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Startups Are Spending Cash Faster
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By Yuliya Chernova, WSJ Pro
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Good day. Venture-backed late-stage companies are spending capital faster, according to an analysis by Silicon Valley Bank.
Cash runway, the metric that measures how long the cash-on-hand would last, declined to 36 months for late-stage fintech companies, for example, in the first quarter of this year, from 45 months in the fourth quarter, according to Silicon Valley Bank. Similarly, late-stage enterprise-software companies had 34 months of runway, down from 41 months in the fourth quarter of 2020, SVB showed.
“Our entrepreneurs have a ton of confidence in running their balance sheets a little bit more lean,” said Dave Sabow, SVB’s head of technology and healthcare banking, North America. He added that startups are going “all in on growth,” which is being rewarded by high valuations.
Having raised substantial funding and cut expenses over the past year, startups are boosting hiring, therefore, increasing spending, said Rebecca Lynn, co-founder and general partner at Canvas Ventures. She said that even though burn is going up, nearly three years of runway is still an “eternity,” with plenty of time for companies to change course or raise additional funding should market conditions change. (Read more highlights from the report below.)
And now on to the news...
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AirAngels has raised $20 million to invest in technology-enabled companies, such as mental-health care startup Cerebral. Pictured, an example of delivery medications from Cerebral.
PHOTO: CEREBRAL
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AirAngels fund takes off. Former Airbnb Inc. employees have raised an early-stage venture-capital fund from backers with ties to the home-sharing company and several outside investors, WSJ Pro’s Brian Gormley reports.
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New venture firm AirAngels is deploying a $20 million pool whose backers include Airbnb alumni and several outside individuals, according to the firm. Airbnb itself isn’t an investor.
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Technology companies can be springboards for employees who leave to launch startups. Airbnb alumni have formed close to 100 companies, said Michelle Kwon, a venture partner with AirAngels and a former Airbnb employee.
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AirAngels doesn’t restrict itself to investing in only those with Airbnb ties. But its investors are betting the firm, because of its networks, will have an edge when seeking to finance many of the best startups emerging from the company.
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Tech Startup Financing Hits Records as Giant Funds Dwarf VCs
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Big money-management firms expanded their dominance in Silicon Valley last quarter, crowding out venture capitalists in a once-niche business and putting 2021 on pace to nearly double last year’s record in startup financing. Investment in U.S. startups for the first half of 2021 hit $150 billion, eclipsing full-year funding every year before 2020, according to a report from PitchBook.
The large asset firms have massive pools of capital, move quickly and are less likely to ask for board seats, making them more appealing to founders, according to interviews.
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SEC to Set New Disclosure Requirements for Chinese Company IPOs
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The Securities and Exchange Commission will increase scrutiny of Chinese companies that aim to sell shares in the U.S. following new restrictions from China’s government on companies that raise capital offshore, The Wall Street Journal reports. SEC Chairman Gary Gensler said he has asked agency staff to seek specific disclosures from Chinese firms before signing off on regulatory filings that precede an initial public offering. He also called for additional reviews of filings for companies with significant China-based operations.
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Robinhood IPO Soured By Investor Confusion, Valuation Concern
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Robinhood Markets Inc.’s bid to revolutionize IPOs has created losses for investors instead, after one of the year’s most highly anticipated listings fell flat, WSJ reports. In a regulatory filing in early July, the trading platform’s co-founders said they would open their initial public offering to customers on equal terms with institutional investors. They said they recognized it may be the first IPO many would participate in, and pledged to “never sacrifice the safety of our customers’ money.” It now appears Robinhood’s commitment to “democratizing” the IPO process played a role in the offering’s big initial stumble last week.
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More Consumer Startups Saw Revenue Decline in Q1
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Some startup sectors are showing a greater proportion of companies with declining revenue, according to a new report from Silicon Valley Bank.
About half of late-stage consumer internet companies, a set of more than a hundred U.S.-based companies in e-commerce, gaming, social-networking, and other sub-sectors analyzed by SVB, saw revenue decline in the first quarter, compared with 23% in the prior quarter and 44% in the first quarter of 2020. SVB defined late-stage as companies with a revenue run-rate of $50 million or greater.
Natalie Dillon, principal at consumer-focused venture firm Maveron, said several factors may account for the data, such as that disruption of supply chains caused more volatility in revenue, while some startups curbed marketing spending, resulting in lower revenue, she said.
She said that consumer startup performance has been polarizing over the past year and a half. “Revenue loss can be someone else’s gain,” Ms. Dillon said.
Dave Sabow, SVB’s head of technology and healthcare banking, North America, said that there will always be “quarterly aberrations.” Overall, venture-backed companies have tripled their revenue growth since 2016, with the median annual revenue run-rate increasing to roughly $60 million this year among companies that had a run-rate of between $10 million and $25 million five years ago, according to SVB’s analysis. He added, “we are going to continue watching, but there’s nothing in our...data that gives us anything but additional enthusiasm for what’s happening in this market.”
