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Which Cities Are Winning in Tech?
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By Yuliya Chernova, WSJ Pro
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Good day. New York has demonstrated its appeal for tech workers and venture investors. For this week’s question, we are interested in hearing from you what changes you are seeing in other startup hubs that are either resulting in more investment or, conversely, making it harder for startups to thrive in those hubs. Any specific policy or other dynamics that have changed how you plan on investing in a city or region? Email responses to vcnews@wsj.com.
Last week, we asked how venture capitalists are factoring in different interest-rate scenarios. How could those situations affect dealmaking? Here are edited and condensed excerpts from some responses.
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Ben Lerer, managing partner at Lerer Hippeau: We're certainly heading in the right direction—money will soon get cheaper, and I don't think the venture market will regress. The trough in the market is behind us, but we don't yet know how steep the incline is ahead of us. We might be in this middle realm for a while.
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Michael Proman, managing director at Scrum Ventures: With meaningful rate cuts now looking more like a 2025 reality, startups with proven revenue models will inevitably outperform in the next six to 12 months. In thinking about the longer-term venture implications of this trend, the 'buy the dip' venture investor could be one of the biggest winners of the current economic environment in the next 3-5 years.
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Victor Echevarria, managing director at Jackson Square Ventures: While LPs may increase or decrease their exposure to VC in any given year based on interest rates, our belief is that venture investors need to consider entry price independent of current interest rates and not pay artificially high valuations when capital is cheap.
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Aydin Senkut, founder and managing partner at Felicis: Interest rates likely won’t go down and it will impact public markets and as a consequence growth-stage valuations. Earlier stage valuations are much more based on supply and demand and decoupled from fundamentals like interest rates. Expensive and more scarce venture debt will force more focus on efficiency.
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And now on to the news...
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Cybersecurity rebounds with tailwind from AI. While startups across most sectors face a difficult fundraising environment, cybersecurity startups are showing signs of life, thanks in part to their sector’s ties to artificial intelligence, WSJ Pro reports.
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Venture investment into cybersecurity startups globally increased 69% in the first quarter from the prior quarter, according to analytics provider Crunchbase.
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Venture capitalists attribute the rise to increased merger-and-acquisition activity and initial public offerings, which allow investors to cash out investments. Cyber’s overlap with AI, the startup investing world’s darling over the last 18 months, is also helping to buoy the industry, they say.
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Meta Releases Latest AI Model, Seeking to Build Out Rival to ChatGPT
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Meta Platforms on Thursday released Llama 3, the latest edition of the company’s publicly available large language model, as the AI battle in Silicon Valley continues to escalate, The Wall Street Journal reports. The company’s new AI capabilities will be used to upgrade its Meta AI tool, which it will now feature more prominently in its apps. Meta is releasing two versions of the model to start, including an 8 billion parameter model and another with 70 billion parameters. Parameters are the term for the variables in an AI system that is used to measure a model’s size and capabilities.
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Pension Funds Are Pulling Hundreds of Billions From Stocks
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Stock portfolios at large pension funds had a blockbuster run. Now, managers are cashing out, WSJ reports. Corporate pension funds are shifting money into bonds. State and local government funds are swapping stocks for alternative investments. The nation’s largest public pension, the California Public Employees’ Retirement System, is planning to move close to $25 billion out of equities and into private equity and private debt. Like investors of all kinds, the funds are slowly adapting to a world of yield, where they can get sizable returns on risk-free assets.
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Funds
Consumer tech investor Maven Ventures raised $60 million for its fourth fund, bringing the firm’s total assets under management to $200 million.
Contango Digital Assets has closed on half of its $10 million Contango Blockchain x AI Fund, which is dedicated to making seed investments in North American startups at the intersection of blockchain and artificial intelligence.
People
Climate-focused investor Buoyant Ventures appointed Alex Behar as principal investor. He was previously vice president at Cultivian Sandbox.
Headline promoted Taylor Brandt and Jacob Conger to principals in the firm’s San Francisco office.
Exits
Chicago-based technology consultancy Thoughtworks acquired staff and technology assets from Watchful, a San Francisco-headquartered company that helps businesses make and deploy artificial intelligence models. Terms weren’t disclosed.
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Metsera, a New York-based startup developing medicines for obesity and metabolic diseases, launched with $290 million in financing. ARCH Venture Partners led the funding, which included participation from GV, F-Prime Capital and others.
Ramp, a New York-based corporate spend management platform, grabbed $150 million in Series D2 funding at a $7.65 billion valuation co-led by Khosla Ventures and Founders Fund.
Magnus Metal, an Israel-based developer of a digital casting process for the production of metal alloys, scored a $74 million Series B round from Entrée Capital and several others.
Cape, an Arlington, Va.-based privacy-focused mobile carrier, picked up $61 million in funding led by A* and Andreessen Horowitz.
Avive Solutions, a South San Francisco, Calif.-based maker of a connected automated external defibrillator, completed a $56.5 million growth equity round from investors including Questa Capital.
UniUni, a Canadian e-commerce last-mile logistics platform, landed $50 million in an oversubscribed Series C round led by DCM.
Anvilogic, a Palo Alto, Calif.-based AI cybersecurity startup, closed a $45 million Series C round led by Evolution Equity Partners.
Mosa Meat, a cultivated beef startup headquartered in The Netherlands, snagged a €40 million investment from Lowercarbon Capital and others.
Swtch Energy, a Toronto-based provider of electric vehicle charging technology for multi-tenant buildings, secured $27.2 million in Series B financing led by Blue Earth Capital.
NeuBird, a San Mateo, Calif.-headquartered cloud-based generative operations platform for enterprises, was seeded with a $22 million investment led by Mayfield.
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Here is our weekly roundup of stories from across WSJ Pro that we think you'll find useful.
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Richard Galanti was named CFO of Costco at age 28. Nearly 40 years later, he has stepped down after leaving his mark at the retail behemoth by trying to keep things simple.
State lawmakers are debating and passing bills to make it harder for private-equity firms to buy up healthcare businesses across much of the U.S.
The messaging from a pair of top monetary policy setters this week made it clear that the central banks of the U.S. and Europe are to part ways.
🎧 Listen to the chief information security officer at cloud-based financial services company Bill discuss what company leaders can do to improve how they oversee cybersecurity.
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Apple was China’s top smartphone maker last year, with more than 17% of the market.
PHOTO: CFOTO/ZUMA PRESS
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