Week of February 26th, 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: Ascend Elements Climbs To The Top (5 minute read)

Last week saw a continuation of strong investment in startups, with several raising $100 million or more across various sectors:

1. Ascend Elements: the manufacturer of sustainable battery materials for EVs, raised $162 million from investors including Just Climate

2. Abridge: the provider of AI-powered clinical documentation tools raised $150 million in a Series C led by Lightspeed Venture Partners

3. Antora Energy: the company uses renewable electricity to heat carbon blocks, it raised $150 million in a Series B led by Decarbonization Partners

4. Hornblower Group: Acquired by Strategic Value Partners, it received $121 million in financing from SVP-managed funds and Crestview Partners

5. Recogni: the startup is developing AI inference chips for generative AI and automotive industries, it raised $102 million in a Series C co-led by Celesta Capital and GreatPoint Ventures

A Growing List Of Unicorns Haven’t Raised Funding For 3-Plus Years (4 minute read)

Many startups, like cars, eventually need to refuel, with the time between funding rounds varying. For some U.S. unicorns, it's been over three years since their last fundraise, which could make fresh investment less likely. These companies cover industries like connected fitness, enterprise software, and digital health

• While some, like Reef Technology, raised large sums in the past, investor interest in their sectors may have waned

• Other startups may have more runway due to large past funding rounds, yet they can't delay fundraising indefinitely. Historically, there's rarely a gap of four years or more between funding rounds

5 Reasons Launching A Fintech Startup Has Become So Challenging (5 minute read)

The fintech industry saw it’s highest-ever investment value in 2021, but the market has since become more challenging in recent years. Startups need to show a clear path to profitability, as explosive growth is no longer the main priority. Several factors contribute to this challenging landscape:

1. Decreasing investment volume: Venture capital investment in fintech dropped by 36% year-on-year in Q3 2023, with early-stage firms facing stiff competition from trendier startups

2. Strengthening regulations: Governments worldwide are introducing stricter regulations, especially in areas like know your client (KYC) and know your business (KYB) compliance

3. Deglobalization: National restrictions and conflicting rules in different countries make it challenging for cross-border fintech companies to operate seamlessly and affordably

4. Price competition: Existing players like Stripe offer competitive pricing, making it difficult for new startups to compete

5. Geopolitical instability: Military conflicts and volatile currency markets create uncertainty, making it challenging to expand operations into new countries

INDUSTRY WORLDWIDE

Asian Companies Led The Way On New Unicorn Creation In January 2024 (5 minute read)

In January 2024, eleven companies joined The Crunchbase Unicorn Board, adding $16 billion in value. Six new unicorns are based in Asia, three in the U.S., one in Latin America, and one in Europe. AI, clean energy, semiconductor, quantum computing, and AR are among the sectors represented by these new unicorns, some of these startups include:

1.  Krutrim (AI, Bangalore) - Raised $50 million in Series A funding, now valued at $1 billion

2. Qiyuan Core Power Technology (Clean energy, Shanghai) - Raised $211 million in Series B funding, now valued at $1 billion

3. Doc.com (Healthcare, Mexico) - Raised $300 million, now valued at $1.3 billion

4. Silicon Box (Semiconductor, Singapore) - Raised $200 million in Series B funding, now valued at $1 billion

‘India has arrived.’ Why Modi’s economy offers a real alternative to China (6 minute read)

The quality of India’s new infrastructure is one of the many reasons investors are excited about the country’s growth under Prime Minister Narendra Modi, who has said he wants the nation to become a $5 trillion economy by 2025

• Unlike China, which faces economic challenges and capital flight, India's stock market is thriving and expected to double in value by 2030

• India's emergence as a global growth engine is supported by factors such as its young population, infrastructure investments, and efforts to attract foreign investment

• While India's stock valuations are high suprassing $ 4 trillion last year driven by domestic investors, concerns remain about its capacity to absorb capital compared to China

🏦  ECONOMIC SNAPSHOT

The S&P 500 closes lower on Monday, retreating from record, as rally pauses (5 minute read)

Today, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all declined as the market retreated from its record notch last Friday. Despite economic and inflation risks, investor sentiment toward stocks has risen, driven by a better-than-expected earnings season

