Week of November 18th, 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: Food Delivery Startup Wonder Leads Big Week (5 minute read)

1. Wonder (Food Delivery): Marc Lore’s food delivery startup raised $250 million as part of its $650 million acquisition of Grubhub, which was bought at a significantly reduced price from its 2021 valuation of $7.3 billion

2. Metsera (Biotech): This clinical-stage biopharmaceutical startup secured $215 million in Series B funding, led by Venrock Healthcare and Wellington Management

3. Writer (AI): San Francisco-based Writer raised $200 million in Series C funding, bringing its valuation to $1.9 billion. The AI platform, which helps enterprises optimize workflows using large language models

4. Firefly Aerospace (Aerospace): raised $175 million in Series D funding at a valuation of over $2 billion. The company is preparing for its first lunar mission as part of NASA’s Commercial Lunar Payload Service initiative

5. Chaos Industries (Defense): Chaos Industries raised $145 million in Series B funding for its advanced detection and communication solutions, including radar for unmanned aerial systems, missiles, and aircraft

INDUSTRY

Eye On AI: October Shows Sector’s Crazy Venture Totals Still Abound (4 minute read)

October was a landmark month for AI-related venture funding, securing $12.2 billion—38% of global monthly venture funding and the sector's second-strongest month ever. This figure trails only May 2024, when Elon Musk’s xAI raised $6 billion in a $12.8 billion AI fundraising surge. October’s standout included OpenAI’s $6.6 billion round at a $157 billion valuation

• Even without OpenAI’s contribution, AI startups raised over $6.6 billion, significantly outpacing the $8.7 billion raised across August and September combined

• Despite 413 AI funding rounds in October compared to 522 in September, the month achieved higher totals due to 11 nine-figure deals, compared to 13 across the prior two months combined

• Key October rounds included Poolside’s $500 million Series B at a $3 billion valuation, Lightmatter’s $400 million Series D at $4.4 billion, and Sierra’s $175 million round at $4.5 billion

Valuations at Elon Musk’s SpaceX and xAI set to soar in new deals (3 minute read)

SpaceX and xAI, two private companies owned by Elon Musk, are set to see significant valuation increases through new deals. SpaceX plans a December tender offer at $135 per share, raising its valuation to over $250 billion from $210 billion earlier this year. Meanwhile, xAI has raised $5 billion at a $45 billion valuation, nearly doubling its worth in a few months. The deal includes only prior investors and fuels speculation of a new funding round in early 2025 that could push xAI’s valuation to $75 billion

• xAI, which operates the ChatGPT competitor Grok, is developing Colossus, a supercomputer powered by 100,000 GPUs, making it one of the largest AI infrastructures globally

• Musk’s influence extends beyond Silicon Valley, with his alignment with Donald Trump as head of the new government efficiency department, boosting Tesla’s stock by 30% and positioning him to benefit SpaceX’s ambitions

Metaverse And VR Funding Slides Further As Even Apple Can’t Make A Hit (4 minute read)

The metaverse and virtual reality (VR) industries are facing significant challenges, as evidenced by the struggles of Apple’s Vision Pro and the broader funding downturn in the sector. Despite early excitement, Apple's $3,500 mixed-reality headset has seen slow sales, with users finding it difficult to incorporate into their daily lives, leading to a potential halt in production

• This pattern mirrors the struggles of other companies in the AR/VR and metaverse space

• Investor interest in these technologies has waned in 2024, with just $758 million raised across related startups, marking the lowest funding levels in years

• Many companies that raised substantial funding during the peak of 2021, such as Magic Leap and Niantic, have not secured new rounds since then

🏦 ECONOMIC SNAPSHOT

Soft Landing Completed? (2 minute read)

The U.S. economy appears strong on paper, with 2.8% GDP growth in Q3, unemployment around 4%, and inflation nearing the Federal Reserve's 2% target, suggesting a "soft landing" — controlling inflation without triggering a recession. Yet, public frustration with high prices contributed to Donald Trump and the Republicans’ decisive election victory

• Federal Reserve Chair Jerome Powell recently addressed this paradox, emphasizing the tangible hardships many Americans still face. While inflation has moderated, the price levels remain elevated, eroding purchasing power

• Powell highlighted that while economic conditions are improving, real wage growth is the missing piece

• Adjusted for inflation, wages have lagged behind rising costs, preventing Americans from feeling the benefits of economic progress. The underlying issue, Powell argues, lies in the cumulative effects of high prices

• Although inflation has slowed, the price increases over the past few years haven’t reversed, leaving many Americans feeling the pinch

US inflation rises to 2.6% (3 minute read)

In October, U.S. inflation rose to 2.6%, up from 2.4% in September, while core CPI held at 3.3% annually, with monthly core prices rising 0.3% for the third straight month. The Federal Reserve, aiming for a soft landing, has already cut rates by 0.75 percentage points, targeting a range of 4.5%-4.75%. Futures markets now see an 80% chance of another rate cut in December

