The week's developments in investing & technology, explained | 28.03.24

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This week, the financial stage is set with US small-caps taking a historic hit against large-caps, hinting at a potential comeback amid favourable conditions and looming interest rate cuts. Plus The investment world buzzes as Venture Capital Trusts witness a late surge in funding, driven by investors eager to capitalise on tax incentives before the April deadline, despite a significant overall decrease this year.

Meanwhile, a revealing survey shows that 91% of investment managers are now either utilising or planning to incorporate AI into their strategies, signalling a major shift as regulatory challenges loom large. The spotlight also shines on a study of US and UK unicorn founders, showcasing a majority of "underdogs" at the forefront, with an increasing presence of female founders and a strong educational pedigree, reshaping the VC landscape. 

Read on to find out more — including the Yen’s 34-year old low, how AI can boost sustainable investing, and Donald Trump’s $4.6bn social media market stake..

—Charlie and the Research & Intelligence Team

Ps. We’ve just launched The CogX Transatlantic Accelerator; a joint campaign with the UK Government to connect the most innovative UK startups with US markets. If you are or know a UK startup they can apply for over $20k worth of support to attend, exhibit and network at CogX Festival in LA on 7th May here

The investment ecosystem

📉 US small-cap stocks suffer the worst run against large-caps in over 20 years, likely due to high interest rates and investor shift towards big tech. With potential interest rate cuts, small-caps are trading at steep discounts, indicating a possible rebound and favourable future returns.

💸 Donald Trump's social media company surged 26% in pre-market trading ahead of its NASDAQ listing increasing Trump’s stake value to $4.6 billion. The merger and upcoming listing, however, have been overshadowed by delays and ongoing federal investigations.

🏦 Late surge of investment into Venture Capital Trusts (VCTs) as tax year looms, with investors rushing to capitalise on tax relief and exempted dividends before the April deadline despite a 19.8% decrease in overall funding for the year. 

💹 Japanese finance officials gather after the yen hits 34-year low against the dollar in 34 years. The Ministry of Finance has signalled readiness to take bold measures, which may include direct market intervention, a step taken last year at a significant cost to support the currency. 

💰 Microsoft in a $650 million deal with Inflection AI secures technology and averts poaching disputes, offering VCs favourable returns. Inflection's investors will profit and maintain equity even as the company transitions to an AI support role. 

Chart of the week

Venture capital investment in Foodtech declined significantly in Q4 2023, with the largest funding drops in online grocery, food waste, and fermented protein. Categories like novel ingredients and molecular engineering saw funding increases, suggesting a shift in investor focus amidst a challenging exit environment.

How AI is transforming investing 

🌍 AI can boost sustainability investing, equipping companies to navigate and excel in the rising tide of global ESG mandates. As firms adapt to stringent EU and US disclosure rules, AI's role in refining ESG metrics, assessing risks, and modelling emissions becomes indispensable. 

📊 Survey shows 91% of global investment managers are using AI, or planning to use it in their investment strategies. The industry is facing a pivotal shift, with nearly half of the managers emphasising the risks of regulatory divergence on AI integration. Check out the full report here. 

🤔 Should you invest in AI startups? AI-startups received $50 billion last year, yet the majority went to tech giants, hence a company with a simple AI interface has no chance. The competitive edge leans towards companies that integrate AI for operational efficiency or those that support AI implementation, like chip manufacturers or cloud services. 

🤖 A Canadian firm has launched an AI-powered ETF, created with Boosted.ai's model, to pinpoint North American stocks with significant AI focus, filling a niche for AI-centric investments. This fund, which rebalances quarterly to keep its portfolio stable and cut down on expensive turnover, sets itself apart from other AI ETFs.

Startups

🦄 Study on US, UK unicorn founders reveals most are "underdogs" (70% being immigrants, women, people of colour), with an increasing presence of female founders (17%) and a strong educational background from top universities (53%), highlighting a shift in the VC investment landscape.

🔓 Increased demand for open source startups highlighted by the ROSS Index that reveals a notable $513 million funding surge, a 32% increase from 2022, emphasising the broad innovation span from AI chatbots to privacy solutions.

Jobs

• Private Equity Associate | Idex | London | Up to £281k

• Senior Portfolio Manager | ICF | Los Angeles | $116k – $198k

• Senior Analyst | Capital Group Companies | Los Angeles |  $131k – $210k

• Chief Financial Officer | Harper May | London | £200k

Noteworthy deals

• Cyera, a cybersecurity startup using AI, is finalising a funding round of nearly $300 million, led by Coatue and joined by Accel — boosting its valuation to $1.5 billion.

  
  

• Eliyan, a specialist in advanced AI chip development, has secured $60 million in funding led by Samsung Catalyst Fund. 

  
  

• VitaBowl, a food-as-medicine meal delivery startup, has raised $3 million to integrate medically tailored meals with health insurance for people with chronic illnesses. 

  
  

• Global Screening Services, a London-based regtech company has raised approximately £37 million in a Series A2 funding round, marking the startup's shift to operational mode. 

  
  

• CemVision, a Bill Gates-backed startup aiming to produce sustainable cement, has raised a €10m seed round from Polar Structure, BackingMinds, and Zacua 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.