Pre-Money: Mar 25th, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• Let the IPO rivers flow: After a long wait, venture-backed IPOs are back! The industry saw not one, but two, notable private companies go public last week. Reddit ($RDDT), the notorious social network featuring “subreddit” forums on any topic you might want to talk about or troll pseudonymously, debuted Thursday on its second try. It sold shares on NYSE at a $6.4B price, raising $748M, and the stock climbed almost 50% above its opening level before closing the week around 35% above its opening price. The day prior, Astera Labs ($ALAB), a hardware maker whose products improve the efficiency of devices like AI chips in data centers, jumped the queue and went out on Nasdaq on Wednesday. Astera priced at $5.5B, raised $713M, climbed 72% on the first day of trading, and settled into a range 24% higher than the opening price to close the week. Celebratory cheer rippled throughout the venture community, as a broad variety of funds, angels and SPVs look poised to get liquid when lockup periods expire later this year. Tech IPOs, it seems, are on the way back.

• But the after-effects continue: While the overall market look to be getting back on track, parts of the world not centered in the Bay Area and not focused on AI have not turned the corner. In India last year, for example, venture funding fell to $9.5B, roughly 35% of the prior year’s 6.5B total. African dealmaking fell off as well, dropping more than 30% with funding totaling $4.5B for 2023. And in Israel, venture funding dropped more than 70%. The list goes on. The “rise of the rest” - the trend noted a few years back where the growth of startups and venture funding outside of the Bay Area, New York, Boston and Seattle grew rapidly - is still having an impact. But the turnaround is most likely to start in the heart of the ecosystem and it may lag before it spreads to other regions.

• Gulf gains: With limited capital available of late, private companies have been going to where capital abounds, the Persian Gulf. Mostly indexed to evergreen petroleum exports, countries in the region asserted themselves in private markets, growing their LP activities and hosting a growing number of conferences and fora. Saudi Arabia just earmarked $40B for AI, which would make it the world’s biggest AI investment fund so far. Not everyone is a fan of the Gulf’s new prominence, since some associate the oil-rich Kingdoms with unsavory activities and national security concerns. Anthropic, for instance, excluded Saudi Arabia from its recent financing. Still, the region is likely to be a growing force in tech as it continues to diversify from oil.

• A Wonder of a funding round: Wonder, the “fast-fine” food delivery company featuring dishes from famous chefs, raised a huge $700M round, bringing its total funds raised to $1.5B. The valuation was not disclosed but it was rumored that they were targeting a $4.5B-$5B level for this round after last raising at a $3.5B valuation. The company is led by notable entrepreneur Marc Lore, who is investing $100M of his own capital in the round. This shows that a strong business with a well-known founder and a large addressable market can still raise funds in this environment, even if it’s not an AI company.

Deal Points

A few items of interest

• Enterprise, consumer and fintech are the sectors with the most unicorns according to this market map of the 1,229 private companies worth more than $1B today

• Audio platform PocketFM, an India-based pay-as-you-go “Netflix for audio”, raised $103M at a $750M valuation in a round led by Lightspeed Ventures

• Cameo, the personalized video platform, saw its valuation drop more than 90% since its last financing, thanks to its recent $28M “cram-down” round - in which investors who do not “pay to play” are massively diluted

• Venture Capital investors may be part of the (possibly resolved) IPO backlog, given they often have incentives to block an IPO as well as the rights to do it

• With astronomical valuations and the built-in advantages held by incumbents in capital, technology and data, there could be a shakeout coming for AI startups

• Microsoft hired two co-founders of Inflection, a $4 billion AI startup, raising questions about whether it is essentially an acquisition that could conflict with its OpenAI partnership and raise antitrust concerns

• Product Hunt founder Ryan Hoover provides convincing encouragement for VCs to raise their funds publicly instead of in private

• As Venture shifts back into gear, big limited partners like CalPERS are once again considering increasing their allocations

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