Pre-Money: Feb 19th, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• The Unicorn Club — hard to join, and harder to remain: A lot of ink has been spilled about Unicorns, private companies with more than $1B of market cap, especially during the pandemic when it seemed like there was a new one every day. While 2023 was light for new Unicorns with only 95, less than any year since 2016, the exclusive club still boasts 1,500 members worth more than $5T. Unicorns tend to hang around longer than top companies of a prior era, with their average lifespan to exit standing at almost 11 years. On that kind of timeframe, the chances of a misstep or failure to meet massive growth expectations rise considerably. Quite a few of their ilk will fall back to reality, like Bolt, the high-flying online checkout company that saw 97% of its value vaporized in a recent buyback transaction with one of its investors. Others will bring tomorrow’s mergers and IPOs. Here’s to the Unicorns, may they live long and prosper.

• Show them the money: With venture distributions at a multi-decade low, the VC cash squeeze continues. Recently, many funds have been willing to accept considerable discounts on some of their company holdings and fund stakes in secondary market transactions. Selling lets them raise and distribute cash, and eventually move on to a subsequent fund. For newer managers who raised a first fund in the past few years, raises are taking considerably longer, with 2.6 years as the mean time between funds. Indeed, more than a third of firms started in the 2019 to 2021 timeframe are unlikely to raise that sophomore fund at all. In the land of VC, look for cash to remain king.

• Founder vs. investor: There is a long-standing dichotomy in venture capital between GPs with prior experience successfully founding and building companies, and classically trained investors who came up through the ranks without that pedigree - though often, with an MBA. Now, as funds seek to boost flagging capital raises, the split is making its way into the LP ranks. With the contraction in fundraising, now may be the chance for founders and family offices to find their way into top-tier funds. This new breed of LP - the operator - is compelling since they have a lot of capital, can make decisions quickly, and signal well to potential founders who may admire their experience. Contrast this with the institutional limited partner(LP), who typically represents an institution and operates within a more defined framework. Keep an eye on how the composition of new fund investors changes in today’s market moment.

Deal Points

A few items of interest

• As a tech hub rich with talent and funding at the epicenter of the AI surge, San Francisco is back, while sojourns to Miami and elsewhere wrap up

• The public market has returned to pre-pandemic norms, and now expects profitable growth from a top-performing IPO candidate, according to Iconiq’s analysis of 115 offerings over the past decade

• Following up on a Delaware court’s decision to invalidate his 2018 comp package at Tesla, Elon Musk filed to move SpaceX’s incorporation to Texas

• In its run-up to a potential IPO, Reddit is cutting a $60M content licensing deal with an unnamed AI company

• OpenAI is doing a tender offer with Thrive Capital, which would allow secondary liquidity for employees and early investors, that values the company at $80B, 3x its 2023 price

• AIX Ventures, an early-stage funder who invested in Hugging Face and other AI companies, raised a $202M second fund

• Crypto venture funding is (relatively) back in favor now that the asset class overall is rallying, with $1.9B raised in Q4

• If you’re ready to try your luck as a founder, top accelerator YCombinator just issued a request for startups(RFS) it would fund

• Latigo Biotherapeutics, a biotech company developing pain medications without opioids, raised a $135M Series A from Westlake Village Bio Partners

• Want to invest in clean energy? The New River Solar Project, an affiliate of Energy Shares, is now open for funding. When you invest early, you are rewarded additional units.**

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