companies) and anticipation about how AI might transform industries. Market observers were optimistic then that U.S. venture investment activity would pick up significantly from 2023 levels, which—based on PitchBook data—had reverted to the lower average level of investment seen during the period of 2018-2020 as compared to the robust levels of activity seen in 2021 and the first half of 2022. This hope was centered in large part on expectations about how the Federal Reserve would begin lowering interest rates. READ MORE
AI Funding Stays Strong Despite Few Billion-Dollar Rounds
The slowdown some predicted for AI funding did not play out in the first quarter.
Venture funding to AI-related startups actually increased in Q1 2024 compared to Q4 2023, Crunchbase data shows. The first quarter saw $12.2 billion invested in venture-backed AI startups in 1,166 deals. The dollar number represents a modest 4% uptick from last year’s final quarter, which saw $11.7 billion go to similar startups in 1,072 deals. READ MORE
FTC Noncompete Rule’s Tentacles Reach M&A and Private Equity
The Federal Trade Commission’s final rule banning noncompete provisions in contracts will have broad implications for employers and employees in the labor and employment context. It will also impact businesses and their owners entering into sale transactions and any other transactions involving noncompetes. READ MORE
Private equity deals defy the lack of rate cuts
Conventional wisdom entering 2024 was that private equity dealmaking would surge on a series of interest rate cuts by the U.S. Federal Reserve.
Fast forward: The prediction was right, but for the wrong reasons.
By the numbers: U.S. private equity activity is up 54% year-over-year, with nearly $132 billion of deal value, according to LSEG. READ MORE
Private Equity and Venture Capital Industry Shows Resilience and Optimism in 2024
The private equity industry is showing resilience and optimism for 2024 despite shifting market dynamics, according to the S&P Global Market Intelligence 2024 Private Equity and Venture Capital Outlook. According to the outlook, private equity executives are notably more optimistic about deal activity in 2024 with 60% expecting an improvement, compared to 34% last year. Survey respondents also showed increased interest in private credit and shared that artificial intelligence (AI) will play a larger role in deal sourcing and target selection.
"This year's survey revealed more optimism among both general partners (GPs) and investors as they are racing for a return to increased deal activity with increasing valuations allowing them to exit their backlog of investments and return cashflows to limited partners (LPs)," said Thomas Mercieca, associate director and lead author for the report, at S&P Global Market Intelligence. "There is also increased investor interest in private credit allocation, with 61% of LPs reporting that they will increase their asset allocation to the asset class in 2024. We are pleased to see that despite macroeconomic challenges still lingering, the industry remains adaptable and poised for growth throughout 2024." READ MORE
5 Trends Steering Venture Capital In 2024
While some analysts might call the current state of the venture capital industry a winter, there is still a warm investment climate for startups and established businesses. Even if your business isn't on the same scale as OpenAI—setting the tone for the AI industry and securing a reported $10 billion funding round from Microsoft—the funding opportunities are still abundant.
At all times, investment firms and VCs have resources to support innovators and cutting-edge technological novelties. Based on what I'm seeing in the industry, they're now looking for businesses that show promise for predictable growth and liquidity and align with current VC trends. READ MORE
Embracing Change And Venturing Into VC
Thanks to online retailers and the magnetic draw of unlimited two-day shipping, convenience stores have never felt less convenient.
It felt like an overnight shift from our usual way of swinging by the drugstore to an easy press of the button (or set to auto-ship) to get us what we need as quickly as we need it. Before these online retailers rose to prominence, convenience was a term we held quite loosely. But suddenly we have discovered a new need and an entirely new meaning of convenience. READ MORE
Investors won’t give you the real reason they are passing on your startup
When an investor passes on you, they will not tell you the real reason,” said Tom Blomfield, group partner at Y Combinator. “At seed stage, frankly, no one knows what’s going to fucking happen. The future is so uncertain. All they’re judging is the perceived quality of the founder. When they pass, what they’re thinking in their head is that this person is not impressive enough. Not formidable. Not smart enough. Not hardworking enough. Whatever it is, ‘I am not convinced this person is a winner.’ And they will never say that to you, because you would get upset. And then you would never want to pitch them again.” READ MORE
The Shrinking Series E: More Senior Startups Raise Smaller Follow-On Rounds
Typically, when a venture-backed startup raises a follow-on round, the size of the investment and the company’s valuation go up as well.
