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Future of Capital Allocation

Your weekly newsletter on the fast-evolving world of investing

 
The week's developments in investing & technology, explained | 25.10.23

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The VC downturn persists, but the economy is seeing glimmers of hope — from an upswing in private equity to the unrelenting growth of AI. AI startups brought in nearly £15 billion in global funding in Q3, soaring 27% from last year, and GenAI startups made up 60% of newly minted unicorns.


Get a closer look at Europe’s unicorns in our chart of the week, which maps their spread across the continent.

 

Meanwhile, we highlight systemic barriers and biases in VC, including falling funding for Black founders and women’s (unsurprising) pessimism about fundraising.

Finally: what type of VC is seeing almost no slump at all? And what secret ingredient makes European startups 10 times more likely to secure funding? Read on to find out.

 

—Charlie and the Research & Intelligence Team


 

The investment ecosystem


UK VCTs defy downtown: Global VC funding is down 50%, but venture capital trusts only saw a 4% dip in 2023. With their tax benefits and stable, long-term funding, VCTs are a  beacon for startups suffering through a fundraising desert.

 

🛎️ European private equity catches a break: Last quarter was slow for dealmaking, but PE exits continued to rise for the second consecutive quarter — and financial services deals grew by a staggering 244% year-on-year. Is it too soon to call it a recovery? 

 

💸 Black founders face systemic barriers: Their share of US funding fell from 1.2% to 0.1%, highlighting the continued — and clearly worsening — discrimination problem in VC. Funding to Black founders has been falling since 2020, highlighting the need for corrective action. 


🚀 CogX Festival 2024 super early bird tickets: A limited number of Festival tickets are up for grabs at a whopping 75% off. Grab yours at the discounted price now — before they disappear!


 

Chart of the week



Europe is now home to more than 23 AI-driven unicorns. The UK remains the undisputed leader in the AI unicorn race, with nine minted so far. France and Germany follow with three unicorns each.


Any thoughts on why London attracts so many AI startups? Is it the UK’s AI ecosystem, research institutions — or something else? Hit reply and let us know.


 

How AI is transforming investing 

 

🤖 AI: VC’s lone bright spot? Amid a funding drought, AI startups pulled in £14.7 billion in Q3 — a 27% increase in global funding year-on-year. Rising interest rates and a post-pandemic slump continue to hammer funding in other sectors.

 

🦄 GenAI breeds unicorns: 60% of the companies awarded billion-dollar valuations in the last year were in the generative AI space. While the majority of funding went to the US startups, European talent is driving research: they produced 50% more AI journal publications than Americans. 



Startups


👩 Are founders optimistic about VC? Depends on their gender: 70% of male founders are hopeful about fundraising, but only 45% of women share the sentiment, according to a January Ventures survey of North American and European founders. (This may have something to do with the fact that women receive less than 3% of all VC investment.)

 

📃 Patents are startups’ golden ticket: European startups holding IP rights during their seed or early growth stages are up to 10 times more likely to secure funding. 29% of startups in Europe have filed for patents or trademarks; many of them are in biotech, engineering and healthcare. 


 

Jobs



 

Noteworthy deals


  • Quantum Systems, a Munich-based startup developing AI-powered drone robotics, raised £55.5m in Series B funding led by HV Capital.

  • Gen AI-driven video platform Oxolo raised £11.3m in Series A funding led by DN Capital.

  • Ternary, a cloud management startup, raised £9.9m in a Series A funding round led by Jump Capital.

  • Spain-based AI chatbot startup Luzia raised a £8.2m Series A round led by Khosla Ventures.

  • London-based pet tech startup Creature Comforts raised £6.9m in seed funding co-led by Torch Capital, Hanaco VC and Boost Capital Partners.


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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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