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Future of Capital Allocation

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The week's developments in investing & technology, explained | 4.10.23

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Caution is the name of the game this week, as the FCA reviews private market valuations, VCs warn startups to delay IPOs, and US investors work with government to regulate AI investing. 


The latter is an attempt to subvert the “move fast and break things” spirit that has long dominated Silicon Valley. The impetus drove the rapid rise of social media technologies without consideration for risks like misinformation and mental health problems — and could lead to a much bigger fallout with AI. VCs are being asked to consider governance, risk mitigation, privacy, and security when conducting due diligence. But how do you effectively design regulations for AI investing?


Check out these stories and more — from a report claiming that European VCs outperform the Americans, to how the US is luring chip makers away from the UK.


—Charlie and the Research & Intelligence Team


The investment ecosystem

🇪🇺 European VCs outperform Americans: Since 2002, Europe’s funds have achieved a net annual return of 12.7%, compared to US VCs’ 12.3%, according to an Invest Europe report. (US VCs are dubious.) 


💰UK regulator to assess ballooning valuations: The Financial Conduct Authority will launch a sweeping review of the “disciplines and governance” presiding over private market valuations, amid growing fears of the impact of higher borrowing costs. 


⛔VCs caution startups to delay IPO plans: After Arm, Klaviyo and Instacart all saw underwhelming debuts, VCs are advising their portfolios to postpone going public in the US in the current interest rate environment.


Chart of the week

In 2023, UK transportation and robotics startups led in early-stage VC funding, surpassing old favourites l fintech and health-tech.


How AI is transforming investing 


📈 US VCs work with government to “self-regulate” AI investing: A group of firms is working with the Commerce Department to develop responsible guidelines for themselves and their portfolio companies. It’s an attempt to correct the “move fast and break things” philosophy that drove the rapid rise of social media startups. 


💸AI startups are still snagging huge valuations with low revenue: 74 AI companies have closed rounds with valuations of $100 million or more since 2022. 95% of these startups make less than $5 million a year, but investors say that it’s still too early to expect meaningful revenue — potential is what counts.




👩‍💻US lures UK semiconductor startups: In the race to beat France on AI, has the UK forgotten about its semiconductor sector? The US hopes so, as it attempts to entice UK chip makers overseas with the promise of £41 billion in government subsidies.


♻️Most UK startups do nothing on climate: 76% of the top 500 VC-backed startups — which have altogether raised £33 billion — have no measures in place to assess or offset their carbon emissions. Fintech companies scored the highest on climate-friendly measures. 




Noteworthy deals

  • London mortgage lender Perenna raised a £43m round led by Silverstripe Investment Management.

  • Sitryx, an Oxford-based startup that develops therapies for chronic diseases, raised £22.5m from a series of investors including Oxford Sciences Enterprises.

  • Amsterdam startup Framer — a no-code website builder — raised a £22.3m Series C round led by Meritech Capital Partners.

  • Cambridge content moderation startup Unitary AI raised a £12.4m round in a Series A led by Creandum.

  • London fintech Apron raised £10.4m in Series A funding in a round led by Index Ventures.

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Disclaimer: This content is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice.

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