Tech Titans' Valuation Race 🏁🏎️

June 17, 2024

Week of June 17th, 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

  1. Cruise (Autonomous cars):  General Motors is investing an additional $850 million into Cruise. This comes after GM acquiredSoftBank's equity stake in Cruise for $2.1 billion in early 2022, followingSoftBank's failure to deliver a promised $1.35 billion

  2. AlphaSense(AI): raised $650 million, co-led by Viking Global Investors and BDT & MSDPartners, at a $4 billion valuation. The company, which provides AI-powered market intelligence and search platforms, has now raised $1.4 billion since its founding

  3. Santa Ana Bio(Biotech): the company focuses on therapies for autoimmune and inflammatory diseases, emerged from stealth with a $125 million Series B round led by GV

  4. Alzheon (Biotech): the company develops treatments for Alzheimer's disease and other neuro degenerative disorders and raised $100 million in a Series E round led byAlerce Medical Technology Partners

  5. Apex (Space): the spacecraft manufacturing company secured $95 million in a Series B round led by XYZ Venture Capital and CRV

Since the inception of the crypto industry, startups have attracted around $100 billion in venture funding, spurred by recent investments coinciding with Bitcoin and other major tokens' rallies

  • DeFiLlamareport $101 billion raised since 2014, while The Block Research tallies over$95 billion from 2017 onwards

  • Despite robust fundraising through VC and token sales, investor returns have been mixed, with few notable exits like Coinbase's $86 billion Nasdaq listing in 2021 standing out

  • While token investments offer liquidity and potential short-term gains, venture capitalists still focus on longer-term returns amid regulatory uncertainties and fluctuating market conditions

INDUSTRY

While funding for AI-related startups remains robust, with nearly $30 billion raised this year, there are signs of "AI fatigue" among early-stage investors. The volume of deals is slowing in the second quarter, with number of deals projected to drop to about 900 vs 1,052 last quarter

  • Despite the decline in deal volume, the total dollar amount raised is up, with over $16billion raised in Q2

  • Seed funding has seen a sharp decline in deal volume, with only 423 rounds announced

  • Early-stage deals declined in deal volume compared to Q2 last year. However, the dollar amount raised has increased significantly to $9.8 billion vs $4.7 billion last year

In May alone, AI startups raised $12.5 billion, constituting 40% of venture funding. Despite robust investments, regulatory scrutiny from the FTC and DOJ on Microsoft, OpenAI, and Nvidia could impact future investments

  • Nvidiap articipated in 10 deals this year, including seven over $100 million

  • Microsoft made a landmark multibillion-dollar investment in OpenAI and continued with a$1.5 billion stake in G42 and several other deals

  • Google and its venture arm, GV, have been active with seven deals, including a $27.5million Series A for WitnessAI

  • DatabricksVentures has been involved in significant deals, like a $200 million Series D for Glean

Edtech is currently struggling to attract venture investment, with 2024 seeing just over $1 billion in total funding, marking a potential low point in recent years. U.S. investment mirrors this trend, remaining well below pre-2021 levels

  • The last wave of notable IPOs was in 2021 with Duolingo, Coursera, and Udemy. However, only Duolingo has maintained its value

  • Despite the tough climate, some startups have secured financing, with Crunchbase data highlighting seven that raised $20 million or more this year

  • Advancements in AI might drive investment in new educational technologies

Venture capital investment in cryptocurrency and blockchain companies increased by nearly one-third in the first quarter of 2024, reaching $2.5 billion, matching levels from the same period last year, according to PitchBook data.

