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Down Rounds Subside, but Valuation Troubles Aren’t Over
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By Marc Vartabedian, WSJ Pro
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Good day. The broad valuation reset that hit venture deals starting in 2022 is easing, according to a second-quarter report published last week by Carta, which offers startups software to manage capitalization tables.
In the second quarter of this year, 17% of venture funding rounds on Carta’s platform were down rounds, compared with nearly 20% in the first quarter and 19.3% in the second quarter of 2024. Down rounds, where the valuation assigned to a company in a funding round is lower than in its prior round of financing, are typically viewed as a negative sign for a company. At the same time, the boom in 2020 and 2021 saddled many startups with inflated valuations.
To be sure, the percentage of down rounds is still high relative to the 2021 boom, when they accounted for between 5% and 10% of all deals on Carta’s site.
The AI frenzy of the last several years may also have caused elevated levels of down rounds, said Tara Stokes, a partner at Point72 Ventures. Many venture investors had high revenue expectations for startups, particularly for those looking to raise a Series A round.
“This means seed founders that planned for a roughly $1 million annual recurring revenue milestone have been surprised by investor expectations of $3 million today, potentially leading to flat or down rounds,” Stokes said.
It also remains to be seen whether venture-backed companies can post up-rounds in perhaps the most crucial test of all—an initial public offering. Nearly every major listing in the second quarter was a down round from the company’s peak valuation, according to a report published earlier this month by analytics firm PitchBook Data, referencing IPOs including Chime Financial and Hinge Health.
“The normalization of down rounds is a healthy correction that will help reinvigorate dealmaking and exit pathways,” the PitchBook report said. “Still, valuation uncertainty will likely persist until public markets stabilize and macroeconomic questions, particularly around interest rates and geopolitics, are resolved.”
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And now on to the news...
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OpenAI executive Greg Brockman is among those helping to launch the super-PAC network. Photo: Errich Petersen/Getty Images for SXSW
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Silicon Valley Launches Pro-AI PACs to Defend Industry in Midterms
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Silicon Valley is putting more than $100 million into a network of political-action committees and organizations to advocate against strict artificial-intelligence regulations, a signal that tech executives will be active in next year’s midterm elections. Venture-capital firm Andreessen Horowitz and OpenAI President Greg Brockman are among those helping launch and fund Leading the Future, a new super-PAC network focused on AI, the group told The Wall Street Journal. Andreessen Horowitz’s head of government affairs, Collin McCune, Brockman and OpenAI chief global affairs officer Chris Lehane were involved in initial conversations earlier in the year about the need to help shape industry-friendly policies.
Read the article here.
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$330 Million
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JPMorgan Chase will pay $330 million to settle claims it facilitated transactions in the looting of a Malaysian sovereign-wealth fund.
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Trump, Intel Agree to 10% U.S. Stake
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The U.S. government is taking a 10% stake in Intel, a deal that caps a two-week frenzy for the troubled chip maker and marks the latest in a series of extraordinary private-sector interventions by President Trump. Under the terms of the agreement, $8.9 billion in grants that had been awarded to Intel from the 2022 Chips Act, but not yet paid, will be converted to equity, the two sides said Friday. The government could get more stock depending on what happens to Intel’s chip manufacturing business.
Read the article here.
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U.S. Foreign Trade Zones Draw New Demand as De Minimis Ends
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E-commerce brands are turning to warehouses with an obscure federal designation as they brace for the end of a popular tariff exemption. Logistics companies say more online merchants are seeking out warehouse space within so-called Foreign Trade Zones across the U.S. that allow companies to defer tariffs until goods are shipped out to U.S. customers. Congress authorized the creation of the zones in 1934—four years after the Smoot-Hawley Tariff Act raised duties on imports—to encourage foreign trade and help companies control their exposure to tariffs. Businesses can store goods within the zones and defer duties until they sell the items, which helps spread out the payment of tariffs.
Read the article here.
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People
Defense manufacturing startup Mach Industries appointed Gary Hobart as chief financial officer. He was previously CFO and chief transformation officer at Terran Orbital.
Guidewheel, an AI-powered factory operations platform, appointed Charles Lawson as chief revenue officer. He most recently served as CRO at Fulcrum and at Propel.
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Bluefish, a New York-headquartered AI marketing platform, scored $20 million in Series A funding led by New Enterprise Associates.
Definite, a Wilmington, Del.-based data platform startup, was seeded with a $10 million investment led by Costanoa Ventures.
Cascala Health, a Boston-headquartered clinical intelligence platform for post-acute care, landed $8.6 million in seed funding co‑led by Flare Capital Partners and Eniac Ventures.
OneCrew, a San Francisco cloud-based platform for paving contractors, picked up a $7.5 million Series A round led by Stage 2 Capital.
SRE.ai, a San Francisco-based enterprise DevOps startup, secured $7.2 million in seed financing led by Salesforce Ventures and Crane Venture Partners.
Agenda Hero, a San Francisco-based startup transforming text, images and PDFs into fully structured calendar events and shareable schedules, launched with $5.6 million in funding led by Upfront Ventures.
LO:TECH, a London-based digital asset trading startup, closed a $5 million seed round led by 13books Capital.
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Wind turbines and solar panels near Palm Springs, Calif. PHOTO: MARIO TAMA/GETTY IMAGES
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