Week of October 28th, 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: Seaport Therapeutics And Zip Top Big Money Week (5 minute read)

1. Seaport Therapeutics (biotech): raised $225 million in a Series B round led by General Atlantic. The Boston-based biotech company focuses on developing medicines for depression, anxiety, and other neuropsychiatric disorders

2. Zip (procurement): raised $190 million in a Series D round led by Bond, boosting its valuation by 47% to $2.2 billion. The company assists businesses in sourcing and managing software and hardware purchases

3. AvenCell (biotech): the clinical-stage cell therapy startup, raised $112 million in a Series B round led by Novo Holdings

4. Nimble Robotics (robotics): secured $106 million in a Series C round led by Cedar Pine and FedEx, valuing the company at $1 billion. The AI robotics startup, focused on autonomous e-commerce fulfillment

5. Redaptive (energy): received a $100 million equity investment from CPP Investments. The company funds and installs energy-saving and generating equipment

AI-Related Seed Rounds Slow, But Prices Remain High (4 minute read)

In Q3, AI startups raised an impressive $19.1 billion in venture funding, making it the second-highest quarter ever, though total deal volume dropped below 1,000 rounds for the first time since ChatGPT launched, marking a 33% decrease year-over-year

• Seed-stage funding rounds saw the sharpest decline, down 43% from last year to just 627 rounds, compared to 1,095 in Q3 2023

• Early-stage rounds saw $6.2 billion raised —a 41% increase from Q3 2023—

• Late-stage rounds remained steady, totaling $11.3 billion in late-stage funding, up 36% from Q2 and 30% year-over-year

Even With Venture Slowdown, Megadeals Grow (5 minute read)

Despite a general slowdown in venture funding, 2024 has seen a resurgence of significant investment rounds, with nearly 240 rounds of $100 million or more reported by U.S.-based startups, surpassing last year’s total of 210. This year has seen 11 U.S. startups raise $1 billion or more, compared to 10 last year, although the largest round from last year remains OpenAI’s $10 billion investment from Microsoft

• The biotech and healthcare sectors lead with 87 such megadeals, including Xaira Therapeutics’ $1 billion round and Radiology Partners’ $720 million investment

• The AI sector follows closely, highlighted by OpenAI’s $6.6 billion round and xAI’s $6 billion round

• If current trends continue, the total number of megadeals for this year could reach nearly 300, reflecting a nearly 50% increase from last year

INDUSTRY

Does US Startup Funding Rise In Post-Election Years? (4 minute read)

A Crunchbase survey of U.S. startup funding trends over six presidential election cycles found that while investors don't directly tie funding decisions to the presidency, election year uncertainties do affect investment totals. Historically, venture funding tends to rise overall, especially in post-election years, often spurred by cultural shifts and favorable policies

• Total investments rose significantly in the four post-election years analyzed, with the largest increase in 2021 —over 100% year-over-year—reaching a record $345 billion due to a robust IPO market and post-pandemic recovery

• The second-largest increase occurred in 2017, with a 26% rise to $98 billion during Trump's first year, while 2013 saw a 20% rise to $48 billion, marking the rise of "unicorns"

• In contrast, two post-election years, 2001 and 2009, experienced declines due to the dot-com bubble burst and the Great Recession, respectively

PitchBook Analyst Note: US Presidential Election Guide (20 minute read)

As the 2024 U.S. presidential election approaches, private market participants are closely examining how a Democratic or Republican victory might impact the investment landscape, particularly in venture capital and key industries. Interest rate policies and the broader economic path are expected to play a significant role in influencing market valuations and revenue growth over the coming years

• One notable area of policy debate is the taxation of unrealized capital gains: Democrats have proposed a "billionaire tax" on individuals with net worths exceeding $100 million, while Republicans remain broadly opposed to tax increases, favoring cuts in areas like tips and overtime instead

• Although taxes on unrealized gains remain only a proposal, and would face significant obstacles if pursued, there is concern that such taxes could dampen risk appetite among wealthy investors and impact entrepreneurs with substantial private company holdings

• Immigration policies also show contrast: Democrats generally support skilled-labor immigration, vital for tech-driven startups, while Republicans may continue a more restrictive stance, impacting VC-backed sectors that rely on international talent

4 Areas Where Seed Funding Is Strong (3 minute read)

Recent seed-stage funding trends reveal a future heavily reliant on AI and robotics, as roughly 1/3 of tracked investments went to AI-related startups, with four main sectors emerging as top-funded areas: robotics, legaltech, carbon capture, and AI assistants