One expects a Series D round, for instance, to be larger than a Series C. Another bump usually occurs should the company secure a Series E. READ MORE
IPO Market Insiders ‘Cautiously Optimistic’ That Current Trickle Will Get Stronger
With Microsoft-backed data security firm Rubrik set to enter the public market this week, talk about the rejuvenated IPO market has returned as many wonder who may be next, and when.
Rubrik is set to join the likes of chip startup Astera Labs, Walmart-backed Ibotta and online forum host Reddit as one of the bigger IPOs so far this year. Those IPOs came after last year’s second-half offerings by Arm Holdings, Instacart and Klaviyo helped thaw an IPO pipeline that had been frozen for nearly two years. READ MORE
More M&A players hold back stay-bonus ‘dry powder
While a growing appetite for mergers and acquisitions appears to be afoot, there are signs some buyers are nonetheless more guarded when it comes to tapping their retention bonus budgets for payouts designed to keep target companies’ top executives and employees in their seats. READ MORE
The Mixed State Of Startup Funding In 2024
Startup investors kept a tight hold on their wallets in the first quarter of 2024, Crunchbase data shows. There were big exceptions — some AI, healthcare, energy and robotics startups, among others, received massive investments — but overall the tone was cautious as the year got started.
To break it down further, let’s look at 11 charts based on recent Crunchbase data that show the state of the startup world in early 2024. READ MORE
Raising Private Capital: Tips For Startups In Today's Market
Private capital activity has increased in recent years. For startups, raising private capital offers financial support for development and innovation.
Our firm's capital raises have included obtaining capital through funds and direct investment. Drawing from that experience, here is a look at the current private capital landscape and strategies for successfully raising capital. READ MORE
New Funds Target Out-Of-Favor Startup Sectors
Startups in sectors that saw steep funding declines may be getting fresh attention from investors, courtesy of new industry-focused funds that closed this year.
In areas from consumer products to apps to gaming, U.S. venture firms have raised fresh capital to invest in industries where funding levels remain drastically below peak. This, along with a modest uptick in first-quarter venture investment, indicates some sectors may have hit a cyclical low last year and should be heading higher. READ MORE
How To Fundraise In This Challenging Venture Capital Era
With VC firms in the U.S. spending only half of the $435 billion funds raised between 2020 and 2022, dry powder reserves have reached a record high. According to Pitchbook and the Financial Times, $311 billion still awaits deployment.
Meanwhile, terms like "unicorpse" are being thrown around as high-growth companies are running out of money. READ MORE
How To Catch A Unicorn In The Ed Tech Industry
In the world of venture capital and business start-ups, the greatest measure of success is a company that is valued at more than $1 billion and earns over $100 million annually. These businesses are called “unicorns,” and according to the analytics firm CB Insights there are more than 1,200 such companies operating in the U.S. today, over 500 of which were created in the past decade. So why is it that despite significant financial backing over the same decade – via venture capital and government funding – very few educational technology companies have reached unicorn status? Let me count the ways. READ MORE
Dear venture capitalists: You're blowing it
Dear venture capitalists,
I've been covering your industry for over two decades, through booms and busts and back again. If there is to be another two decades, you'd better change your behavior. And quick.
The basic VC model is cyclical. Raise money, invest that money, exit via IPOs or strategic sales, and then use those exits to raise more money. READ MORE
Private equity’s latest trade: The financial futures of millions of retirees
A brisk new trade in the financial futures of millions of retirees is unnerving some US workers, regulators, and politicians who worry that private equity firms will invest corporate pensions recklessly.
Recent lawsuits challenging AT&T, Lockheed, and Alcoa’s plans to turn their pensions over to Athene, which is owned by Apollo, casts a broader spotlight on private equity’s push into new corners of finance. Sen. Sherrod Brown has held hearings, cheered on by the Teamsters, and the Labor Department is weighing whether to require companies to at least consider whether an insurance business is owned by private equity before turning over their pensions. READ MORE
Private equity’s latest trick is to buy and hold
Warren Buffett famously said that when he owns outstanding businesses with outstanding management teams, his favourite holding period is “forever”. Fix-and-flip private equity bosses have come round to his way of thinking. READ MORE
The inequity method of accounting
The fundamental bargain of M&A seems pretty simple. At the closing of a deal, the buyer pays the seller, and gets a business in return.
It hasn’t been so straightforward for the family who agreed in 2022 to sell its California supermarket Save Mart to the private equity firm Kingswood Capital Management, which valued the grocery chain at $245mn. READ MORE