Pre-Money: July 1, 2024

Nailing IPO timing, winner take all, robots coming, M+A muddles & more

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The Vibe

The week’s most important happenings

Officially into the back half of the year and things are still moving fast. This week everyone takes a breath to salute the country that invented venture capital. Here’s what’s top of mind:

  • Nailing IPO timing

  • Winner take all in fundraising

  • Robot invasion

  • Muddling M+A

  • A helpful VC

  • and more…

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The week’s top performance indicators

Based on publicly available data from Thompson Reuters, NASDAQ, CNN Business & other third-party sources. As of June 28th market close.

Dots & Lines

The week’s top takeaways

  • Getting ready to IPO: The first half of ‘24 was the best for IPOs since 2021, but new issues remained rare, and will likely stay that way as rates stay high and the election dominates our collective mindshare. Now the chatter is focused on figuring out when the ideal IPO timing is, and which companies in the backlog of Unicorns are ready and fit today’s criteria. As the cost of IPOs has risen, the amount of revenue of the average new issue has doubled, to almost $200M, reflecting the greater progress Wall Street expects. Regulatory and governance challenges are another complicating factor, one the market decidedly does not like, as with China-founded Shein’s continued IPO uncertainty. Whatever the ideal profile, hopefully the rest of 2024 will see more unicorns that are a fit to go public.

  • Strength begets strength: There are bright spots emerging for venture funds raising from LPs, with the average fund size going up to $153.5M. But the median or small firm isn’t benefitting - in a year that may end up lowest in the decade for fundraising, it’s the big, established funds hauling in all the dough. Yeah, it’s smaller than their last one, but seeing Index raise $2.3B makes it hard to feel bad. Same with Stepstone’s $3.3B secondary fund, Kleiner’s latest $2B+ twin funds and Redpoint’s $740M growth fund. Just like “you don’t get fired for hiring IBM,” you don’t get questioned when you allocate to Sequoia as opposed to a small, emerging manager who hasn’t put many points on the board yet in terms of actual cash distributed. Still, these headwinds are likely to separate the tourists from those staying long-term, and we’ll see a leaner, tougher generation of managers new and old come out on the other side.

  • The robots are coming: With advancements in AI and devices getting cheaper, bots are starting to come into the real world. No longer just automated processes on servers, robots are walking and talking, serving as vehicles and playing roles in undermanned factories, healthcare and beyond. The sector will almost certainly show growth this year. It’s already seen $4.2B into 147 deals by the midpoint, the latest being Bright Machines, which automates manufacturing, raising a $106M Series C. Additionally, Google’s Waymo is out of beta and providing driverless ride-sharing to denizens of San Francisco, after operating for four years in Arizona. Look for this trend to accelerate as jobs go unfilled and technology keeps advancing.


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Deal Points

A few items of interest

  • Europe is having a record year for AI funding with more than $2.1B invested into innovators like Mistral

  • While corporate venture contracts, customer support Unicorn ZenDesk, itself taken private two years ago, will invest ‘tens of millions’ into AI customer support startups off its own balance sheet

  • EvolutionaryScale, the New York and San Francisco-based AI company making proteins for scientific research, raised $142M in a Series A led by Lux

  • Boston-based Creatio, which makes no-code CRM and workflow software, raised $200M on a $1.2B valuation led by Sapphire

  • San Francisco-based Etched, a chipmaker whose chip is optimized for transformers central to running AI models, raised $120M in a Series A led by Primary Ventures

  • Formation Bio, which uses AI for drug development, raised $372M in a Series D led by a16z

  • Weekend Fund’s Ryan Hoover chimed in with some thoughts on how investors can be helpful to their portfolio companies

  • The General Partnership raised $300M for their second fund, employing a helpful model where they provide services like hiring and engineering for some equity while buying the rest with cash

  • Venture Funds are investing in the technology aggressively today, but at some point in the future AI may thin their ranks

  • If you’re curious about the foundational models and how they match up, take a look at how Pitchbook handicaps the AI horse race today

  • Apparently, a report on a16z investing in private equity was a fake out, and venture’s most iconic firm remains focused on its home territory


Last week’s BG2 podcast with Bill Gurley and Brad Gerstner covers the Coatue Conference and hits on the questions of appropriate timing and revenue for Unicorns to go public.

The Forecast

Looking ahead to this week

As the nation takes a breath and we roll into H2 watch out for:

  • No notable earnings reports expected

  • US employment and wage reports on Friday

  • Fed leaders speak and release June FOMC minutes on Wednesday

  • Take time away from tickers to enjoy BBQs and fireworks

The promised wave of mergers still lies ahead, according to Carta

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