• The S&P 500 fell by 0.38% to 5,069.53, the Nasdaq Composite declined by 0.13% to 15,976.25, and the Dow slipped by 0.16% to 39,069.23

• Investors are watching key inflation data and the sustainability of the AI-powered rally, driven by companies like Nvidia

• New home sales in January came in below economists' estimates, and there are several economic releases scheduled for the week, including consumer spending and PCE numbers

Fed officials remained worried that inflation could stop cooling, minutes show (3 minute read)

The Federal Reserve is concerned about high inflation and its impact on the economy, leading them to consider keeping interest rates at a 23-year high for longer, affecting Americans’ borrowing costs

• In January, the Fed opted to hold rates steady for the fourth consecutive meeting. But Chair Jerome Powell pushed back on the market’s expectation that the first rate cut could come in the spring: it’s too soon to declare victory

• The first measure of inflation for 2024, the Consumer Price Index, showed that prices rose by 3.1% for the 12 months ended in January. That marks a step back from December’s 3.4% rate and a dramatic cooling from the 6.4% increase seen in January 2023

• Fed officials want to see sustained trends before making decisions. So, Investors now expect the first rate cut to occur around midyear

• Fed's approach to monetary policy will be data-dependent, focusing on inflation, economic growth, and the job market

Dollar inches down as heavy week of data begins (5 minute read)

The dollar slightly declined against other major currencies as investors await U.S. durable goods orders and inflation data this week, which could shed light on the Federal Reserve's future interest rate decisions. Expectations for Fed rate cuts have diminished due to the strong U.S. economy

• Fed funds futures show a 54.9% chance that the Fed starts cutting rates in June, with a 35.3% probability of no cut at all, a shift from bets on Feb. 1 of a 62% chance of a cut in March

• The dollar index was last down 0.2% at 103.78 - though the U.S. currency strengthened 0.1% to 150.70 against the Japanese yen

• The euro strengthened against the dollar, up 0.2% at $1.08, driven by expectations of less divergence in interest rate policies between the U.S. and euro zone

🧑🏿‍🤝‍🧑🏽 IMPACT & DIVERSITY

A Change Is Gonna Come. Right? (4 minute read)

Amidst the #MeToo movement, and the mobilization of millions of people after the murder of George Floyd, many tech companies and investors felt motivated to act, and in the summer of 2020 they pledged to do better, hired chief diversity officers, updated their branding, etc. nonetheless, these efforts amounted to very little:

• Tech still has a diversity problem: between 2021 and 2023, the percentage of nonwhite hires at startups declines in every job area

• On the funding side, just 17% of venture capital goes to companies with at least one woman founder, while black-founded companies raised less than 3% of venture

• Chicago has the second-highest percentage (24.4%) of companies with at least one founder of color, behind Miami

Investing for Women: What You Should Know (5 minute read)

Women have traditionally been less likely to invest than men, which has serious financial repercussions, for example in their retirement savings. Women still face hurdles such as the gender pay gap and limited representation in the finance industry. Additionally, women are typically more conservative investors, less impulsive, and more likely to seek financial advice. Despite all these challenges, more women are investing their money:

• As of 2023, around 60% of women invest in the stock market, and 68% save for retirement

• Investing is most popular with younger women since 71% of Generation Z women and 63% of millennials invest

• Women investors get better investing returns than men, with studies finding differences of 0.4% to nearly 1% respectively

🚀 IPOs

IPO Lawyers See Cornerstone Investors Boost Deals in Slow Market (7 minute read)

Lawyers are adapting to a sluggish market for initial public offerings (IPOs) by facilitating companies' engagement with cornerstone investors, who commit funds in exchange for early access to shares, an strategy that allows for a larger allocation at a lower value

• Cornerstone investors played a significant role in many large IPOs in 2023 and are expected to remain important as the IPO market picks up momentum

• Despite challenges, such as low valuations and macroeconomic conditions, companies may proceed with IPOs to meet investor demands for liquidity

• While IPO activity slowed, industries like biotech, health, and energy continued to see transactions, with life sciences remaining robust due to capital needs for research and development milestones

🗞️ 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 here

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Happy reading,

AI8’s Research & Performance Team