Week of July 8th, 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

5 Interesting Startup Deals You May Have Missed This Year — So Far (4 minute read)

1. Rainmaker Technology: raised $6.3 million in a seed round from investors such as Long Journey Ventures. The company is developing cloud seeding techniques, a weather modification tool aimed at inducing rainfall by introducing ice nuclei to clouds

2. StatusPro: raised a $20 million Series A in February to enhance its virtual reality simulation gaming franchise, NFL PRO ERA. This game allows players to experience the perspective of an NFL quarterback

3. 1X: a Norwegian developer of android technology, raised a $100 million Series B led by EQT Ventures. Known for its Neo bipedal humanoid, the company aims to provide versatile domestic assistance

4. 10Beauty: secured a $17 million Series A in February led by Shine Capital. The company has developed a manicure machine that files, polishes, and shapes nails

5. Butterflies.AI: raised a $4.8 million seed round led by Coatue in June. The company is creating a social media platform where users can generate AI friends, complete with profiles, backstories, and emotions

AI Companies Lead the 2024 Crop of New Unicorn Startups (5 minute read)

A recent analysis reveals that 28 startups have achieved "unicorn" status in 2024, with 16 of these being American companies. Half of these unicorns are centered around AI technology, either developing large language models or incorporating AI into their products. Another four are in the fintech or crypto sectors

• The U.S. remains a leader, with the total value of new U.S. unicorns reaching nearly $25 billion, 61% of the global total

• The U.S. hosts 662 unlisted unicorns, with 175 based in San Francisco and 118 in New York

• While 28 new unicorns have emerged in the first half of 2024, there were 69 new unicorns last year and 255 the year before, far below the 502 new unicorns in 2021

INDUSTRY

How a decline in dilution is reshaping the fundraising landscape (6 minute read)

Over the past five years, dilution levels have decreased at every stage of the startup lifecycle, significantly impacting company cap tables. Between Q1 2019 and Q1 2024, median dilution declined at all stages: from 23% to 20.1% at the seed stage, from 24.1% to 20.5% at Series A, and from 20.8% to 16.7% at Series B

• During the record-breaking years of 2020-2021, companies had more leverage to negotiate favorable terms, while in 2022-2023, only the most attractive startups could raise funds, further reducing median dilution

• This trend means startups are retaining more ownership when raising new funds, allowing greater flexibility for future fundraising

Startups Merge In Spaces Where Funding Has Fallen (4 minute read)

In recent years, several high-flying startup sectors that once attracted substantial venture capital have faced a downturn, leading to a wave of consolidation among heavily funded companies, prompting strategic M&As to navigate challenging market conditions

• Industries like e-commerce aggregators and real estate platforms have seen funding diminish as market dynamics change, forcing consolidation to maintain a competitive edge

• Despite earlier enthusiasm, sectors within fintech such as BNPL and neobanks have cooled, prompting mergers among later-stage startups to bolster market position amidst funding constraints

• Startups across sectors are leveraging consolidation not only to reduce competition but also to streamline operations and enhance growth prospects in a more challenging investment landscape

🏦 ECONOMIC SNAPSHOT

GDP Growth Was Better Than It Looked (5 minute read)

The U.S. Bureau of Economic Analysis reported that the economy grew by 1.6% in the first quarter of 2024, which was below the expected range of 2.1% to 2.7%. From Q2’2020 to Q1’2024, the U.S. economy experienced significant fluctuations due to the COVID-19 pandemic and its aftermath, with growth rates varying widely from a sharp decline of -25.8% in Q2’2020 to a rapid recovery of +27.4% in Q3 of the same year

• The overall trend since the pandemic has been one of recovery and growth, with notable resilience in personal consumption driving economic stability

What You Need to Know Ahead of Thursday's Key CPI Inflation Report (4 minute read)

The Bureau of Labor Statistics’ report on the Consumer Price Index, due Thursday, is expected to show a 3.1% annual increase, down from 3.3% in May. If accurate, this decline would suggest that inflation is easing, potentially leading the Fed to consider cutting interest rates this year

