- Foundry Technologies is in talks to raise money at a valuation of $350 million, a significant increase from its previous valuation of $50 million.
- The increase in valuation highlights the trend of hot companies in the AI sector raising money at rapidly escalating valuations.
- Foundry is one of many AI startups that have experienced a meteoric rise in valuation this year.
- The company plans to rent servers to companies for running AI software.
- The risky pandemic-era fundraising trend of rapidly increasing valuations in short periods of time has returned.
- Sequoia Capital has let go of seven members of its in-house recruiting and talent team, following the departure of five partners.
- This move signals a need for other firms to reevaluate their platform teams, which have grown significantly during the bull market.
- Many venture capital firms have adopted the concept of offering startups both capital and hands-on support, leading to an increase in noninvestment professionals on staff.
- The number of noninvestment professionals in VC firms has increased from 27% to 37% since 2000, while the average venture firm has expanded its headcount by 124%.
- A community of platform venture capitalists claims that having these employees leads to higher returns.
Main topic: The AI sector and the challenges faced by founders and investors.
Key points:
1. The AI sector has become increasingly popular in the past year.
2. Unlike previous venture fads, the AI sector already had established startups and legacy players.
3. AI exits and potential government regulation add complexity to the ecosystem.
4. Entrepreneurs are entering the sector, and investors are seeking startups with potential for substantial growth.
5. Investors are looking for companies with a competitive advantage or moat.
6. Deep-pocketed players like Microsoft, Google, and OpenAI are actively building in the AI category.
7. Some investors are cautious about startups building on top of existing large language models.
8. Building on someone else's model may not lead to transformative businesses.
Main topic: Funding disparity for Black founders in the U.S.
Key points:
- Black founders raised $212 million out of $29 billion in Q2 2023, representing 0.71% of the capital allocated to U.S. founders.
- In Q2 2022, Black founders raised $602 million out of $62 billion, or 0.97% of the capital allocated.
- In H1 2023, Black founders raised around $565 million out of $75 billion, which is 0.75% of all capital raised in the U.S. so far this year.
- Funding to Black founders has been on a steady decline since Q1 2022.
- Black founders have never raised more than 2% of capital in any given quarter.
- The decline in funding suggests waning investor interest, despite momentum in 2020 driven by the Black Lives Matter movement.
- There are two different worlds within the venture ecosystem: the old guard with billions of assets under management and the new guard of emerging fund managers, many of whom are diverse but lack significant funds.
- The venture capital landscape for AI startups has become more focused and selective.
- Investors are starting to gain confidence and make choices in picking platforms for their future investments.
- There is a debate between buying or building AI solutions, with some seeing value in large companies building their own AI properties.
- With the proliferation of AI startups, venture capitalists are finding it harder to choose which ones to invest in.
- Startups that can deliver real, measurable impact and have a working product are more likely to attract investors.
Main topic: Decreased venture funding for crypto companies and increased interest in secondary deals.
Key points:
1. Global venture funding for crypto companies fell by 78% in the first half of the year compared to the same period last year.
2. Crypto-focused venture capitalists still have ample funds and are increasingly buying shares in secondary deals.
3. Shares of previously high-valued crypto startups are being sold at significant discounts in secondary transactions.
Main topic: Latin American startups are turning to high-interest loans as venture capitalists reduce equity investments in the region.
Key points:
1. Debt represented one-third of all venture capital raised in the first half of the year, the highest proportion on record.
2. Startups are seeking loans as they struggle to secure equity deals that would lower their valuations.
3. The increase in borrowing reflects the desperation of founders for cash and the reluctance to accept equity deals.
Main topic: Venture-backed consumer lending startups are seeking to sell themselves due to the impact of higher interest rates.
Key points:
1. Happy Money, formerly known as Payoff, is in talks to sell itself after being valued at $1.1 billion.
2. Sable, a Y Combinator-funded credit card startup, recently sold itself to specialty lender Snap Finance.
3. The spike in interest rates has increased the cost of funding loans and affected borrowers' ability to make payments, leading to a decline in venture capitalists' interest in the sector.
Main topic: The challenges faced by fintech startups in obtaining funding and maintaining valuations in 2023.
Key points:
1. Global fintech funding declined in Q2 2023, with valuations also dropping significantly.
2. Artificial intelligence (AI) is a hot topic in the fintech space, but investors should be cautious and consider the meaningful application of AI in companies.
3. Navigating the venture landscape as a fintech startup requires resilience, perseverance, and a responsible approach to growth.
Hint on Elon Musk: There is no mention of Elon Musk in the given text.
Main topic: The U.S. Small Business Administration plans to invest billions into venture capital funds to support startups in underserved areas and industries crucial to national security.
Key points:
1. The move aims to modernize the U.S. investment landscape and diversify venture capital investment beyond popular sectors.
2. The program will focus on addressing market gaps and investing in perceived riskier territories.
3. The SBA has allocated up to $6.9 billion for fiscal 2024 to provide substantial funding support.
Main topic: The cooling hype and declining investment in artificial intelligence (A.I.) startups.