—Yuliya Chernova
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Since 2015, WSJ Pro and The Private Equity Analyst have published our annual Women to Watch list in recognition of the outstanding achievements of female dealmakers, fundraising professionals and limited partners across the private-equity and venture capital industries. We are accepting nominations for this year’s list until Aug. 13. We will reveal this year’s list in early October. Submit your nomination here.
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Funds
Venture-backed Australian cross-border payments company Airwallex is launching a venture capital fund targeting $200 million to invest in early-stage startups powered by Airwallex’s infrastructure. Airwallex, which has secured over $500 million in funding since it was founded in 2015, said Capital 49 will focus on ecommerce, SaaS, digital and technology, business services and enablers, and fintech. Investors including Greenoaks, Grok Ventures, Skip Capital and ANZi Ventures provided the company’s most recent funding round earlier this year.
Beauty- and wellness-focused True Beauty Ventures surpassed the original $30 million target of its debut fund, closing the vehicle with more than $42 million. To date, the firm has invested in AQUIS, K18 Hair, Kinship, Feals, Crown Affair and maude.
People
Cryptocurrency services provider Babel Finance appointed Edmond Lau as chief financial officer. He previously held positions at companies including Citigroup, Foxconn Mobile and SF-Express. In May, Babel Finance said it raised a $40 million Series A round led by Zoo Capital, Sequoia Capital China, Dragonfly Capital, BAI Capital and Tiger Global Management.
Clearbit, a business-to-business marketing intelligence software provider, named Derek Schlicker as its CFO. San Francisco-based Clearbit is backed by Zetta Venture Partners, Bedrock Capital, Battery Ventures, First Round Capital and Cross Creek Capital.
Exits
Experience-management provider Qualtrics International Inc. agreed to acquire Clarabridge, which helps businesses understand customer feedback, for roughly $1.13 billion in stock. Reston, Va.-based Clarabridge is a portfolio company of General Catalyst, Savano Capital Partners and Summit Partners.
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Gopuff, a Philadelphia-based on-demand household goods delivery provider, scored $1 billion in new funding at a $15 billion valuation. New investors Blackstone’s Horizon platform, Guggenheim Investments, MSD Partners and Adage Capital were joined by existing backers Fidelity Management & Research Co., Softbank Vision Fund 1, Atreides Management and Eldridge in the round.
Neuralink, Elon Musk’s brain-computer interface company, raised $205 million in Series C funding. Vy Capital led the round, which included participation from GV, DFJ Growth, Valor Equity Partners, Craft Ventures, Founders Fund, Gigafund and others.
Rakuten Medical Inc., a San Mateo, Calif.-based developer of oncology products for multiple indications, closed a $166 million Series D round consisting of $75 million in new capital and the conversion of $91 million of convertible promissory notes, including accrued interest. General Catalyst led the round.
Covariant, a Berkeley, Calif.-based AI robotics startup, secured $80 million in Series C funding. Index Ventures led the investment, which included support from Amplify Partners, Radical Ventures, Temasek Holdings and CPP Investments.
Modern Animal Inc., a Los Angeles-based veterinary startup, secured $75.5 million in combined Series A and B funding. Founders Fund led the company’s $40 million Series B round, with True Ventures and Addition leading the $35.5 million Series A investment. Upfront Ventures participated in both rounds. Tony Conrad, partner at True Ventures; and Karen Boone, former CFO of Restoration Hardware, joined Modern Animal’s board.
Nobell Foods, a South San Francisco, Calif.-based producer of cheeses made from plant-derived dairy proteins, landed $75 million in Series B funding from investors including Andreessen Horowitz, Breakthrough Energy Ventures, Germin8 Ventures, Fifty Years, AgFunder, Pear VC, GL Ventures and Mission Bay Capital.
Blaize, an El Dorado Hills, Calif.-based AI computing startup, completed a $71 million Series D round. Franklin Templeton and Temasek Holdings led the investment, which saw participation from Denso and others.
Merqueo, a grocery delivery startup currently serving Mexico, Colombia and Brazil, snagged $50 million in Series C financing. IDC Ventures, Digital Bridge and IDB Invest led the round, which included support from MGM Innova Group, Celtic House Venture Partners and Palm Drive Capital.
Tenderly, a Serbia-based Ethereum developer platform, raised $15.3 million in Series A funding. Lead investor Accel was joined by Point Nine Capital, Version One Ventures and others in the round.
Catch, a benefits provider to independent workers, picked up $12 million in Series A funding from Crosslink Capital, Khosla Ventures, Kindred Ventures, Nyca Partners and Urban Innovation Fund.
Rey, an Austin, Texas-based on-demand mental health startup, added $10 million in Series A funding, bringing the round total to $26 million. Optum Ventures and Oxford Sciences Innovation led the round.
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Amazon disclosed the fine, which was issued two weeks ago, in a securities filing. PHOTO: PIERRE TEYSSOT/ZUMA PRESS
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Kodiak Robotics’ founder says tight focus on autonomous trucks is working (TechCrunch)
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UK's Deliveroo mulls ending Spain operations on high costs (Reuters)
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