Week of September 30th, 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: Zing Health And Whatfix Head Up Slow Week (5 minute read)

1. Zing Health (Healthcare): The Medicare Advantage insurer raised $140 million from investors like Health2047 Capital Partners. Zing Health aims to address healthcare disparities among underserved populations

2. Whatfix (Information Technologies): The digital adoption platform secured $125 million in a Series E round led by Warburg Pincus

3. Supabase (Database): The open-source developer platform raised $80 million in a Series C round led by Craft Ventures and Peak XV Partners. Founded in 2020, Supabase has raised $196 million

4. Ujet (Contact Center): This AI-powered cloud contact center startup raised $76 million in a Series D round led by Sapphire Ventures, valuing the company at $500 million

5. Centivo (Healthcare): The Buffalo-based startup offering primary care-centered health plans secured $75 million in equity and debt financing, supported by Cone Health Ventures and JPMorgan Chase

Corporate Venture Deal Numbers Are Down Despite Big AI Headlines (4 minute read)

Despite headlines highlighting large investments from Big Tech companies like Nvidia, Microsoft, and Google in generative AI, Crunchbase data reveals a decline in corporate venture capital (CVC) investments over the past two years. As of mid-2024, U.S.-based CVCs and corporations participated in only 1,385 deals, a decrease from previous years, particularly in early-stage rounds, where participation dropped from over 700 deals to just 489

• Prominent CVCs include Google Ventures, which has led or co-led nearly two dozen deals this year, focusing on AI investments

• Other active players are Coinbase Ventures, which completed 30 deals this year, down significantly from 111 in 2022

• Notably, Nvidia stands out for increasing its investment activity, participating in 21 rounds in 2024 compared to nine in 2022

INDUSTRY

Washington is a bigger startup hub than Seattle or Austin (4 minute read)

Washington, D.C. is emerging as a significant hub for startups and venture capitalists, alongside its traditional roles as a center for politicians and lobbyists. Since Q3 2018, the city has outpaced both Seattle and Austin in homegrown startup financing and LP capital raised

• D.C. VC funds have collectively secured $36.1 billion in capital commitments during this period

• The city’s tech scene, which dates back to the dot-com boom with companies like AOL, has been bolstered by successful unicorns such as Rebellion Defense 

• Additionally, D.C. has a strong biotech presence due to its proximity to the National Institutes of Health, as well as financial services firms seeking to be near regulatory bodies like the Consumer Financial Protection Bureau and the SEC

INDUSTRY WORLDWIDE

How do US, European VC returns compare? (5 minute read)

Returns for venture capital (VC) funds are currently declining in both Europe and the US, complicating decisions for limited partners on future commitments. US funds underperformed compared to European funds over a one-year period, recording an internal rate of return (IRR) of -4.9% versus -1.6% for Europe. However, US funds generally excel over longer periods, particularly five years, due to a larger and more mature market with quicker and larger exits

• Since 2022, US valuations have declined more steeply than those in Europe, contributing to the better short-term performance of European funds. Recently, however, US valuations are recovering more rapidly, suggesting a potential rebound in performance

• When comparing funds launched in similar market conditions (vintage IRR), US funds from pre-financial crisis years have significantly outperformed European funds

• Regarding distributions US funds initially led but the gap has narrowed recently. As the exit market appears stronger in the US, distributions may favor US funds in the short term

🏦 ECONOMIC SNAPSHOT

Federal Reserve’s preferred inflation measure falls more than expected to 2.2% (5 minute read)

The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index, unexpectedly fell to 2.2% in August, suggesting a potential interest rate cut in November. This decline is below economists' expectations of 2.3% and down from 2.5% in July

• Fed Chair Jay Powell emphasized the central bank's commitment to supporting the labor market while controlling inflation, targeting a 2% rate for headline PCE

• Despite a more positive trend in inflation, with the core measure influenced by persistent housing costs, yields on two-year Treasuries fell slightly

• Biden noted that inflation rates are now similar to pre-pandemic levels, while former President Trump criticized the current administration for previous high inflation rates

