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Software-as-a-Service Deal Making Eases
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Good day. Coming off of the second-best year on record, venture-capital deals in the global enterprise software-as-a-service sector in 2022 began to ease up, with startups raising a total of $62.4 billion, down 18.4% from 2021, according to PitchBook Data.
The number of deals was also down, dropping 11.9% on an annual basis to a total of 2,093 deals, the firm said.
Despite last year’s declines, the sector has proven to be remarkably resilient, compared with much sharper losses in the broader venture-capital market. In a research note, Derek Hernandez, PitchBook’s senior analyst for emerging technology, said the sector is likely to stay that way, even as it faces continued headwinds in the year ahead.
As of the end of March, SaaS startups, which provide software services for businesses, had raised a total of $13.9 billion, up 18.5% from the previous quarter, over 363 deals, down 8.6%, PitchBook says.
One important caveat, PitchBook notes: Stripe’s $6.5 billion Series I raise, announced in March, alone accounts for almost half of the quarter’s funding total. Without Stripe, first-quarter fundraising fell 37%, PitchBook says. Also worth noting, perhaps, is that Stripe’s raise knocked its valuation down to $50 billion, from $95 billion a year earlier.
And now on to the news...
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THOMAS R. LECHLEITER/THE WALL STREET JOURNAL
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Slow to change. Nearly a decade ago, a generation of startups promised to transform the insurance business with new types of data and algorithms to more accurately assess risk and price policies. So far, that hasn’t happened, WSJ’s CIO Journal reports. Three high-profile insurtechs that have since gone public—Lemonade, Root Insurance and Hippo—have each lost tens of millions of dollars in their most recent quarters and watched their share prices plummet over the last few years.
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At first, the insurance pricing process seemed ripe for upending, thanks to advances in the sheer amount and variety of data digitally-native companies could suddenly collect on customers.
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But the Silicon Valley axiom to move-fast-and-break-things hasn’t been enough to transform an industry built on centuries of observed human behavior, massive marketing budgets and a savvy grasp of the regulatory environment.
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6.4%
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The average short interest of office REITs at the end of April, up 0.28 percentage point from March, as stock-market investors sell office stocks short, wagering their share prices will fall as more workplaces adopt remote-work policies, WSJ reports.
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Applied Materials to Build Chip Research Facility in Silicon Valley
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Applied Materials said it would invest up to $4 billion in a new California facility to conduct research on tools for making semiconductors, adding to a wave of chip-industry projects in the U.S. spurred on by federal government subsidies, The Wall Street Journal reports. The Santa Clara, Calif.-based company, a leading maker of machines used to make advanced chips increasingly seen as crucial to modern economies and geopolitical power, will invite chip makers and universities to collaborate and experiment with its equipment at the facility, which is expected to be complete by 2026.
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That model could cut the time it takes to develop chips by 30% in an era when manufacturing is becoming increasingly complex, the firm said.
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TikTok Sues Montana Over State’s Ban of Its Service
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TikTok is suing Montana over the state’s new ban of the social-media platform, challenging the law’s constitutionality, WSJ reports. The suit, filed Monday in the U.S. District Court of Montana, alleges the ban violates the First Amendment and several other laws. The case was brought against the state’s attorney general, who is tasked with enforcing the ban. The ban is scheduled to go into effect Jan. 1. It is unclear how it will be enforced.
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Young Investors in College Clubs Embrace Wild Market Ride
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Investment clubs might not be as ubiquitous as Greek life or intramural sports, but they are fixtures at colleges around the U.S.—big and small, public and private, WSJ reports. Graduating seniors have already seen quite a lot in their short investing careers. The market crashed during their freshman year as Covid-19 sent students home. Their sophomore year was a market boom. Junior year brought historic inflation, the most aggressive rate increases in decades and another downturn. Their final semester included a banking crisis. Many have learned to be OK with seeing a lot of red in their portfolio.
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Corrections & Amplifications:
The average annual salary for CEOs at U.S. startups this year has fallen to $142,000, the lowest since 2020, according to Kruze Consulting. An item in Monday’s newsletter incorrectly said the average salary had fallen to a four-year low.
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Inflation Hit Americans’ Finances Last Year, Fed Finds
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Americans reported a sharp decline in their financial well-being last fall as high inflation eroded earnings and savings, according to a Federal Reserve survey released Monday. The survey, conducted in October 2022, found that rising prices left more families in an economically precarious place, though households continued to benefit from a strong labor market. The share of adults who reported being worse off financially in 2022 than a year earlier climbed to 35%.
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Deals
SoftBank Group agreed to sell its 90% stake in U.S. investment manager Fortress Investment Group to Abu Dhabi-based sovereign-wealth fund Mubadala Investment and Fortress’s management, the companies announced, WSJ reports. After the deal closes, Mubadala Capital will own 70% of Fortress, while the firm’s management team will own 30%. An arm of Mubadala currently owns nearly 10% of Fortress. People close to the matter have said the deal would be valued at more than $2 billion, representing a disappointing investment for SoftBank. The Japanese technology company, which has struggled due to its investment in hundreds of tech startups through its $100 billion Vision Fund and
a successor fund, purchased Fortress in 2017 for $3.3 billion.
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Axelera AI, a startup maker of chips for artificial intelligence applications, said it extended its Series A round to a total of $50 million from new investors including CDP Venture Capital and Verve Ventures. The round was led by Innovation Industries, a deep-tech venture firm out of the Netherlands. Axelera AI is based in Eindhoven, Netherlands and California.
ClearMotion, a Boston-based automotive tech startup, raised a $32 million investment from investors including NewView Capital.
Volition, an online industrial parts marketplace designed specifically for the needs of the hardware development world, raised an $11 million seed round led by Newark Venture Partners and Quiet Capital.
Sort, a Web3 app development startup, announced that it has raised $3.5 million in a seed funding round co-led by Lemniscap and The General Partnership, with participation from Alliance DAO, Punk DAO, Orange DAO, Blizzard Fund, Parasol, Red Rooster Ventures and others.
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Meta Chief Executive Mark Zuckerberg. PHOTO: YVES HERMAN/REUTERS
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How can founders from marginalized communities run successful crowdfunding campaigns? (Forbes)
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What nobody tells you when you're thinking about raising venture capital (Entrepreneur's Handbook)
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