• Robotics startups are working to automate repetitive, labor-intensive tasks, while legaltech startups focus on AI-driven solutions for efficiency in legal processes

• Carbon capture and storage has also seen strong investment, with at least 10 companies funded in the past six months

• AI assistants for personal and business tasks, including 23 startups in areas like travel planning and medical billing, are gaining momentum

Web3 Funding Gains 43% Year To Year But Dips From Q2 (5 minute read)

Web3 funding had a mixed quarter in Q3, with startups raising $2 billion across over 300 deals, a 43% increase from $1.4 billion in Q3 last year but a 13% decline from Q2. The number of deals hit a low not seen since Q2 2020, significantly down from nearly 1,200 deals in Q1 2022

• Despite this, several large funding rounds were notable, including Infinite Reality raising $350 million at a $5.1 billion valuation

• The increase in funding is linked to renewed interest in crypto, particularly following the approval of Bitcoin and Ethereum ETFs by the SEC

• However, the declining deal flow raises concerns about fewer startups receiving funding, potentially limiting future investment opportunities, though the overall dollar amounts suggest a stabilization in the Web3 sector

🏦 ECONOMIC SNAPSHOT

New data shows US economy on track to grow at 'encouragingly solid pace' (5 minute read)

Recent data indicates that the U.S. economy is expected to maintain solid growth through the end of 2024. The S&P Global's flash composite PMI for September showed a slight decline to 54.4, reflecting ongoing expansion in both services and manufacturing. This level is consistent with an annualized GDP growth rate of approximately 2.5%. Improved economic indicators have alleviated recession fears, leading to heightened confidence in above-consensus growth forecasts for 2025

• Competitive pricing is driving sales, contributing to lower inflation rates, which align with the Federal Reserve's target

• Current projections for third-quarter GDP growth are strong, with Goldman Sachs estimating 3.1% and the Atlanta Fed's GDPNow model at 3.4%

• While markets expect a 95% chance of a 25 basis point rate cut in November, the outlook for future cuts has moderated

US leads global growth in latest IMF Outlook (5 minute read)

The International Monetary Fund (IMF) projects that the U.S. economy will lead global growth through 2024 and 2025, driven by strong consumer spending. The IMF has raised its growth forecasts for the U.S. to 2.8% for 2024 and 2.2% for 2025, making it the only developed economy with upgrades for both years

• Global growth is expected to remain at 3.2% in 2024, slightly lower than previous predictions, and to decline to 3.1% over the next five years

• Despite geopolitical and trade risks, resilience is seen in markets like Brazil, India, and Southeast Asia. The IMF suggests that the risk of a U.S. recession is diminished unless a significant shock occurs

• Meanwhile, the Federal Reserve reports stable economic activity and slight hiring increases

🌱🌎 Impact & Climate Resilience

Immigrant Entrepreneurship in the US (5 minute read)

Immigrants in the US are more entrepreneurial than native-born individuals, making up a disproportionately high share of high-growth startups and venture-backed tech firms. In the US, immigrants accounted for 24% of entrepreneurs in 2019, up from 19% in 2007, and as high as 28.9% in 2020 among single-unit firms in the Longitudinal Employer-Household Dynamics database

• Immigrants, who constitute around 14-15% of the US population, are overrepresented in entrepreneurship, often founding AI-related and venture-backed firms, where their representation exceeds 40%

• Immigrant-led firms also produce more patents per worker and are more innovative, partly due to higher education and unique fields of study among immigrants

🚀 IPO & Exits

Why IPOs lag as markets soar (5 minute read)

IPOs, once the highlight of investment banking, have lost much of their appeal. Despite a 20% rise in the US stock market this year, IPO activity remains sluggish, with volumes trailing not only the 2020-21 pandemic boom but also pre-pandemic levels of 2017-19. Only seven tech companies have gone public in the US this year, and three of these are trading below their IPO price

• Global IPO markets are similarly slow, with regions like Australia barely reaching $400 million in IPOs, and emerging markets facing liquidity issues and underperformance

• The rise of private capital has pushed companies to avoid the regulatory and financial burdens of going public, turning IPOs into a “buyer beware” scenario where only less attractive companies may go public

• Structural changes, like the decline in broker research and growth in passive investing, have further reduced IPO liquidity and investor interest

🗞️ 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