Nicolaj Højer Nielsen’s Post

The venture capital market has a lot of contradictory signals today (I.e. valuations are down, but AI feels like 2021 again, seed deals are down, but valuations are up). So what does the data say? Join us tomorrow at 10am PST tomorrow to find out why our theme is "A Tale of Two Cities" Link in the comments below. Hope you can join us.

Three Trends in Private Secondaries 1. Global Start-Up Capital Dries Up The global venture capital landscape experienced a dip for the sixth consecutive quarter. In Q2 2023, total VC investments shrunk to $77.4 billion across 7,783 deals down from $86.2 billion across 10,121 deals in Q1 2023. This trend can be attributed to multiple factors such as rising interest rates, increasing inflation, and geopolitical issues like the ongoing war in Ukraine and worries about the stability of the global banking system. In addition, it’s also possible that pre-2022 valuations were simply not rooted in sound financial judgment. In 2023, buyers are on the hunt for so-called "Proficorns", privately held startups valued over a billion dollars that are profitable (or have a clear path to profitability). Such companies are scarce, leading to a global stampede that has pushed up prices of those few unicorns with strong underlying fundamentals (AI is an exception, see below). This dearth of capital is also leading to a wave of consolidation in the tech and software sector, as startups are left without a clear path to liquidity. The Financial Times explored this trend by highlighting Databricks purchase of MosaicML for $1.3 billion, Thomson Reuters' $650 million acquisition of Casetext, Robinhood of X1 for $95 million, and Ramp taking over Cohere.io. 2. Crypto Falls as AI Rises Private crypto companies are among those seeing the steepest decline in secondary market prices. Buyers are increasingly distancing themselves from the sector, following the lead of firms such as Sequoia Capital, which cut its crypto fund by 65.8% to $200 million from $585 million. These cuts are reactions to several catastrophic events in the crypto market, beginning with the Terra/LUNA collapse and the bankruptcy of FTX. Meanwhile, Artificial Intelligence (AI), especially generative AI, has witnessed a swell in investor interest following the launch of OpenAI’s ChatGPT. The U.S. saw substantial AI investment with Microsoft-backed Inflection raising $1.3 billion, Silicon Valley startup Anthropic securing $450 million, and OpenAI raising $300 million. Europe followed suit with growing investor interest in AI and deep learning technologies. UK-based Quantexa achieved unicorn status by securing $129 million in funding. 3. Surge in Secondary Market Transactions, Particularly in AI Open AI, Anthropic, Hugging Face, Databricks and other companies in the AI space have seen a surge in interest from buyers, and the secondary market is often the only way to access these shares. Business Insider recently highlighted this trend, pointing out the increased interest in markets where stakeholders such as founders, employees, early investors, and VC funds offload their startup shares ahead of an exit or IPO (my broker-dealer, Rainmaker Securities, specializes in such transactions). Read full at https://lnkd.in/dNUfeSzK  

Silicon Valley Bank's H1 2024 State of the Markets Report goes live today - and it's incredibly good. A few key takeaways below, and you can download the full report here: https://lnkd.in/ez3-6-JJ AI: 1 in 4 funds closed in 2023 had a stated focus in AI; and AI accounted for 1 in 5 VC deals in 2023. DOWN ROUNDS: Over 60% of companies that raised a down round since 2016 have gone on to raise another equity round—good news for the 1 in 4 Series D+ companies raising down rounds in 2023. $$$: Revenue growth for companies that successfully raise a series A has fallen from 176% in 2020 and 2021 to 127% in 2022 and 2023. VALUATIONS: Seed Valuations have increased 25% since 2021 despite every other stage experiencing declines — with series D+ valuations falling 59%. RUNWAY: The typical early-stage company has just 10.3 months of runway; with sectors like frontier tech falling to just 7.4 months of runway. GROWTH: For companies successfully raising venture deals, revenue growth has slowed by 36 to 42 percentage points depending on the company size. BURN: Nearly 70% of startups reduced net burn year over year in 2023, leading to an overall improvement in EBITDA margins for VC-backed tech companies. EXITS: 21% of companies exiting today via M&A are selling for less money than they raised.

"Are these graphs looking scary? Yesterday, I gained insights into what to expect in the current venture markets at the "AI & Innovation Revolution Conference": 1️⃣ Venture markets aren't going back to 2021. 2️⃣ There's a more cautious funding environment - all stages are affected by the downturn. 3️⃣ While AI impacts the tech industry, it hasn't changed the overall funding slowdown. 4️⃣ The venture markets are paused until investors regain some liquidity. Securing funding is as tough as battling for survival or lifting off the company you're building. Therefore, we have to support each other at these times. Let's take action and make introductions to investors for our founder friends' companies. Together, we can help founders navigate these tough times and emerge stronger #DontGiveUp #Resilience"

Signals indicate that the recent downturn in #venturecapital may have hit bottom. Just as #privates trailed the public market correction in 2022, we believe they will follow its recovery, and cycle-tested private managers who have weathered the storm may have a bright year ahead. See our full 2024 VC outlook here: https://lnkd.in/ekTDdHet

Prepare for lift-off as we venture into a brave new world ushered in by none other than Arjun Sethi, co-founder of Tribe Capital. You heard it here first folks: "in five years, I’ll have 50% of the world’s private data!" Check out our blog on why his bet is far ahead of the pack in the market-making game: https://lnkd.in/ex3R3mDp 📲 Sethi's grandeur is not just for show but shaped by Termina, Tribe Capital's tantalizing AI software platform. This game-changing technology is on a sky-rocket trajectory to redefine investing by sending seismic waves in the marketplace 🔥 👴 Now, let's unravel Termina's magic. This novel platform comes with two main products. A nifty dashboard that empowers investors, and a second product that unleashes an army of predictive tools. One stop shop for investors looking to own the future 🖥 📈 Despite being a belated entry in the tech world, Termina has sparked industry titans' imagination. Sethi’s unwavering claims further bolster Termina's marketplace prowess. Brace yourselves for a Tsunami in the investing sphere! 🌌 🚨 So, what does the future behold? Will Termina restructure the private market landscape? We'd love to sift through your thoughts. Until then, keep an eye on Sethi's next move and dive into our blog for more exhilarating insights! 📐 #ArjunSethi #Termina #TribeCapital #InvestmentTrends #TechInnovation #MarketRevolution #AI #PrivateData #AlightRead

New Year, New Wave of #Unicorns as Valuations Reset and Rate of Losses Slows. Our January Private Market Update is hot off the press. Read more on the potential outlook for the #PrivateMarket this year at https://bit.ly/3D3weUn #ForgeGlobal #privatemarkets #startups #shareholders #investors

Signals indicate that the recent downturn in #venturecapital may have hit bottom. Just as #privates trailed the public market correction in 2022, we believe they will follow its recovery, and cycle-tested private managers who have weathered the storm may have a bright year ahead. See our full 2024 VC outlook here: https://lnkd.in/g-6JcHbG

Some interesting data in here on the state of the startup markets for the first half of 2024. #4 is an interesting one, more and more it's looking like anyone saying that the AI buzz is all hype are finding out that it's not, it really is a foundational change and where investors are continuing to focus. "While recent investment activity may reflect some over-hype, AI has the potential to become a horizontal platform that crosses all industries" Spot on.