• Fed officials, who aim for a 2% inflation target, have kept interest rates high to reduce borrowing and spending. As of Monday, there was a 75% chance of a rate cut in September

• Core inflation, excluding food and gas, is predicted to remain at a 3.4% annual increase, the same as in May

• Economists expect inflation to stay moderate through 2025 due to more cost-conscious consumers, which is likely to keep price increases in check across both goods and services sectors

US economy adds 206,000 June jobs as labor market cools slightly (4 minute read)

In June, the US labor market showed signs of easing with the addition of 206,000 jobs, slightly below the revised 218,000 jobs added in May. The unemployment rate rose to 4.1%, marking the first time it has exceeded 4% in over two years

• Despite the slowdown in job growth, the Federal Reserve remains cautious, keeping interest rates at a two-decade high as it seeks more data to confirm a sustainable decline in inflation

• The upcoming inflation report on July 11 and the Fed meeting on July 30-31 will be crucial in determining future rate adjustments

Over $170 billion wiped off cryptocurrencies as market tanks on Mt. Gox bitcoin payout fears (4 minute read)

Cryptocurrency markets experienced significant volatility on Friday 5th, largely driven by concerns surrounding the payout of nearly $9 billion from the collapsed bitcoin exchange Mt. Gox to its creditors

• The Mt. Gox trustee announced the start of $9 million repayments in bitcoin and bitcoin cash to creditors, which triggered fears of increased selling pressure as these coins enter the market

• Bitcoin, the largest cryptocurrency, saw its price drop nearly 3% to $56,571, briefly dipping below $55,000 for the first time since February

• The market downturn resulted in substantial liquidations in the derivatives markets, totaling over $639 million in the past 24 hours, primarily from long positions

🌱🌎 Impact & Climate Resilience

Jobless rates rise in June for white, Black and Hispanic women but fall for men in the three racial groups (3 minute read)

The unemployment rate for women across white, Black, and Hispanic racial groups increased in June. Specifically, the unemployment rate for white adult women rose to 3.1% from 3.0% in the previous month. For Black women, the rate climbed to 5.7% from 5.2%, and for Hispanic women, it increased to 4.5% from 4.1%

• The overall female unemployment rate rose to 4.1% from 4.0%

• The unemployment rate for men in all three racial groups decreased: for white males fell to 3.2% from 3.4%, for Hispanic men it dropped to 4.2% from 4.7%, and for Black men, it declined to 6.1% from 6.4%, the highest unemployment rates among the demographic groups

Carbon & Emissions Tech Overview (10 minute read)

VC deal activity in the carbon and emissions tech sector hit a new high in 2023, with $17.7 billion across 1,133 deals, compared to $15.8 billion in 2021 and 1,017 deals in 2022. In Q1 2024, VC deal value totaled $2.7 billion—the lowest quarterly value since Q1 2021—partly due to a lack of large deals, with only four deals exceeding $100.0 million

• Exit activity peaked at $3.8 billion in 2021 but fell to $2.0 billion in 2022 and $1.9 billion in 2023

• The median deal size for Q1 2024 is $4.2 million, higher than the peak annual median deal size of $4.0 million in 2022

• The largest VC deal value in Q1 2024 was in the lithium battery recycling category, which saw $771.0 million

🚀 IPO

Slow and steady is a virtue in this US IPO recovery (5 minute read)

After two challenging years, the US market for IPOs Is showing signs of revival. In the first six months of 2024, 78 companies have listed on the US exchange, raising over $17 billion. This marks the best start for capital raised from traditional IPOs since 2021

• However, Investors burned by losses from the 2020 and 2021 IPOs have become more conservative in pricings and look for a clear path to profitability

• The broader Renaissance Capital IPO Index, which tracks issues for two years post-IPO, is up 7% this year, compared to the S&P 500’s 16% gain

• The IPO market is expected to continue its slow and steady recovery, with companies aiming to list shares before the November US presidential elections

🗞️ 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 with 2024 commentary 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

If you have any comments or feedback, just respond to this email!

Happy reading,

AI8’s Research & Performance Team