• While inflation has dropped significantly from its 2022 peak of over 9%, progress has slowed, with housing costs driving much of the recent increase

• Fed Chair Jay Powell expects inflation to stabilize near 2% after a "bumpy path," though economists warn Trump’s proposed policies, like tariffs and tax cuts, could fuel price pressures

• Markets reacted calmly to the data, with the S&P 500 flat and Treasury yields easing

Fed Chair Powell delivers blunt message on interest rate cuts (4 minute read)

Inflation has declined unevenly since its 2022 peak, with October’s Consumer Price Index (CPI) rising 2.6% and Producer Price Index (PPI) up 2.4% year-over-year, both slightly above expectations. Core inflation remains elevated, with core CPI at 3.3% and core PPI at 3.1%. Federal Reserve Chair Jerome Powell acknowledged challenges in reducing inflation further and suggested a slower pace of interest rate cuts

• The federal funds rate is expected to be trimmed by 0.25% at the Fed's December meeting

• Powell emphasized the Fed’s independence, stating it would remain uninfluenced by the incoming Trump administration

• Despite inflation nearing the Fed’s 2% target, Powell noted that the economic signals do not support rapid rate reductions

Dogecoin Outperforms Bitcoin as Trump Spurs Crypto Speculation (3 minute read)

In recent days, smaller cryptocurrencies, or "altcoins," outperformed Bitcoin, driven by optimism about the sector's prospects under President-elect Donald Trump. Dogecoin, a meme-inspired coin backed by Elon Musk, rose 50%, while ADA from Cardano surged over 60% after its founder discussed plans to collaborate with U.S. lawmakers. Other altcoins, including Polygon, Cosmos, Solana, and Algorand, also saw gains exceeding Bitcoin's 7% increase

• Crypto enthusiasts are hopeful that Trump's administration will create a more favorable regulatory environment, especially with plans to fire SEC Chair Gary Gensler, who has been tough on digital assets

• Trump also promised to support Bitcoin mining and potentially create a strategic Bitcoin stockpile

🌱🌎 Impact & Climate Resilience

Careening towards extinction: Why developed economies cannot survive without immigrants (20 minute read)

Western economies, grappling with rapidly aging populations and declining birth rates, increasingly rely on immigration to sustain economic growth and address labor shortages. In the U.S. and Europe, fertility rates have fallen below replacement levels (2.1 children per woman), now standing at 1.5 in many countries. This demographic shift creates a growing economic burden as the working-age population struggles to support retirees. In the U.S. faces nearly one in four Americans is projected to retire by 2050 and a looming $35 billion shortfall in Social Security funding by the 2030s

• The aging population is affecting tax revenues, which are declining, and GDP which could stagnated. The USA only accepts about 14% of its population as immigrants

• A study from the Cato Institute suggests that immigration could increase U.S. GDP by approximately $2 trillion, nearly 10%. Immigrants contribute significantly to the labor market, with low-skilled workers filling positions often avoided by locals, while skilled immigrants drive productivity and innovation

• Furthermore, immigration helped the U.S. labor market recover rapidly after the pandemic, with nearly 79% of foreign-born residents who arrived after 2010 between the ages of 18 and 64, contributing to job growth and keeping inflation in check

• In the U.S. immigrants contribute nearly $1 trillion in taxes annually, while the government spends $300 billion less on them due to their exclusion from key benefits

Are We United or Divided in The Fight Against Climate Change? (2 minute read)

The World Risk Poll, conducted by the Lloyd’s Register Foundation and Gallup, surveyed 147,000 people across 142 countries, asking if climate change will be a threat to their country in the next 20 years. Despite 2024 being predicted as the hottest year on record, with global temperatures 1.54°C above pre-industrial levels, around 28% of people worldwide do not view climate change as a threat

• Countries like Spain, Germany, and Austria showed the highest levels of concern, with over 90% of respondents recognizing climate change as a threat

• However, this perception gap is especially notable in oil-producing nations, where fewer people view climate change as a concern

• Perceptions have remained largely unchanged since the 2021 survey, indicating a persistent divide in global attitudes toward the climate crisis

🚀 IPO & Exits

Trump 1.0 was as tough on M&A as Biden. Trump 2.0 may not be different (4 minute read)

Despite expectations of reduced M&A scrutiny under Donald Trump, his first term saw robust enforcement, with 118 merger enforcement challenges by the Justice Department (DOJ) and the Federal Trade Commission (FTC) between fiscal years 2017 and 2019—surpassing the 108 challenges during Joe Biden's first three years (2021-2023). Biden recorded the highest single-year total of 50 challenges in 2022, the largest in over two decades

• During his first term, Trump initiated significant antitrust cases against Google, Apple, Meta, and AT&T, laying the groundwork for Biden’s DOJ to expand these efforts

