Pre-Money: Jan 8th, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• The best ROI is still in politicking: The stories of tech usually start with a couple tinkerers in a garage. But as the industry has grown, the action takes place even more in the halls of Congress, with big tech companies utilizing regulatory action as a core part of their strategies. As Artificial Intelligence entrenches itself as the next big platform shift, the lobbying race is well underway, with more than 300 groups active, $55M spent and at least 48 bills introduced in 2023. The agendas are diverse - deepfakes, copyright issues, election protections, anti-discrimination, and more - while the legislative bodies are global, and not super-savvy. Yet 2024 will prove pivotal in making the rules for AI, on a number of fronts. Let’s hope it results in a fair playing field that doesn’t overly favor incumbents, stifle innovation or lead to societal meltdown.

• Innovation just got a bit more expensive: In other government news, rumblings rose in the startup ecosystem as the fun annual tax process came into view. There is growing concern about section 174 of 2017’s Tax Cuts and Jobs Act. The law mandates that as of 2022, software engineering costs must be amortized over five or more years, making software company P+Ls look more profitable than they actually are, and owe more taxes. As companies approach profitability and break-even - the new mantra within the venture ecosystem and the norm for bootstrapped startups - the challenge is magnified. For now, the matter sits in the capable hands of Congress(!).

• Carta’s own goals continue: Carta, which last raised on a $7.4B valuation, is more than just another unicorn. As the leader in cap table software, it holds the share data and ownership on an estimated 40,000 venture-funded startups, making it foundational to the ecosystem. On the heels of a quarter where allegations and lawsuits related to gender-based misconduct reared their head again, the company is now being accused of using client data to fuel sales on CartaX, its secondaries marketplace. The company responded over the weekend, apologizing for missteps and clarifying its data use policies. But the fallout is likely to continue, as the use of customer data is a problematic line to cross. And in the meantime, two strong, well-funded competitors with new, low-cost offerings - Angellist and Pulley - continue to chip away at its cap table business.

Deal Points

A few items of interest

• Consistent with the broader economy, tech hiring in Q4 stayed strong, giving hope that fears of continued layoffs like what we saw in ‘23 and AI taking everyone’s job this year may be overblown

• In a bid to take on search, startup Perplexity.ai added a cool $73M to its war chest in a Series B led by IVP and with participation from Jeff Bezos

• Israeli cybersecurity firm Aqua added $60 million to its series E led by Evolution Equity and confirmed it’s still a unicorn

• Venrock, a well-known Sandhill Road venture firm, closed its 10th and largest fund to date, raking in $650M in investor commitments on the belief that it will need to put more into its portfolio companies in this next chapter

• After a couple years of secondaries struggling to find a clearing price, many Limited Partners (LPs) in VC funds are questioning the reported valuations of venture fund holdings, stalling fundraising

• Mega-fund Coatue is closing its European office - formerly based in London - as another sign of the times

• Design collaboration platform Invision, an OG in the creator SaaS universe, is the latest unicorn to shut down, with reasons unclear but speculation centered on being out-competed by Figma and failing to iterate

• Only 7% of climate tech funding went to women last year, in a continuing pattern of under-representation in the asset class