Pre-Money: Mar 11th, 2024

KPIs

The week’s top performance indicators

Correction: We mistakenly listed Klarna’s latest valuation as 83% down from the prior round last week. In fact, it should have been noted as up 22% from the last financing, after an 85% drop from the prior round.

Dots & Lines

The week’s top takeaways

• More accredited pathways: Recent decades have seen a growing appetite from individual investors to participate in private opportunities, once the realm of institutions and endowments, and more recently restricted to “accredited investors.” Dating back to the Securities Act of 1933, an accredited investor has to have a net worth over $1 million (excluding primary residence) or a salary above $200,000 - or several other qualifying criteria. Many ridicule the principle that unaccredited investors are permitted to play the lottery and gamble, but not invest in a friend’s startup. In 2012, Congress passed the Jumpstarting Our Business Startups (JOBS) Act, which opened up exemptions like Regulation CF - “crowdfunding” - to expand access to private offerings. This week, the House passed H.R. 2773 - the “Expanding Access to Capital Act”, which would allow investors to be accredited by virtue of working with a qualified investment advisor. Introduced by Finance Committee Chair Rep. Patrick McHenry (R-NC), the measure doesn’t get all the way there but would be a step in the right direction to democratize private markets if it gets through the Senate and eventually becomes law.

• Rise of the Family Office: The expansion of wealth in recent years tripled the number of family offices from 1,285 in 2019 to more than 4,500 today. Family offices, which employ investment staff to manage allocations to public and private markets, as well as philanthropic endeavors on behalf of individuals, differ widely in their structure and mission. Overall, though, they account for more than $6 trillion of investible capital, and many invest into alternative assets. With more billionaires than ever, and many more family offices to come, the sector is likely to continue to drive capital allocations into venture capital and other alternative asset classes. So expect asset managers to continue building their focus on this source of capital.

• The War on TikTok: Two years ago, ByteDance, TikTok’s parent, was being traded in the Pre-IPO market with a twelve-figure valuation. Today, it’s a geopolitical issue, as Congress introduced a bill to force ByteDance to divest the social network that boasts more than a billion DAUs (daily active users). Proponents of the bill cite the app’s connection to China’s governing CCP, a link CEO Shou Zi Chew denied in congressional testimony last year. TikTok has pushed back, claiming freedom of speech concerns (ironic, given China’s stance on free expression), and is calling on its users to lobby their representatives. While it is being called a “ban,” if the bill is successful, TikTok would not have to be shut down, ByteDance would just have to sell it, which would certainly affect the value of its shares.

• The Silicon Valley Bank implosion didn’t change much after all: It’s already been one year since that fateful weekend that saw SVB being taken over by regulators and eventually shutting down. Despite the gravity of the incident, the landscape has not dramatically changed. Venture funds and startups still have traditional banking relationships, many still with SVB, which is now a division of First Citizens Bank. Regulators have not changed anything substantial, and a major competitor has not emerged to take over SVB’s lending business, even though the practice of venture debt rebounded quickly. If nothing else, firms are more aware of “treasury management,” the practice of keeping a closer eye on the safety of its accounts and optimizing for interest payments.

• Elon’s legal entanglements: Being the world’s richest man, and on the forefront of multiple frontier technologies, requires a lot of lawyers. A SpaceX employee sued the Pre-IPO company for sexual discrimination, claiming she was harassed, impregnated and silenced by supervisors, adding to a growing number of similar suits alleging an abusive environment. Ex-Twitter/X execs are suing their former employer for more than $100M of unpaid severance, saying they were fired “for cause” without justification. This is on top of Elon’s claims against OpenAI last week, as the parties continue to trade blows. It would be ideal for innovation to play out in the product and user experience side of things, but for now, keep your eye on the courts.

Deal Points

A few items of interest

• Reddit plans to go public next week, with a $748 million IPO at a $6.5 billion valuation, while its own meme-stock forum, r/wallstreetbets, discussed shorting the offering

• Top IPO candidates for 2024 include Epic Games, Heartflow and ZocDoc, according to Pitchbook’s latest report

• Global venture funding totaled $21.5 billion in February, on par with January and slightly up from a year ago

• British digital bank Monzo raised $430M on a $5B valuation led by CapitalG (Google’s growth fund), and boasts more than 9 million customers

• Women’s share of jobs in technology increased more than 12% since 2019

• Mews, an Amsterdam-based service provider to hotels, became the newest unicorn with a $110M raise at a $1.2B valuation

• Boston-based Overjet, which builds AI tooling for dentists, raised a $53M Series C on a $550M valuation, led by March Capital

• Pre-IPO Human Resource business Deel acquired Payspace, a global competitor that expands its payroll footprint, and announced it eclipsed $500M of annual recurring revenue

• Corporate venture capital investing fell almost 50% in 2023 and 70% from 2021 levels as companies reconsider their venture approach

• Leading venture firm a16Z is on the verge of closing $7B worth of commitments for its latest sector-focused and growth funds