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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 | 21.03.24

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This week, Microsoft's bold move to swallow Inflection whole — despite them raising a whopping $1.3 billion — paints a stark tableau of the AI market's cutthroat terrain. The aftermath? Reid Hoffman and crew, now tasked with salvaging what's left amidst the ruins of Microsoft's latest conquest.


Meanwhile, Reddit's IPO took a dive from $10 billion to $6.4 billion — hinting at a potential shift in Silicon Valley from investment frenzy to sustainable growth. The VC landscape is evolving too: with Series B funding rounds reaching record heights (yet now 85% more difficult to close), and Series A funding decreasing by 21%, indicating a more cautious VC market bracing for future uncertainties…


Read on to find out more — including the countries trying to steal UK and EU AI-startups, a top investors guide for ‘smart AI investment’, and why women-led startups have found themselves with a mere 0.7% of the £10.5 billion AI investment pie since 2010.

—Charlie and the Research & Intelligence Team


The investment ecosystem

🍴Inflection eaten alive by its biggest investor, Microsoft, sees its co-founders and team absorbed into Microsoft's new AI division despite raising $1.3 billion for AI development. The takeover leaves Reid Hoffman and the new CEO to rescue what's left, highlighting the brutal AI market competition and Microsoft's aggressive acquisition tactics.


📉Reddit's IPO reveals a reality check for Silicon Valley, valued at $6.4bn, down from $10bn in 2021. The drop reflects a broader trend towards more grounded valuations and a correction from the investment excesses of 2021, signalling a healthier approach to growth in the tech sector.


🔒Late-stage VCs are partly responsible for the delay in startups going public in 2024, as their deal terms grant them the power to block IPOs. This reluctance stems from several factors, including the necessity for valuation alignment, challenging market conditions, and the availability of secondary market liquidity options.


📈Series B getting bigger, but harder to raise: New data shows that while Series B funding rounds have increased in size in 2023, reaching a record high average of £35m, they are also taking 85% longer to close compared to the first half of 2022. At the same time, Series A round sizes have decreased by 21% in the latter half of 2023. 


💼Sacked Social Capital partners push back over their AI investment dismissal, challenging their termination linked to selling interests in Groq, a company with a valuation over $1bn, without approval. The partners are now exploring legal avenues to recoup alleged owed funds.


Chart of the week

Q4 2023 saw record-breaking investment in AI & ML, totaling $895.8 million across 23 deals. Whilst Series A rounds are leading funding, seed-stage companies comprised half the deal count, signalling an upward trend expected to extend into 2024.


How AI is transforming investing 


🤖Silicon Valley has a growing interest in niche AI applications, highlighted by Hippocratic AI's recent $500 million valuation. The startup, just a year old, is pioneering AI "agents" to assist in healthcare settings, focusing on enhancing hospital and clinic operations without compromising safety. 


🧠Top investment manager details the ‘smart way to invest in AI’ The key to success? Not just backing the companies developing AI, but backing those providing the necessary infrastructure needed for AI to grow — leading to a strategic, diversified investment approach. 


👩‍💼UK-based women-led AI startups receive just 0.7% of the £10.5 billion invested in the AI software sector since 2010, underscoring a significant gender gap in VC funding. Research shows female-founded AI companies raise 6x less capital per deal compared to male-founded counterparts, with 95.5% of VC decision-making teams being majority male.


🚀Analysts revamp Nvidia price targets post Blackwall launch, as the company unveils advanced chips to cement its market dominance in the $1 trillion AI market. Analysts hail the launch as one of Silicon Valley's most ambitious projects, further distancing Nvidia from competitors like AMD.


🌍European and UK AI startups are being targeted by rival countries, including Canada and the UAE, offering relocation incentives. These nations propose benefits like subsidies, lenient tax regimes, and light regulation, aiming to become significant players in the AI industry outside the US and China.

📍The Top 10 startup hubs in Europe, identified by The Financial Times, Sifted, and Statista, highlight the UK's dominance with half of the top hubs and a strong showing from Germany and Spain. Leading the pack is Munich's UnternehmerTUM, while SETsquared and Eura Technologies stand out in the UK and France, respectively.




Noteworthy deals

  • Cure51, a startup focused on improving cancer survival rates by analysing long-term survivor data, has raised €15m in a seed round led by Paris-based Sofinnova Partners.

  • Candela, a Swedish startup developing "flying" electric boats, has raised €24.5m in funding led by Groupe Beneteau with participation from EQT Ventures and Ocean Zero LLC.

  • Ada Ventures closes a £63m second fund focused on diversifying the VC landscape by investing in early-stage UK startups with an emphasis on backing founders from underrepresented backgrounds.

  • Sooma, a Finnish startup specialising in an alternative depression treatment through a 'wearable cap,' has secured €5m in funding to fuel its expansion across Europe and the US. The investment round was led by Voima Ventures.

  • Innatera, a Netherlands-based semiconductor company specialising in neuromorphic chips for edge applications, has raised €15m in a Series A funding round.


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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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