Pre-Money: Dec 11, 2023

KPIs

Top performance indicators

Dots & Lines

The week’s top takeaways

• Venture’s YOLO era is in the rear-view: Venture financing accelerated during the zero interest rate era, accounting for more than $300 billion of new investment in 2021 accompanied by high valuations, oodles of deal syndicates and emerging funds. But for the past 24 months, businesses that raised eye-popping sums at astronomical valuations have moved deftly to reduce costs and extend runway, doing their best to avoid going back to market for a precarious down round. And optimistically holding out for the Mergers and Acqusition (M&A) and public markets to thaw. Funding has slowed drastically for each of the past two years.

• The reckoning may now have arrived: The clock is running out, bringing us to a time when when businesses face a decision point. Numerous unicorns - those businesses that earned a valuation above $1 billion - are among the reported 3,000+ startups said to have shuttered or declared bankruptcy this year, according to Pitchbook. Even the NY Times is talking about it. The cohort that shut down is estimated to have raised more than $27 billion of investor capital.

• The broader industry is under strain: Funds have also shown weakness as Limited Partners (LPs) grow fearful, evidenced by tales of slower-than-expected or delayed fundraises for next vintages. OpenView Ventures, a principal investor in DataDog, is pausing operations. Other funds have reduced their investment team sizes in expectation of the next cycle. This could very well be the bottom, but there’s likely to be more carnage ahead before the escalator goes back up.

• But AI hasn’t flinched: Despite all that, the Artificial Intelligence arms race continues to heat up. Google upped its AI game massively with the launch of Gemini, its new LLM. It’s said to outperform OpenAI’s GPT-4 model by all measures, the fact they faked parts of the demo notwithstanding. Not to be outdone, Elon Musk’s xAI — no relation to Amy, the early ai bot who used to try (and fail) to schedule your meetings — announced plans to raise a billion dollars. And none of that could stop Sam Altman from being declared Time Magazine CEO of the Year after his exit and re-entry to the top spot at OpenAI. All the while, regulators clamored to ensure all of this activity doesn’t lead to global extinction.

Deal Points

A few items of interest

• SpaceX is said to be putting together a tender offer at a $175 Billion valuation, an impressive bump in price for one of Elon Musk’s standout startups

• British payments company SumUp, competitor to Block (f/k/a Square), hauled in a $307M raise, signaling fintech may be on the way back

• Smile Direct Club, a telehealth teeth straightening company that was valued at $8.9 billion and then went public, making its founders billionaires, declared chapter 11 bankruptcy and shut down its service, stranding more than a few teeth less than straight midway through their 6-month treatment cycles

• Female founders pulled in an even lower share of VC funding this year, raking in only 2.8% of the total funds raised, a dropoff from each of four years prior

• Tech layoffs continued this week, with private Pre-IPO travel unicorn Navan and publicly-traded comms platform Twilio ($TWLO) each cutting 5% of staff in pursuit of profitability

• Notably, Spotify, which already achieved profitability, cut 17% of its team and parted ways with its CFO for good measure, overturning long-held beliefs about European job security and employer loyalty in general

• Fintech unicorn Klarna announced a moratorium on hiring, citing its belief that in a world of AI each team member should be significantly more productive

• While many Limited Partners (LPs) have shied away, Calpers (the California Public Employees’ Retirement System) - one of the largest - has leaned into venture with $4.5 billion committed this year under the belief these market conditions will produce an extraordinary vintage