Key points:
1. A.I. seed companies were previously highly sought after by investors but are now facing more scrutiny due to concerns about their technological advantage (tech moat).
2. The value and number of A.I./ML seed-stage deals have decreased during the summer.
3. Investors are becoming more cautious with seed investments and valuations as Series A funding becomes more challenging to secure, questioning the defensibility of A.I. companies.
Main topic: Decline in venture capital funding for Latin American startups
Key points:
1. Latin American startups experienced a 70% YoY decline in venture capital funding during Q2.
2. Funding for Latin American startups totaled $800 million in Q2, compared to $2.6 billion in the same period last year.
3. Fintech sector in Mexico led the way in terms of investment, with companies like Clara and Kapital securing significant funding rounds.
Main topic: Decline in venture capital (VC) funding for cryptocurrency startups
Key points:
1. Crypto startups secured the lowest amount of VC funding ($2.3 billion) since Q4 2020 in Q2 2021.
2. Regulatory concerns and crypto market volatility have contributed to the decline in VC funding.
3. Reduced VC funding could hinder innovation and intensify competition among startups in the crypto sector.
Main topic: Declining valuations and potential contraction in the late-stage venture market for startups
Key points:
1. Valuations across startup stages have sharply declined, with a more significant decline in later stages.
2. A sharper decline in late-stage dealmaking could make it harder for Series B and C companies to raise pre-IPO capital.
3. A smaller late-stage market could benefit the wider tech market by filtering out weaker startups and promoting faster recycling of human capital.
Main topic: Decline in the Israeli fintech industry in 2023.
Key points:
1. A 70% decrease in new fintech companies encountered by TLV Partners compared to previous years.
2. Private investments in Israeli fintech have plummeted by over 50% in the first half of 2023.
3. Stringent regulations and global financial shifts contribute to the decline, along with the risk aversion of older fintech entrepreneurs.
Main topic: Challenges and strategies for closing a funding round in 2023.
Key points:
1. The fundraising landscape in Silicon Valley has become more difficult, with VCs becoming more cautious and investing in later-stage startups.
2. The number of successful fundraises completed in a short period of time has decreased, and investment at the pre-seed stage has been significantly impacted.
3. Despite the challenges, founders are still actively seeking funding, and it is important for them to structure their pitch decks effectively in order to gain attention from investors.
Main topic: Slowdown in venture capital investment in creator-focused startups
Key points:
1. Venture capital investment in creator-focused startups significantly decreased in the second half of 2022.
2. The slowdown is attributed to the bursting of the "creator bubble" and the temporary factors that drove the growth of the creator economy.
3. Startups in the creator space are struggling to raise money and expand, except for outliers like OnlyFans.
The lack of funding for emerging managers in venture capital is impacting early-stage funding opportunities, as VC fundraising decreases and the number of new startups declines, but there is a slight thaw in exits via public markets with promising IPOs from companies like Cava.
Main topic: Challenges faced by VC-backed startups in finding funding and potential consequences.
Key points:
1. The number of VC-backed startups in the US has doubled since 2016, reaching over 50,000, leading to a high capital shortage.
2. VC funding has become scarce, with consecutive quarters of less capital available compared to demand.
3. Startups that fail to secure funding may be forced to seek alternative solutions such as selling the company or shutting down.
Exchange-traded funds tied to artificial intelligence have performed well in the first half of 2023, but higher interest rates are causing investors to rethink their positions and consider the potential benefits of industrials in the AI space.
More than 25% of investments in American startups this year have gone to AI-related companies, which is more than double the investment levels from the previous year. Despite a general downturn in startup funding across various industries, AI companies are resilient and continue to attract funding, potentially due to the widespread applicability of AI technologies across different sectors. The trend suggests that being an AI company may become an expected part of a startup's business model.
The American venture market has been experiencing a significant decline in technology IPOs, but the recent filings of public-offering paperwork by Instacart and Klaviyo stand out as important milestones in a market that has seen a lack of startup exits for over 1.5 years.
Venture capital firm SK Ventures argues that current AI technology is reaching its limits and is not yet advanced enough to provide significant productivity gains, leading to a "workforce wormhole" that is negatively impacting the economy and employment, highlighting the need for improved AI innovation.
The rise of artificial intelligence (AI) is a hot trend in 2023, with the potential to add trillions to the global economy by 2030, and billionaire investors are buying into AI stocks like Nvidia, Meta Platforms, Okta, and Microsoft.
Crypto funding in August appeared promising with a $819 million investment, but without two large funding rounds, it would have actually shown a decline from July and a significant decline from the same time last year, reflecting a continuing slowdown in the industry.
Global venture funding in August 2023 reached $22 billion, a 19% increase from the previous month but a 16% decrease from July 2022, with late-stage funding experiencing a year-over-year increase for the first time in 18 months, according to Crunchbase data. However, early-stage funding nearly halved and seed funding was down by around one-third compared to the previous year, while deal counts in August 2023 were almost half of the previous year. The largest fundings were in transportation, sustainability, and biotechnology, and the hope for the startup funding landscape lies in upcoming IPOs of well-funded venture-backed companies.