  • Interest in crypto was reignited by the approval of Bitcoin exchange-traded funds (ETFs) in January

  • Memecointrends have resurfaced, echoing past crypto crazes

🏦  ECONOMIC SNAPSHOT

On June 12, the Federal Reserve announced it would maintain its benchmark lending rate, marking the seventh consecutive time it has done so. Fed officials predict only one rate cut this year, down from the three anticipated in March, and they expect inflation to be more persistent than previously forecasted

  • The Fed's decision keeps interest rates at a 23-year high

  • Officials need more evidence that inflation is moving towards the 2% target before reducing rates

  • May's Consumer Price Index (CPI) showed a 3.3% annual rise, down slightly from April’s 3.4%

  • The Fed's cautious approach indicates a preference to ensure inflation is fully under control before making any significant policy changes, aiming to balance economic growth and price stability

Apple has reclaimed its position as the world's largest company by market capitalization, reaching$3.31 trillion, with a 4% surge in its stock. Microsoft and Nvidia also saw increases, with valuations of $3.26 trillion and nearly $3.1 trillion, respectively

  • The AIboom, highlighted by Apple's unveiling of "Apple Intelligence" at WWDC, has contributed to this growth

  • Analysts predict a race among these tech giants to reach a $4 trillion valuation within the next year, driven by AI adoption

  • Apple, in particular, stands to benefit from its large installed base of smartphones, with potential for a "super cycle" and the development of AI-focused apps

US inflation fell to 3.3% in May, boosting the stock market and raising expectations for early interest rate cuts. The S&P 500 and Nasdaq Composite both closed at record highs following the news (gained .9% and 1.3% respectively)

  • TheFederal Reserve kept interest rates at 5.25-5.5%, their highest in 23 years, but signaled only one rate cut in 2024

  • Market reactions were volatile, with traders placing a 64% probability on a September rate cut

  • President Joe Biden welcomed the data, highlighting progress on reducing inflation, which is now nearly two-thirds from its peak

🧑🏿‍🤝‍🧑🏽 IMPACT & DIVERSITY

In 2023, U.S. startups with at least one female founder raised a record $34.7 billion, up from $32 billion in2022, with generative AI being a significant driver of this increase

  • Women-led startups received 24% of all venture funding in 2023, a notable rise from 15% in 2022

  • A substantial portion of this funding—$21 billion—went to AI-focused companies

  • The previous record was set in 2021, with $47.6 billion raised by female-led companies, representing 14% of total U.S. venture funding that year

The ranking of countries by the rate of women in the workforce reveals that both the wealthiest and poorest nations tend to have higher participation rates compared to those with average incomes

  • Increased female participation in the workforce can significantly contribute to economic growth and productivity, considering women represent roughly half of the population

  • Madagascar, Burundi, and Mozambique have some of the highest participation rates, with around 80% of women in the workforce

🚀 IPOs

The pandemic bull market saw a surge in IPO activity, peaking in 2021 with 1,035 IPOs in the U.S. However, this trend reversed sharply with only 181 IPOs in 2022 and 154 in 2023. As of mid-2024, there have been 81 IPOs, on track for a modest 18% increase over the previous year

  • As IPO activity decreased beginning in 2022, so did the median valuations at the latest stages of venture funding

  • High-profile IPOs like Reddit and Astera Labs indicate investor readiness to support profitable, high-quality companies

  •  TheS&P 500's 13% rise since January suggests a favorable environment for IPOs, potentially encouraging more startups to go public

US Senator Marco Rubio wrote to UK Chancellor Jeremy Hunt, expressing concerns about Shein's business practices as the company seeks to list on the London Stock Exchange

  • The senator highlighted previous failed attempts by Shein to list in New York due to similar concerns and urged caution before allowing the listing in London

  • UK institutional investors are wary of the allegations, and the UK Treasury declined to comment

  • The senator also mentioned Shein's alleged practices to bypass US customs enforcement and tax rules, urging the UK to take similar actions

🗞️ AI8 VENTURES HIGHLIGHT

Alpha Impact 8 Ventures is thrilled to share our latest insights into the dynamic world of investments with our 2023 Venture Capital Report, here’s an updated version that dives into the ever-evolving landscape of financial markets.Just a few months ago, 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. Warren Buffett’s money pile reached record highs of $157 billion as Berkshire Hathaway disposed of a net $33 billion of stocks over the past three quarters. Is there something Buffett and Burry know that the rest of us don’t?Check out the full updated report with 2024 commentary

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Happy reading,

AI8’s Research & Performance Team