• Trump’s administration also issued "second requests" for in-depth M&A investigations in 2.6%-3% of transactions, higher than Biden’s 1.9%-2.1%

• Despite Trump’s promises of deregulation and tax cuts, experts warn that investor optimism for a lenient antitrust environment might be misplaced, as scrutiny on corporate tie-ups is likely to remain significant

We analyzed 40,000 M&A deals over 40 years. Here’s why 70-75% fail (5 minute read)

In October 2024, major acquisitions like Canadian Natural Resources acquiring Chevron’s shale assets for $6.5 billion highlight the scale of global M&A activity, which totals around 5,000 deals annually, worth $2 trillion. However, a staggering 70–75% of acquisitions fail to achieve their objectives, as evidenced by a 40-year analysis of 40,000 deals

• Failures are often due to strategic mismatches, overpayment, poor integration, and misaligned executive incentives prioritizing deal completion over long-term success

• Large targets, conglomerate acquisitions, and operationally weak companies are particularly prone to failure

• Despite M&As being seen as transformative solutions, alternatives like internal development, partnerships, and joint ventures often yield better returns

• The current state of widespread M&A failure demands a fundamental shift in approach to protect shareholders, employees, and the broader economy

China Investing: Big Nasdaq Gains Attract Chinese IPOs (4 minute read)

Nasdaq listings by Chinese companies in 2024 have already surpassed last year’s totals, driven by investor optimism and robust private sector growth in China, the world’s second-largest economy. So far, 42 Chinese companies have listed on Nasdaq, alongside eight SPAC deals, exceeding the 28 IPOs and seven SPAC combinations from 2023

• Nasdaq Vice Chairman Bob McCooey highlighted the strength of the pipeline, underscoring China’s entrepreneurial spirit and its growing presence on global wealth rankings

• Notable new listings include autonomous vehicle firm WeRide and Super Hi, the international arm of Haidilao

• However, IPO activity still faces challenges due to tightened IPO regulations in China

Klarna chooses New York over London for much-anticipated IPO (4 minute read)

Klarna, the Swedish buy-now-pay-later fintech giant, has confidentially filed for an IPO in the U.S., signaling another loss for the London Stock Exchange. While the number of shares and valuation remain undisclosed, Klarna is expected to secure a multibillion-pound valuation

• At its 2021 peak, the company was valued at $46 billion after a SoftBank-led funding round but saw its valuation plummet by 85% to $6.7 billion in 2022 due to rising interest rates and tech sector reratings, leading to significant layoffs

• Analysts cite looser U.S. regulations and a stronger stock market as key attractions, with Kathleen Brooks of XTB noting this trend could accelerate under another Trump presidency

🗞️ AI8 VENTURES HIGHLIGHT

Alpha Showcase 2024: Thank you Mexico City!

What an incredible experience at the NAA International Symposium and Startup Pitching Competition!

On September 25th, we hosted the Startup Pitching Competition for the NAA’s first-ever International Symposium in Mexico City. The event featured four exceptional early-stage startups, each selected through a rigorous process, showcasing their energy and innovative ideas to an audience of over 100 allocators and industry leaders.

A huge shoutout to Yoel Gavlovski and the entire Quash team, congratulations on your well-deserved victory! The competition was fierce, and every participant truly brought their A-game to the pitches. Thank you all for making this such a memorable event!

About the NAA: Founded in 1999, the New America Alliance is dedicated to advancing the economic development of the American Latino community. We believe that Latino business leaders have a special responsibility to lead the way in building the forms of capital crucial to Latino progress – economic, political, human, and philanthropic. Through coordinated philanthropy and strategic public and private collaboration, we aim to drive investment in our community.

Alpha Insights: 2024 Venture Capital Report

Alpha Impact 8 Ventures is thrilled to share our latest insights into the dynamic world of investments with our 2024 Venture Capital Report.

Last year, Michael Burry, the legendary fund manager who famously profited from shorting the US housing market in 2008, bet more than $1.6 billion on a Wall Street crash by shorting the S&P 500 and Nasdaq-100. Nothing happened.

This year, Warren Buffett’s cash reserves reached a record $276.9 billion as Berkshire Hathaway trimmed its stock holdings in Apple. Some view it as a routine adjustment, while others speculate that Buffett perceives an overheated, overvalued market.

Everyone talks about a soft landing, but warning signs are flashing and the world seems to be teetering on a delicate balance. Is there something we’re missing? Is there an unseen factor at play?

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

Alpha Impact 8 Ventures is pleased to announce that we are adding a third investment vertical to our thesis: Climate Resilience Technology.

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.

Alpha Impact 8 Ventures is disrupting the industry, generating wealth, creating technology, providing access, leveling the play field, reducing systemic barriers, and building a resilient world.

Become part of the our revolution.

Happy reading,

AI8 Ventures’ Research & Investment Team