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Hot Market for Startups Gives Rise to Smaller Late-Stage Rounds
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By Yuliya Chernova, WSJ Pro
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Good day. Mega rounds tend to attract attention. But some companies are taking a different tack—raise just a little at a time, and each time at a higher valuation.
“Our strategy has always been to raise small rounds more incrementally, and that has been working well,” said Cliff Obrecht, co-founder and chief operating officer of Canva Pty. Ltd., a visual-presentation software company. Most recently Sydney-based Canva raised $71 million at a $15 billion valuation, just a few months after raising $60 million at a $6 billion valuation.
“That’s when you know a market is hot,” said Larry P. Naughton, commenting generally on this sort of fundraising. Mr. Naughton works on venture deals at the Mintz Levin Cohn Ferris Glovsky and Popeo PC law firm.
In a normal environment, he said, most companies are happy to get funding and take on more capital than they need.
Raising smaller amounts at higher valuations helps founders and existing investors avoid selling too much of a company. But there are risks. “It’s based on assumptions, that we’ll actually grow and that valuation will increase and that the money will be there when we go back out to the market,” Mr. Naughton said.
Canva says it’s profitable. But for startups that aren’t—and will need more capital going forward—the risk of funding incrementally may be far greater.
And now on to the news ...
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Epic Games is in a legal tussle with Apple after the tech giant yanked ‘Fortnite’ from its app store. PHOTO: EPIC GAMES
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Higher valuation. “Fortnite” creator Epic Games Inc. is now valued at $28.7 billion after raising more capital, The Wall Street Journal reports. On Tuesday, Epic said it completed a $1 billion funding round that includes an additional $200 million from Sony Group Corp. The company, which also counts Walt Disney Co. and China’s Tencent Holdings Ltd. among its investors, was valued at $17.3 billion as of last August. Its chief executive, Tim Sweeney, remains the company’s controlling shareholder.
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Epic was founded in 1991. In addition to the shooter game “Fortnite,” it makes the Unreal Engine, a suite of software tools for developing videogames and producing special effects for television shows, movies and other types of digital content. It also owns the video-chat app Houseparty and the studios behind hit games such as “Rocket League’’ and “Fall Guys: Ultimate Knockout.”
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Grab to Go Public in Record-Breaking SPAC Merger
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Grab Holdings Inc. said it would go public on the Nasdaq Stock Market by merging with a special-purpose acquisition company, securing a near $40 billion valuation in a new milestone for the SPAC boom that has swept U.S. financial markets, WSJ reports. The $39.6 billion deal to list Grab, a ride-hailing, food-delivery and digital-wallet group that operates across much of Southeast Asia, is by far the biggest involving a blank-check company and means Grab’s valuation has more than doubled in just 18 months. The merger also comes alongside a $4 billion-plus fundraising, which is the largest-ever share sale by a Southeast Asian company in the U.S.
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Nasdaq Sets Reference Price for Coinbase Listing at $250
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Nasdaq set the reference price for the highly anticipated public listing of Coinbase Global Inc. at $250, which would give the cryptocurrency exchange a valuation of about $65 billion, WSJ reports. That valuation would be a significant increase over the $8 billion at which Coinbase was last valued in a 2018 fundraising round. Shares of Coinbase, the largest bitcoin exchange in the U.S., are set to start trading on Wednesday.
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Insight Partners Amasses $1.56 Billion for Preferred Equity Deals
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Insight Partners has raised $1.56 billion for a new fund initially focused on structured preferred equity investments in technology companies, giving the fund’s limited partners an opportunity to collect fixed returns, WSJ Pro's Laura Cooper and Preeti Singh report.
Insight Partners Opportunities Fund I LP, the firm’s first fund outside of its flagship growth-investment vehicles, will provide alternative financing such as structured preferred equity investments, according to the firm.
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Funds
BlackRock Inc. and Singapore sovereign-wealth fund Temasek Holdings are teaming up to invest in companies and technologies that aim to reduce or eliminate carbon emissions. The New York asset manager said it is forming Decarbonization Partners with the Singapore firm to establish a series of growth-investment and late-stage venture funds with the target of raising $1 billion for the first of the vehicles. While BlackRock and Temasek together plan to invest $600 million across the planned funds, they are seeking institutional limited partners as well, according to a news release.
London-based seed investors LocalGlobe and its Series B sister fund, Latitude, have raised $150 million and $220 million, respectively, to continue investing in core markets in the U.K. and Europe.
