Pre-Money: Dec 25, 2023

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• Fraud doesn’t pay: The awkward cleanup from the party of the last few years continues. Electric vehicle maker Nikola’s founder Trevor Milton was sentenced to four years behind bars for wire fraud and securities fraud in the latest case. While “fake it til you make it” may still be a mantra, as the US Attorney who led the case pointed out, lying to investors rarely ends well. Milton joins Theranos’ Elizabeth Holmes, FTX’s Sam Bankman-Fried and Headspin’s Manish Lachwani in facing consequences. He’s unlikely to be the last.

• Next year will likely be better, but still tight in VC-land: The macro outlook should continue to improve, but next year will still be a grind, according to Pitchbook’s latest forecast. The IPO market may re-open and fundraising should warm up after a frigid ‘23 as many companies finally come to market, the report states. But valuations are likely to remain challenged, with a continued preponderance of inside-led rounds as funds, by and large are smaller, stay cautious and find their reserves stretched. Indeed a significant percentage of funds, are not actively investing at all, with some trying to sell their holdings on secondary markets.

  
  
  

  

• Investors are still AI-crazed but wondering how the businesses will make money: Artificial Intelligence remains as top-of-mind as ever, with this week’s news cycle owned by San Francisco-based Anthropic. Founded by former execs from OpenAI, the company and its LLM, Claude, are rumored to be valued at more than $18 billion in their ongoing raise. There is room for several foundational LLM platforms, but given the massive sums needed to build and maintain the models and cover the intensive computing costs, investors wonder just how many will succeed. Beyond the platforms, investors are evaluating where the big wins will come from. Concerns have emerged that the current crop of user-facing apps have little in the way of proprietary functionality and defensibility. It’s still early, and investors believe the reward for getting it right stands in the trillions.

Deal Points

A few items of interest

• Bird, the company that delighted customers with its environmentally-minded, fast and easy to use transport experience - and endlessly annoyed others with scooters strewn all over city blocks - declared bankruptcy this week

• In other transportation news, hyperloop is quietly going away after raising $450 million but not landing any customers

• In a nod to George Jetson, Miso Robotics is teaming up with Cali Express to merge AI and robotics to bring us the first fully automated restaurant

• A useful reflection by OnlyCFO on how investors score false negatives by assuming a growing market won’t become massive

• After Adobe and Figma split at the altar, there are concerns M&A will be seen as not worth the hassle to pursue due to high regulatory barriers

• After the split, Figma’s valuation is likely more than 50% below where the merger priced it despite the ample $1 billion breakup fee it earned

• In what might become a broader trend, Google is eyeing 30% reduction of sales jobs due to AI

• Atlanta-based GreyOrange robotics raised a $135 million series D led by Anthelion to continue building logistics and warehouse automation

• Lightmatter, a photonics company, raised $155 million to expand production of next-generation chips

Carta’s 2023 Series A fundraising by sector