Week of August 5th, 2024

Welcome to AI8’s weekly newsletter, your ultimate source for curated insights and updates from the dynamic world of venture capital!

We’ve scoured the vast landscape of the web to bring you a comprehensive roundup of the industry’s top news articles, all in one convenient place. We keep you ahead of the game and in the know about all things related to the vibrant world of investments

🦄 STARTUPS

ROUNDS AND UNICORNS

The Week’s Biggest Funding Rounds: Entertainment And Supply Chain Lead In Another Busy Week Of Funding (5 minute read)

1. Cosm (entertainment): raised $250 million in a funding round led by Mirasol Capital and Baillie Gifford, valuing the company at over $1 billion. The Dallas-based company offers immersive dome experiences, primarily focused on sports

2. Altana AI (supply chain): secured $200 million in a Series C round led by the US Innovative Technology Fund, reaching a $1 billion valuation. The New York-based startup uses AI to provide deep insights into global supply chains, addressing new trade restrictions and policies

3. Bilt Rewards (loyalty rewards): raised an additional $150 million led by Teachers’ Venture Growth. The NY-based startup allows renters to earn rewards on rent payments

4. Outpace Bio (biotech): raised $144 million in a Series B led by RA Capital Management. The Seattle-based biotech company uses AI-powered protein design to combat solid tumors

5. Agrovision (agtech): closed a $100 million round led by Aliment Capital, valuing the company at $1 billion. The Los Angeles-based agtech startup grows, packs, and markets superfruits and uses proprietary genetics and data analytics

38 startups have become unicorns so far in 2024 (5 minute read)

So far in 2024, 38 startups have reached unicorn status, highlighting a positive trend in the VC market, showcasing the continued investor confidence and the innovation these startups bring to their respective fields. Some of those notable startups include:

• Anthropic: An AI safety and research company, which aims to build reliable, interpretable, and steerable AI systems

• Beta Technologies: A company focused on electric vertical takeoff and landing (eVTOL) aircraft for sustainable aviation solutions

• Dune Analytics: A community-driven analytics platform for the Ethereum blockchain, enabling users to create and share analyses

• Gusto: A platform that simplifies payroll, benefits, and HR for small businesses

INDUSTRY

The AI gold rush is hiding a wider cash crunch for startups (4 minute read)

Despite the excitement around AI, today's fundraising landscape reveals a challenging reality: many startups are struggling to sustain themselves financially, pushing the limits before needing to replenish their cash reserves. VCs are now demanding stronger customer traction and organic revenue growth, especially for consumer-facing startups

• Startups are taking longer between funding rounds, with the average time increasing from 15 months to 19 months in Q2 2024

• AI startups continue to see rising valuations, creating a stark contrast with other sectors facing financial difficulties

• H1’2024 saw a significant increase in down rounds, where startups raise funds at lower valuations, and flat rounds with additional cap-table structure

Private markets rise in Q2, but interest rates continue to hold investors and deal-makers back (5 minute read)

Q2’2024 saw a rebound in fundraising, investment, and exit activity across most private capital asset classes, though the market has not fully recovered. Despite the challenges posed by higher interest rates, investor interest in VC remains strong, with 83% of surveyed investors planning to maintain or increase their allocations in the next 12 months

• Private debt funds in North America dominated global fundraising, with a notable increase in direct lending

• Globally, the aggregate value of VC deals increased by 13% to $69.4 billion, driven by a significant 42% rise in IT sector deal value

• Exit activity also saw an uptick, with 223 exits generating $41.6 billion, although this remains below the five-year quarterly average of $82.4 billion

• Fundraising was subdued, with 200 VC funds closing globally and raising $25.6 billion, slightly down from the previous quarter

Femtech startups appear on track for record VC funding (2 minute read)

Femtech startups are on track to raise a record amount of venture capital in 2024, with around $1.2 billion invested globally since the beginning of the year. At this pace, the sector could surpass its previous record of $1.9 billion in 2021

• London-based fertility app Flo Health became Europe's first femtech unicorn with a $200 million Series C from General Atlantic

• Femtech deal value experienced a smaller decline (7.1%) compared to healthtech (32.5%) in annual totals last year, reflecting stronger performance and growing consumer demand for women's healthcare products and services

INDUSTRY WORLDWIDE

India's $45 Billion Startup Implosion Puts Tech Future in Doubt (4 minute read)

India's tech startup ecosystem, once heralded as the next big market, is now struggling. Leading startups like Byju’s, Paytm, and Oyo Hotels have seen their valuations plummet significantly, collectively losing over $45 billion from their peak. This downturn has raised doubts about India's ability to compete with global startup leaders like the US and China

• Over 35,000 startups ceased operations last year, reflecting the broader struggles in the ecosystem