GDP: US economy grows at 3% annualized pace in second quarter (2 minute read)

The US economy grew at an annualized rate of 3% in the second quarter, exceeding Wall Street's expectation of 2.9%. This figure, unchanged from previous estimates, indicates stronger growth compared to the 1.4% rate in the first quarter

• Additionally, the US Labor Department reported that 218,000 unemployment claims were filed for the week ending September 21, below expectations and marking the lowest level since mid-May

• This data follows the Federal Reserve's recent decision to cut interest rates by half a percentage point, with Fed Chair Powell noting the economy's solid growth and declining inflation

• Looking ahead, the Atlanta Fed's GDPNow tracker estimates third-quarter growth at 2.9%, while Goldman Sachs projects a 3% annualized growth rate for the same period

Inflation and interest rates tracker: see how your country compares (4 minute read)

Central banks worldwide are expected to lower borrowing costs as global inflation trends downward from the highs seen in recent years. Some emerging markets have already begun rate cuts, with major institutions like the US Federal Reserve, European Central Bank, and Bank of England likely to follow suit

• While inflation has generally decreased, achieving the target rate of around 2% remains challenging

• The Financial Time’s tracker also monitors various economic indicators, such as underlying price pressures and wholesale energy costs, which have moderated since their peaks

🌱🌎 Impact & Climate Resilience

Women in the Workplace 2024: The 10th-anniversary report (30 minute read)

The 2024 Women in the Workplace report marks the tenth anniversary of a comprehensive study conducted by McKinsey & Company and LeanIn.Org, examining the experiences of women in corporate America. This year's report analyzes insights from 281 organizations. Key findings reveal that while women’s representation has improved —especially at senior levels (29% in C-suite positions compared to 17% in 2015)—the overall progress remains fragile and uneven, particularly for women of color, who hold only 7% of C-suite roles

• The report highlights persistent barriers such as the "broken rung" phenomenon, where only 81 women are promoted to manager roles for every 100 men, a slight improvement from 79 in 2018

• Some advancements include increased support for employees with caregiving responsibilities and greater workplace flexibility (with 80% of employees reporting improvements)

• However, the percentage of organizations prioritizing gender diversity has declined from 88% in 2017 to 78% in 2024, leading to decreases in mentorship (from 45% to 37%) and sponsorship programs (from 31% to 16%) for women

🚀 IPO & Exits

Startup M&A Trends Higher As PE Leads, But Remains Sluggish Compared To Earlier Years (3 minute read)

In 2024, startup investors turned to mergers and acquisitions (M&A) as a way to achieve liquidity, but activity remains slow compared to previous years. Venture-backed M&A deals are likely up year-over-year, the total value of $67 billion from over 1,300 deals trails behind the $72 billion seen in 2023. PE firms are leading many of the largest deals, shifting away from the typical dominance of public companies

• The biotechnology sector has been particularly active, with significant acquisitions such as Merck's purchase of Eyebiotech

• Despite the slowdown in M&A and public-market exits, secondary financings are gaining traction as a means of returning capital to investors

• The largest tech firms, including Microsoft and Alphabet, have been less active in acquisitions this year, with some opting for licensing deals instead of outright purchases of promising AI startups

Are We At The End Of The Startup M&A Era (And The Tech Dominance Of Silicon Valley)? (3 minute read)

Silicon Valley's ability to foster continuous innovation has historically relied on a cycle of VC investment in startups, which then acquire other startups to accelerate growth. According to a report by Mind the Bridge and Crunchbase, six of the ten largest global startup acquirers are based in Silicon Valley, with North American companies acquiring startups at rates significantly higher than their European and Southeast Asian counterparts

• However, since 2021, there has been a marked decline in global startup M&A activity, which may signal a more permanent shift rather than a temporary slowdown

• Increased regulatory scrutiny, particularly in the tech sector, is driven by geopolitical tensions and protectionist policies

• Large acquisitions are facing heightened oversight, as seen in the blockage of the $20 billion Adobe–Figma deal

🗞️ 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. We hope the Symposium and Competition inspired you and helped elevate your journey to success.

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