VC fund performance is down sharply — but it may have already hit its lowest point

Venture capital has been hit hard by souring macroeconomic conditions over the past few years and it’s not yet clear how the market downturn affected VC fund performance. But recent data from the San Francisco Employees’ Retirement System (SFERS) give us something to chew on.

SFERS’s venture portfolio recorded a -.9% internal rate of return last year through the third quarter, according to data from the pension fund’s May 8 meeting. The data also highlighted that the venture portfolio recorded a 48.8% IRR in 2021 and -19.9% return in 2022. READ MORE

AI washing: A Microsoft VC’s warning about dubious, and rising, corporate artificial intelligence claims

The artificial intelligence landscape is teeming with players, and they’re not all legitimate. Some are practicing something called “AI washing,” which Securities and Exchange Commission chair Gary Gensler explained in a video includes “false claims to investors by those purporting to use those new technologies.”

In the financial space, the SEC fined two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., a total of $400,000 in March for what the SEC described as marketing AI-enabled investment predictions to their clients when they were not actually using this technology. (The companies paid the penalties and accepted SEC orders without admitting or denying the Commission’s findings.)  READ MORE

Chinese venture capitalists warn IPO freeze will hit innovation

Chinese venture capitalists have warned the country's IPO freeze is starving tech startups of funds by keeping market participants locked into existing investments, undermining Beijing's current push to lift innovation in the economy.

Venture capital firms said at the three-day ChinaVenture Investment Conference in Shanghai that they were struggling to recoup investment through the traditional route of initial public offerings. READ MORE

What the slow pace of venture capital deals in Q1 2024 means for startups

While the market continues its retreat from the highs of 2021, funding for VC-backed companies saw an uptick in Q1 2024, increasing 12% from the $29.4b raised in Q4 2023. Deal volume saw its lowest levels since 2012, as investors scrutinize value propositions and look for clear paths to growth from founders. The only exception to that rule are companies in the artificial intelligence (AI) space. AI-related companies raised $5.6b in Q1, which accounted for 17% of VC investment this quarter. Prior to last year, AI represented 10% of investment on average between 2013–22. READ MORE

The stealth path of profitable efficient growth

In 2015, I stood at a crossroads in Silicon Valley, a place where the pursuit of venture capital was the yardstick of success. Faced with the choice of chasing after VC dollars or embracing the road less traveled of bootstrapping, I chose a path fueled by a desire for autonomy, profitability, and sustainable growth. This journey challenged the prevailing wisdom, pushing me to redefine what success in the tech world could look like.  READ MORE

VC Funding May Be Down, But Here’s How Impact-Focused Startups Can Score Big

As global startup funding experiences a downturn, with Q1 2024 marking one of the lowest points since 2018, the landscape for entrepreneurs seeking investment has become increasingly challenging.

In these uncertain times, investors are placing greater emphasis on startups that offer tangible solutions to pressing societal and environmental issues. As a result, sustainable startups in this climate have a unique opportunity to shine by aligning their missions with the growing demand for impactful investments. READ MORE

Riding the continuation fund trend in venture capital

Continuation funds are taking hold in venture capital.

Driving the news: Lightspeed Venture Partners has a term sheet from a lead investor and is hoping to wrap things up by July, while NEA is quietly working on its own vehicle, Axios has learned.

Why it matters: Historically rare in venture capital, they've been getting more attention recently as firms look for new ways to navigate the market downturn and ongoing lack of liquidity.

The big picture: Continuation funds have been a staple of the private equity world, typically used to manage one or a few assets. READ MORE

Four secrets to unlocking venture capital

Securing venture funding is an intricate dance of presentation, persuasion, and perception. It’s an art. As an experienced investor in AI, tech, and biotech startups, I’ve observed a pattern among the successful ventures I’ve backed.