• India has abolished the angel investment tax and created research clusters to promote innovation in areas like AI and semiconductors

• In the first half of 2024, Indian startups raised $4.1 billion, a slight increase from H2 2023 but a 13% decrease from H1 2023

🏦 ECONOMIC SNAPSHOT

Global stock markets fall sharply as worries grow over US recession (5 minute read)

Global stock markets experienced a dramatic decline today driven by a mix of factors including the growing fears that the US economy may be heading into a recession. Investors are now anticipating up to five quarter-point rate reductions by the end of the year, with some even predicting an emergency cut before the Fed's next scheduled meeting in September

• The global market turmoil was further intensified by the unwinding of the yen carry trade. The yen’s recent strengthening, partly due to an interest rate hike by the Bank of Japan, added pressure on these trades

• Warren Buffett’s Berkshire Hathaway disclosed it had halved its stake in Apple by almost 56%, contributing to the broader market anxiety

• The impact was widespread: South Korea’s Kospi fell 8.8%, Australia’s S&P/ASX dropped 2.5%, India’s Sensex lost 2.7%, the Stoxx Europe 600 index fell 2.2%, and the UK’s FTSE 100 decreased by 2%

• The cryptocurrency market also suffered, with Bitcoin's price falling 14% to $53,789 and Ether dropping 21% to $2,390

Japan’s Nikkei logs worst day since 1987 Black Monday crash (4 minute read)

Japan stocks confirmed a bear market on Monday (August 5th), with the Nikkei 225 and Topix plummeting over 12%, driven by ongoing sell-offs from the previous week. The Nikkei 225 experienced a historic drop of 12.4%, closing at 31,458.42, marking its worst day since the 1987 Black Monday crash. This significant decline erased all of the index's gains for the year

• Heavyweight trading houses like Mitsubishi, Mitsui and Co, Sumitomo, and Marubeni saw losses exceeding 14%, with Mitsui losing nearly 20% of its market cap

• The yen also strengthened to its highest level against the dollar since January, trading at 142.09

• South Korea’s Kospi fell 8.77%, triggering circuit breakers and halting trade temporarily, with the small-cap Kosdaq tumbling 11.3%

Key takeaways from the latest Fed meeting (5 minute read)

On their last Wednesday meeting, the Federal Reserve indicated that it may cut its benchmark lending rate in the coming months, potentially lowering borrowing costs for Americans. Despite keeping rates steady at 5.25-5.50% for now, the Fed has shifted its focus to labor market risks and noted inflation’s progress. Chair Jerome Powell emphasized recent inflation improvements and expressed cautious optimism about economic resilience

• The Fed hinted at possible rate cuts as soon as September

• The Personal Consumption Expenditures index showed a 2.5% annual increase in June, approaching the Fed’s 2% target

• The GDP grew at a robust 2.8% annualized rate in Q2, up from 1.4% in Q1, but there are concerns over the cooling labor market, with the unemployment rate at 4.1%

• The Fed is weighing how to support economic stability and employment while managing inflation, amid ongoing economic uncertainties

Job Growth Slows, Unemployment Ticks Up to 4.3 Percent (4 minute read)

Friday's Labor Department report showed a sharp deceleration in U.S. hiring, with only 114,000 jobs added in July, down from 179,000 in June and below the forecast of 175,000. The unemployment rate rose to 4.3%, above the anticipated 4.1%, the highest since October 2021, with 352,000 more people unemployed

• This rise in unemployment and the slower job growth highlight the impact of high interest rates, as the Fed’s previous rate hikes begin to affect the economy

• Wage growth also slowed, with a 0.2% MoM increase and a 3.6% YoY rise, the smallest since May 2021, potentially easing inflation pressures

An emergency rate cut in the next week is looking more likely (3 minute read)

Wall Street's sudden recession fears have led to discussions of an emergency rate cut, with the swap market pricing in a 60% chance of a 25-basis-point cut within a week. US Treasury yields dropped to their lowest levels in a year after a weak jobs report

• Wharton professor Jeremy Siegel, who urged the Fed to implement an emergency 75 basis-point rate cut, followed by another 75 basis-point cut in September and Nobel Laureate Paul Krugman are among those calling for immediate rate cuts

• Investors are now betting on steeper cuts, with a 92% chance of a 100 basis-point cut by year-end

• Goldman Sachs has increased the recession odds to 25%, criticizing the Fed for delaying policy adjustments

🌱🌎 Impact & Climate Resilience

As the DEI debate rages on, research keeps pointing to the business benefits (4 minute read)

The debate around DEI practices continues to intensify, with some companies retreating from these initiatives while others reaffirm their commitment. John Deere recently announced it would no longer support DEI-related events and ended its diversity and climate efforts. Conversely, JPMorgan Chase CEO Jamie Dimon stated the bank remains committed to DEI, despite recent legal changes. Nevertheless, many business leaders and organizations view DEI as crucial:

• According to a February report by Workday, 78% of global business leaders believe DEI’s importance has grown over the past year, with 85% having a budget for DEI initiatives (up 11% from last year)

• Additionally, 75% of consumers consider DEI in their purchasing decisions

• Critics argue that DEI programs, including diversity statements and quotas, can undermine meritocracy, potentially demoralize top talent, and skew hiring processes

Women now account for nearly 47% of angel investors, and get nearly 47% of the money (3 minute read)

The percentage of women who are angel investors has climbed over the last three years, leading to an increase in funding for women-owned ventures, according to a new report from the Center for Venture Research at the University of New Hampshire

• In 2023, women represented 46.7% of the angel market, up from 39.5% in 2022 and 33.6% in 2021

• Women-owned ventures seeking angel capital accounted for 46.3% of entrepreneurs, a significant rise from 37.1% in 2022 and 28.6% in 2021

• Minority angels made up 5.7% of the angel population in 2023, with minority-owned firms representing 10.3% of entrepreneurs, achieving a yield rate of 32.1%

🚀 IPO

Lineage closes up more than 3% in market’s largest IPO of 2024 (2 minute read)

Lineage, the largest temperature-controlled warehouse REIT globally, made a strong debut on the Nasdaq under the ticker "LINE," closing up more than 3%. The company priced 57 million shares at $78 each, raising $4.4 billion with a valuation exceeding $18 billion

• This IPO is the largest since chip designer Arm's $4.8 billion offering last September and more than twice the size of Viking Holdings' recent public offering

• Ranked No. 46 on CNBC's 2024 Disruptor 50 list, Lineage has expanded aggressively, completing 116 acquisitions to date

• The offering was led by Morgan Stanley, Goldman Sachs, Bank of America, J.P. Morgan, and Wells Fargo

How Bill Ackman’s $25bn IPO dream unravelled (5 minute read)

Bill Ackman's ambitious plan to launch Pershing Square USA, a major public listing intended to raise $25 billion, faced significant setbacks and was ultimately withdrawn. The IPO faced multiple hurdles:

• Its fundraising target was repeatedly reduced from $25 billion to $2 billion before being canceled entirely

• Investor skepticism about the fund's structure, coupled with a leaked letter revealing a potential shortfall in raised funds, eroded confidence

• The failed IPO has been attributed to Ackman's overestimation of investor interest and concerns over the fund's post-IPO performance

🗞️ AI8 VENTURES HIGHLIGHT

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Competing startups will have exactly five minutes to pitch their company on stage, followed by a five-minute Q&A session with our expert VC panel. Voting will be open to the public, whoever gets more votes wins. The winner can get up to a $500k investment (after proper due diligence), apply here: https://2cvhe2rlbpb.typeform.com/to/B14c3Bsj?typeform-source=lnkd.in 

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Check Beyond Survival: Opportunities in Climate Change

It all started in 2010 after a great conference with Mr. Al Gore. I was in Mexico City attending an event where Mr. Gore presented what the climate would look like if we did not act quickly and reduce our carbon emissions. That day, Mr. Gore’s team made his “models” available for everyone to study and play with. He told me that the largest desert in the world would be what used to be Mexico, California, Nevada, Arizona, New Mexico, and Texas, all the way to the State of Mexico. He didn’t know if Mexico City would be a part of it because of its altitude. That day, we walked several miles to our dinner because of the bad news.

Introducing: Climate Resilience Technology

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Climate Resilience Technology encompasses digital solutions designed to help communities, businesses, and ecosystems adapt to and recover from the impacts of climate change. We're looking for scalable technologies addressing existing problems caused by climate change.

Our focus areas include:

• AgFinancing: Integrating advanced technologies and tailored financing solutions to improve access to capital for agricultural growth and trade, enhance food security, boost productivity, predict disruptions, and optimize logistics.

• Water Management Systems: Utilizing advanced technologies and financing solutions to address water scarcity and inefficient water use exacerbated by climate change.

• Energy Management and Optimization: Implementing advanced technologies and financing solutions to tackle increased energy demand and grid instability due to extreme weather conditions. This includes smart grids, microgrids, energy management software, and demand response systems that optimize energy use, integrate renewable energy sources, and enhance grid resilience.

• Data, Analytics, and Predictions: Companies that utilize data and advanced analytics to predict and mitigate disruptions and climate-related events. These solutions provide crucial insights and foresight, helping communities and businesses to prepare and respond effectively to climate challenges. Advanced technologies and artificial Intelligence to enhance supply chain visibility, predict disruptions, and optimize logistics ensure continuity and efficiency.

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Become part of the our revolution.

Happy reading,

AI8 Ventures’ Research & Investment Team