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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 | 7.12.23

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Are VCs slowly morphing into private equity firms? Secondary funds just topped $64 billion this year, as VCs "reset the clock" on ageing portfolio companies in a race to return cash to investors.


Meanwhile, Elon Musk's new AI startup X.Ai is looking to fundraise over $1 billion from investors, according to a SEC filing last week. Plus, recent monster deals have flooded the AI startup scene, signalling a bullish market. But are the top-level numbers misleading?


Read on for more, including why thematic investors are missing the mark on their trading strategies — and an expert’s advice on expanding a product to new markets.

 

—Charlie and the Research & Intelligence Team


 

The investment ecosystem


💲VCs out, private equity in? Silicon Valley VCs are rushing to set up secondary funds to "reset the clock" on old assets and return cash to investors, à la private equity style. With $64 billion poured into secondary funds this year alone, the line between VCs and PE is blurring.

 

📉 Thematic investors are losing big on their trades: Buying high and selling low meant thematic fund investors missed out on over two-thirds of potential returns in the past five years. To close the gap, experts recommend adopting a long-term approach and diversifying exposure.

 

🌱 Is climate tech taking over the construction sector? Despite the funding winter, climate tech grabbed over 70% of VC investments for the built sector — up from 20% five years ago. Pressures from regulators to decarbonise the real estate sector have contributed to this boom.


 

Chart of the week


The global AI software market is expected to grow rapidly, forecast to reach £100 billion by 2025. This overall market encompasses a wide range of AI applications including natural language processing, robotic process automation, and machine learning.

 

How AI is transforming investing 

 

🤖 Is the AI boom just another gold rush? From CoreWeave's $642m secondary sale to Aleph Alpha's $500m series B, eight-figure rounds have flooded the AI startup scene as of late. But while mega-deals signal a bullish outlook on AI, they may be giving a misleading picture of the health of the sector.


💸 Musk's X.Ai files for a new funding round: According to an SEC filing, Elon Musk's latest startup endeavour X.Ai is starting a $1 billion funding round this week. With a focus on developing AI for scientific discovery, the startup has already secured $135m from investors.


Startups


🗣 Want to expand your product to a new market? Identify early adopters, tailor the product to your customers’ needs, and build a local team, said Jon Jain, head of product at healthtech Birdie. He advises founders to focus on cultural adaptation to establish a strong market presence.

 

💰 NATO selects 44 startups for its pioneering accelerator program: Offering €100k grants, the programme's first cohort is focused on three main areas: energy resilience, sensing, surveillance, and secure information sharing. Among the selected startups, 30 are European — including seven from the UK.

 

Jobs



 

Noteworthy deals


  • France-based AI data software startup Braincube raised £71m in equity investment led by Scottish Equity Partners.

  • ArmorCode, a cybersecurity platform for apps and software, has raised £32m in a series Bled by HighlandX.

  • Prague-based data platform Keboola raised £25m in series A round led by Viking Global Investors.

  • Australia-based GenAI art platform Leonardo.Ai has raised £24m in a funding round led by Blackbird.

  • UP Catalyst, an Estonia-based startup developing sustainable nanomaterials has raised a £3.4m seed round led by Extantia


 

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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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