These companies, each unique in their offerings, share four distinct traits that set them apart in the competition for venture capital. I offer you, today’s emerging entrepreneurs, a roadmap to both capture the attention of venture capitalists and forge strong, enduring partnerships that go beyond financial transactions.  READ MORE

Inside the mind of the best VC investor ever

Michael Moritz made an unusual career change, from a successful journalist to the best venture capital investor in history. He was the first to identify startups that would change the world, from Google and Yahoo to YouTube and PayPal. In an exclusive interview, he talks about the Israeli mistakes that have helped Hamas control the October 7 narrative, the struggle on US campuses, and his predictions for the AI sector. READ MORE

The Current Landscape for Private Equity Investment: What Entrepreneurs Need to Know

What do entrepreneurs looking for private capital investment need to know in today’s economic climate? Procopio Mergers & Acquisitions and Strategic Joint Ventures co-leader Jason Femrite dove into that topic in a Q&A with Craig Dupper, Managing Partner of Elan Growth Partners LLC. They discussed the current private equity landscape, tailored growth strategies, and working capital optimization, while providing advice to company leaders looking to engage with a private equity investor. READ MORE

Confidence of a better year surges among private equity execs

A global survey of PE executives shows that 60% are expecting deal activity to improve this year, a sharp rise from the 36% who felt the same a year ago. The S&P Global Market Intelligence report also found that optimism is strongest among smaller and mid-tier PE firms compared to larger peers.

There’s good news too for fundraising with just 15% of general partners feeling that things to be worse this year, one third of the percentage that said that last year. But venture capital professionals are concerned that limited partners may reduce their allocations, while 68% of these respondents expect deal activity to improve in 2024. READ MORE

M&A Is The Key To Unlocking Startup Liquidity This Year

The venture capital ecosystem faces a severe liquidity crunch. But although the IPO market shows new signs of life, startup investors should be looking to M&A this year to bring more capital back into the system.

That’s the view from Ryan Hinkle, managing director at New York-based startup investor Insight Partners, one of the most active investment firms in the bull run in private tech companies in 2021 and into the first half of 2022, when the firm announced its $20 billion fund, its largest to date. READ MORE

Solid US Space Mining Regs Could Attract Investors, VC Predicts

Mining in orbit is getting closer to becoming a reality and, with business prospects protected by policy—at least in the US—one investor is predicting the dollars will start rolling in. 

“My hot take is that there are too many investors sleeping on space tech because they are too risk averse,” said Katelin Holloway, a founding partner at 776 venture capital firm, which invested in both Astroforge and Interlune. “In order for this to work for you, you have to be confident enough to make a big bet. You have to be willing to trust that the rules and regulations will follow.” READ MORE

VC-Backed Founder Pitches Shark Tank And Wins Big. Is This A Trend?

Millions of Americans tune into the popular tv show Shark Tank, to watch ambitious entrepreneurs pitch an investment opportunity to a panel of celebrity angel investors. And while entertaining and educational, the deal terms are notoriously harsh and far worse than what is standard for a typical venture capital (or, VC) investment. According to Yahoo Finance, the average Shark Tank investment per deal is just over $300,000, with average equity taken at 24.99%. On the other hand, it is not uncommon for start-ups with no product or market validation to raise what is called a “pre-seed round” of $2-3 million in venture capital, at a $6-8 million pre-money valuation, giving up around 15-20% of the business. READ MORE

The Macro-Economic Environment: What It Means for VC Firms

Hope for a resurgence during 2024 in Venture Capital fundraising, investment, and returns was strong at the beginning of this year, with optimism fueled by the recovery in 2023 of U.S. stock markets (lead by the performance of large tech companies) and anticipation about how AI might transform industries. Market observers were optimistic then that U.S. venture investment activity would pick up significantly from 2023 levels, which—based on PitchBook data—had reverted to the lower average level of investment seen during the period of 2018-2020 as compared to the robust levels of activity seen in 2021 and the first half of 2022. This hope was centered in large part on expectations about how the Federal Reserve would begin lowering interest rates. READ MORE

AI Funding Stays Strong Despite Few Billion-Dollar Rounds

The slowdown some predicted for AI funding did not play out in the first quarter.

Venture funding to AI-related startups actually increased in Q1 2024 compared to Q4 2023, Crunchbase data shows. The first quarter saw $12.2 billion invested in venture-backed AI startups in 1,166 deals. The dollar number represents a modest 4% uptick from last year’s final quarter, which saw $11.7 billion go to similar startups in 1,072 deals. READ MORE