People
Insurtech and fintech investor Brewer Lane Ventures appointed David Castellani as operating principal. He was previously senior vice president and business information officer at New York Life.
Adit Ventures named Joe Bennett as managing director, portfolio manager. He previously held positions at Mount Vernon Capital and Barclays.
Trusona, a passwordless identity authentication provider, appointed John Summers as chief technology officer and David McKeough as chief revenue officer. Mr. Summers was previously senior vice president and general manager of Akamai’s Web Security business. Mr. McKeough was most recently at CrowdStrike. Scottsdale, Ariz.-based Trusona is backed by investors including Georgian, Kleiner Perkins, M12, OurCrowd and Seven Peaks Ventures.
Exits
Enterprise password-management provider 1Password acquired SecretHub, an enterprise secrets protector, for an undisclosed amount. In 2019, Toronto-based 1Password raised a $200 million round led by Accel.
Insect protein producer Ÿnsect purchased Protifarm, a Dutch provider of mealworm ingredients for human food applications, for an undisclosed sum. Last year, Paris-based Ÿnsect secured $372 million in Series C funding from Astanor Ventures, Upfront Ventures, FootPrint Coalition, Happiness Capital, Supernova Invest, Armat Group, Bpi France, Talis Capital, IdInvest Partners and others. Protifarm was backed by Oost NL.
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SambaNova Systems Inc., a Palo Alto, Calif.-based startup building microprocessing chips and accompanying software designed to power data-intensive applications, raised $676 million in Series D funding led by SoftBank Vision Fund 2, bringing the company’s valuation to more than $5 billion. Additional new investors Temasek and GIC also participated in the round, along with existing backers funds and accounts managed by BlackRock, Intel Capital, GV, Walden International and WRVI.
Clearcover, a Chicago-based car insurance provider, picked up $200 million in Series D financing. Lead investor Eldridge was joined by American Family Ventures, Cox Enterprises, Omers Ventures and others in the round.
Degreed Inc., a Pleasanton, Calif.-based workforce upskilling platform, scored $153 million in Series D financing, in addition to $30 million in debt funding, giving the company a $1.4 billion valuation. Sapphire Ventures and Riverwood Capital co-led the round, which included additional support from Signal Peak Ventures, Owl Ventures, GSV Ventures, Founders Circle, Contour Investment Partners, Firework Ventures, Section Partners and Alliance Bernstein.
HomeX, a Chicago-based home services platform for homeowners and service providers, closed a $90 million funding round led by New Mountain Capital.
Vegamour Inc., a Los Angeles-based hair-care brand, snagged an $80 million investment from General Atlantic. Andrew Ferrer and Lexie Bartlett will join the company’s board.
Grover, a Berlin-based startup that offers monthly technology rentals to businesses and individuals, fetched €60 million ($71.7 million) in Series B financing, consisting of €45 million in equity and €15 million in venture debt. Equity was provided by JMS Capital-Everglen, Viola Fintech, Assurant, coparion, Augmentum Fintech, Circularity Capital, Seedcamp, Samsung Next and others. The debt portion came from Kreos Capital.
ConsenSys, a Brooklyn, N.Y.-based Ethereum software startup, completed a $65 million round from investors including J.P. Morgan, Mastercard, UBS, CMT Digital, Greater Bay Area Homeland Development Fund, Quotidian Ventures and Liberty City Ventures.
Seeq Corp., a Seattle-based provider of manufacturing and Industrial Internet of Things advanced analytics software, landed $50 million in Series C funding. Insight Partners led the round, which included participation from existing backers Altira Group, Chevron Technology Ventures, Cisco Investments, Saudi Aramco Energy Ventures and Second Avenue Partners.
Vericred, a New York-based startup whose technology simplifies the exchange of health insurance and employee benefits data, completed a $23 million Series B round. Aquiline Technology Growth led the investment, which included support from Echo Health Ventures, MassMutual Ventures, Guardian Strategic Ventures, Riverside Acceleration Capital, FCA Venture Partners and First Health Capital Partners. Aquiline Technology Growth’s Max Chee and Echo Health Ventures’ Jessica Zeaske will join the board.
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GumGum’s Tokyo office. The new investment from Goldman Sachs Growth values the company at nearly $700 million.
PHOTO: EUGENE HOSHIKO/ASSOCIATED PRESS
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SpaceX’s Falcon Heavy rocket to deliver an Astrobotic lander and NASA water-hunting rover to the moon in 2023 (TechCrunch)
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Pinterest backs California’s NDA-busting bill (Protocol)
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