Pre-Money: Feb 12th, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• Disney is going deep into gaming: Movie maker and streamer Disney is investing $1.5B into pre-IPO startup Epic Games, drawing it further into the world of gaming. Epic, maker of Fortnite and the Unreal Engine 3D creator tool, has worked with Disney to bring Expanded Universe (EU) characters from Marvel, Star Wars and others into its game-worlds. The two will now step it up to create original worlds and characters together. The post-money valuation of Epic, once reported to be above $32B, is now said to sit at $22.5B. The company’s price likely took a dive during its legal battle with Apple, but surged again once it prevailed. The partnership should help Disney as well, since anyone that watched its latest Star Wars series knows they could use some help with plot and character development. Stay tuned to see how this deal impacts Epic’s IPO or acquisition prospects.

  
  

  

• OpenAI keeps raising the bar, and others follow: This week OpenAI Chief Sam Altman was said to be raising $7 trillion for an AI chip fab. Yes, that’s a T, not a B. This quest by the founder who two months ago was on the outside looking in and is now decidedly back at the helm, illustrates both the extreme market potential to be enjoyed by winners in AI and the capital-intensive arms race the industry has now entered. To provide re-assurance on the former point, the company was said to be running at an annualized $2B revenue pace at the end of last year. To back up the second point, they are said to be nowhere near operating at break-even. And the industry lacks the needed chips to scale up smoothly. Not to be outshone, Elon Musk is reportedly raising $1B on a $15-$20B post-money valuation for his xAI initiative, leveraging his extraordinary founder portfolio as well as OpenAI’s momentum to close it.

• Women on the rise: Venture funds with at least one female partner raised more than $3.5B last year, according to the Venture Capital Journal. That’s a $500M increase over the prior year, despite overall funding dropping. Female GPs closed 86 funds, signifcantly more than the 36 which closed the prior year. While this represented a meager 3% of the overall capital raised by funds, it was also a big jump from the prior year’s 1.7% and the start of an encouraging trend.

• Receipts from last year are in and it still looks bleak: Everyone is relieved 2023 is in the books, and in retrospect it looks just as gloomy as it felt. Raises were fewer and further between, smaller, and - at least in the later stages - done at lower prices. Cash distributions, the lifeblood of venture, reached a 14 year low to boot. It’s still early but 2024 has a decidedly better feel to it, with markets rallying and ample helpings of positive news. But even so, a month and a half into it, the most active venture investors are still taking it slow. With elections and some big Fed decisions ahead, companies must remain lean and nimble, but be ready to move fast when the tide shifts more markedly.

Deal Points

A few items of interest

• A look at the aftermath of the acquisition called off between Figma and Adobe reveals the frustrations, challenges and markdowns that often result after a corporate marriage falls apart at the altar

• In a sure sign of valuations recovering, Softbank’s vision Fund gained $4B over the past quarter with strong performances from ByteDance, Didi and other holdings

• As cybersecurity concerns grow, Ninja One, which helps businesses secure the devices on their networks, raised $231.5M Series C at a $1.9B valuation from Iconiq Growth and big data execs

• Sidewalk delivery robot maker Starship Technologies raised $90M in a round led by Plural and Iconical, and said it completed more than 6M deliveries across the US and Europe

• While fundraising remains a slog for most funds, Sequoia continues to rake in the billions, boosting its assets to almost $18B

• The repricing of startups, as Tom Tunguz phrased it in a blog post, has AI companies trading 3x higher than non-AI companies at the early stage

• It’s been a minute since fintech has been in vogue, but a number of formidable companies are lined up to IPO in the next wave, including Stripe, Plaid and Klarna

• Some venture capitalists are reportedly getting frustrated by the crowding out effect created by corporate investments into AI companies

• The US House of Representatives released a scathing report accusing VCs like GGV, Sequoia and others of funding Chinese military and defense-linked businesses

• Sophisticated investors from leading investment firms are diversifying their personal portfolios with 10 East.**

_{** Sponsored Link}