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Future of Capital Allocation

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The week's developments in investing & technology, explained | 19.10.23

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Tech VC funding is down 57% year-on-year in the UK. We’re seeing the effects ripple across this week’s news — from the rise of spinouts over IPOs, to the pressure founders are facing to pay investors for taking a board seat.


Concerning data from Alan Turing sheds light on venture capital’s diversity problem: women-led AI startups in the UK scored just 2% of funding deals over the past decade, its analysis found. California is implementing policy to correct its male- and white-skewed investment ecosystem: new legislation mandates that VC firms report on the diversity of the founders they back.


Read on for more, including why investing in tech for good remains a top priority for UK angel investors and which cancer techs are drawing the most VC interest.


—Charlie and the Research & Intelligence Team


The investment ecosystem

✨Can tech for good withstand the downturn? Despite the sharp decline in funding, only a quarter of UK angel investors say they’ll do fewer deals in 2023, according to a new Bethnal Green Ventures report. Just 8% expect to reduce investment in tech for good: startups that use tech to tackle social and environmental problems.


🌪️IPOs are out; spinouts are in: Market volatility, a spike in bond prices, and political turmoil in the US have led to underwhelming recent debuts. Spinouts carved out of a larger parent company are seen as safer in a risky climate — if less exciting


🛎️VC firms must release diversity data in California: Bill 54, signed into law last week, will require firms to report annually on the diversity of the founders they back. It’s the first piece of US legislation aimed at diversifying who receives investment. Should Europe look into similar mandates?


Chart of the week

The UK’s AI sector is poised for significant growth, with a projected market value of £21.2 billion by 2030 — an annual growth rate of 15%. Machine learning is set to see the biggest explosion, followed by natural language processing and autonomous sensor technologies.


How AI is transforming investing 


 ♀️ Men are getting rich from AI: Women, not so much — according to new Alan Turing research that found female-led AI startups snagged just 2% of funding deals in the UK over the last decade. Experts warn that the funding gap will hinder efforts to reduce bias and discrimination in AI. 


🤖 AI is a top investment priority for CEOs: More than two-thirds said so in a KPMG survey. 62% of US CEOs surveyed expect to see a return on their investments in three to five years.



💸 Think twice before paying investors to sit on your board: With tech VC funding down 57% in the first half of the year in the UK, founders are being more flexible about valuations and terms. But agreeing to compensate advisors for taking a board seat can be short-sighted — and even unethical. 


💊 The startups taking on cancer: Investors are most interested in backing AI tools for imaging and diagnostics, followed by clinical trial and data management software, analysis by Sifted found. But, in line with recent trends, late-stage funding for cancer tech has taken a hit.




Noteworthy deals

  • Saronic, a US startup developing autonomous ships for defence, raised £44.8m in a series A led by Caffeinated Capital.

  • Lyon-based battery recycling startup Mecaware raised a £35m Series A round led by Crédit Mutuel Innovation.

  • Paris cybersecurity startup HarfangLab raised £21.6m from Crédit Mutuel Innovation, MassMutual Ventures and Elaia.

  • UK elder care marketplace Lottie raised a £17.1m Series A led by Accel. 

  • London-based DeFi startup Ostium Labs raised a £2.9m seed round led by General Catalyst and LocalGlobe.

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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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