Despite a decrease in venture capital investments in June, new crypto projects are still attracting funding, including Orbital's $6.4 million raise for expanding blockchain payment infrastructure, unshETH's $3.3 million seed round for decentralized finance solutions, ZTX's $13 million funding for Web3 infrastructure development, Stroom Network's $3.5 million raise for Bitcoin staking, and Fxhash's $5 million funding for its digital art platform.
Despite the hype around AI-focused companies, many venture-backed startups in the AI space have experienced financial struggles and failed to maintain high valuations, including examples like Babylon Health, BuzzFeed, Metromile, AppHarvest, Embark Technology, and Berkshire Grey. These cases highlight that an AI focus alone does not guarantee success in the market.
Nvidia's dominance in the computer chip market for artificial intelligence has led to a significant decline in venture funding for potential rivals, with the number of U.S. deals dropping by 80% from last year. The high cost of developing competing chips coupled with Nvidia's strong position has made investors wary, resulting in a pullback in investment.
The United States and China lead in AI investment, with the U.S. having invested nearly $250 billion in 4,643 AI startups since 2013, according to a report.
August saw the crypto markets experience a downturn, with Bitcoin and Ether losing significant value due to liquidations on the derivatives market, while venture capital investment in the blockchain industry hit a new low and derivatives drove negative sentiment for Bitcoin.
Summary: U.S. stocks slumped amid mixed sentiment about the economy, with only the Dow Jones Industrial Average rising for the week, while Asia-Pacific markets mostly fell, and China's venture capital investment dropped by 31.4% compared to 2022 due to its sluggish economy and geopolitical tensions discouraging foreign investors.
C3.ai's stock has experienced a decline despite the increasing demand for generative AI, leading analysts to express concerns about the company's prospects and providing a downside potential for its stock price.
China-focused investment firms have struggled to generate returns for their investors, with only four U.S. dollar-denominated venture capital funds established between 2015 and 2020 able to return all the money invested, reflecting a lack of IPOs and the need for alternative exit strategies such as mergers and acquisitions or general partner-led deals.
The hype around artificial intelligence (AI) may be overdone, as traffic declines for AI chatbots and rumors circulate about Microsoft cutting orders for AI chips, suggesting that widespread adoption of AI may take more time. Despite this, there is still demand for AI infrastructure, as evidenced by Nvidia's significant revenue growth. Investors should resist the hype, diversify, consider valuations, and be patient when investing in the AI sector.
Several billionaire investors have been reducing or exiting their positions in high-flying artificial intelligence (AI) stocks, including Palantir Technologies, CrowdStrike Holdings, and Tesla, possibly due to concerns over these companies' valuations and the potential for a U.S. recession.
Venture capital investments into web3 startups declined in the third quarter, marking the seventh consecutive quarter of declines since crypto venture fundraising peaked in Q4 2021.
Europe is defying the global trend of declining venture capital investment, with deal volume in the continent perking up despite a slump in the global market.
AI startup Anthropic is reportedly in talks with investors, including Google, to raise an additional $2 billion in funding at a valuation between $20 billion and $30 billion, just weeks after securing a $4 billion investment from Amazon. Meanwhile, rival OpenAI is said to be considering selling shares at a staggering $90 billion valuation, a significant surge from its valuation of $29 billion just a few months ago. Other AI startups, such as Character.AI and Prins AI, are also seeking significant valuation jumps in their funding rounds.
Venture capitalists are making fewer and smaller deals in the crypto industry, with funding levels falling back to Q4 2020 levels amid the ongoing bear market.
Global venture funding in Q3 2023 reached $73 billion, marking a slight increase from the previous quarter but a 15% decline compared to the same period in 2022, with seed and early-stage funding continuing to decline while late-stage funding increased, particularly in strategic sectors such as semiconductors, AI, electric vehicles, and sustainability. The IPO markets also showed signs of easing, with two venture-backed startups going public in September for the first time in 18 months. Additionally, AI companies raised over $10 billion in Q3, and late-stage funding saw growth outside of North America, particularly in Asia and Europe. However, the global funding slowdown persisted, with a 42% decline year over year in the first three quarters of 2023.
The rise of AI is not a new phenomenon, but it is currently experiencing unprecedented levels of attention, prompting companies to consider its potential impact; however, investors are skeptical about the longevity of many AI startups and emphasize the importance of not ignoring the opportunity AI presents.
Top mutual funds are still investing heavily in AI stocks like Nvidia, Meta Platforms, and Alphabet, indicating that the AI boom is far from over.
Stocks and crypto are down following Hamas' attack in Israel, China is investing in AI infrastructure, YC experiences changes, and Wanda Fish Technologies and Lottie raise millions in funding in the startup world.
The global venture capital market continued to decline in the third quarter of 2023, according to data visualization provided by TechCrunch+.
