|
|
|
|
|
Interest Rates Are Up, Will Valuations Go Down?
|
|
|
|
|
|
Good day. The Federal Reserve’s third consecutive interest-rate increase of 0.75 percentage point, approved last week, is likely to lessen the appeal of debt as an option for startups.
Even in the best of times, startups run on some mix of debt and equity. When interest rates were low, taking out a loan was an easy way for startups to patch cash shortfalls without diluting shareholder equity. But now debt is becoming more costly and less tenable.
“Another interest rate hike surely adds a bit more pressure to companies hoping to take on debt to extend their runway,” said Kyle Stanford, senior analyst for venture capital at market-data firm PitchBook Data Inc.
With fewer options to fill cash-flow gaps, more startups will likely face the prospect of raising capital by selling shares at a lower valuation. So-called down rounds might cheapen the value of stakes held by founders and earlier investors while giving the impression of a business in trouble. No wonder most startups these days want to kick equity funding rounds down the road.
Mr. Stanford expects the number of down rounds to pick up over the next few months. By the end of June, he said, roughly 6% of startups that closed fundraising rounds since the start of the year ended up with lower valuations. That compares with around 7% for all of 2021, according to PitchBook.
“The more troubling issue in my opinion is, if rates stay higher longer, how will the market respond,” said Jonathan Lehr, co-founder and general partner at venture firm Work-Bench.
Stock market lows caused by broad economic uncertainty could mean lower startup valuations and more down rounds, he said: “With debt more expensive, and if public comparables stay compressed, then overvalued later-stage companies have a tough financing road ahead.”
And now on to the news...
|
|
|
|
|
|
A Compute North data center in Kearney, Neb., shown last year. PHOTO: TERRY A. RATZLAFF FOR THE WALL STREET JOURNAL
|
|
|
|
Bankruptcy filing. Compute North Holdings Inc., a data-center owner that houses bitcoin-mining rigs and blockchain companies, filed for bankruptcy protection after succumbing to a liquidity crisis driven by the collapse in cryptocurrency prices, rising costs for electricity and supply-chain issues, WSJ Pro reports. The company, which manages data centers in Texas, South Dakota and Nebraska, filed for chapter 11 in the U.S. Bankruptcy Court in Houston on Thursday after having borrowed up to $300 million in project financing earlier this year.
|
|
|
|
'The latest interest-rate hike amplifies the giant sucking sound of new capital investment rushing from growth to higher current yield opportunities.'
|
— Gene Frantz, general partner, CapitalG, told WSJ Pro on Friday
|
|
|
|
|
A Slimmed-Down Oyo Looks Better Placed for an IPO
|
|
Oyo Hotels & Homes has shelved some of its grand overseas ambitions. But the slimmed down, SoftBank-backed Indian startup looks stronger, too. If the recovery in budget travel, which is Oyo’s bread and butter, can gain a bit of steam, the company would be relatively well placed for a public listing, even in a tough market, The Wall Street Journal reports. Oyo last week disclosed data showing narrower losses and a rebound in sales for the year ended in March. For the first quarter of the current fiscal year, the company managed an operating profit. The success of its public listing would, however, depend heavily on the strength of the continued recovery in travel in price-sensitive
markets such as India where Oyo operates.
|
|
Oracle’s Ellison’s Compensation Topped $130 Million Last Fiscal Year
|
|
Oracle Corp.’s top executives are again among the highest-paid at big U.S. companies, thanks to a decision last year to give them more time to earn stock options, WSJ reports. Oracle Corp.’s Chairman Larry Ellison and Chief Executive Safra Catz were each paid total compensation of more than $138 million in the company’s fiscal year ended May 31, the company said in its annual proxy statement Friday. Most of that sum—$129.3 million each—reflected the company’s decision to give the executives an additional three years to earn a significant tranche of stock options under awards originally made in 2018, the proxy said.
|
|
Pensions Brace for Private-Equity Losses
|
|
Public pension funds are already reporting big losses in 2022. Things are likely to get uglier, WSJ reports. That is because the funds, which manage around $5 trillion in retirement savings for the nation’s teachers, firefighters and other public workers, haven’t yet factored in second-quarter returns on private equity and other illiquid investments. “You should expect sometime over the next three to four quarters to see write-downs in the illiquid part of the portfolio,” Allan Emkin, a consultant to large pension funds with Meketa Investment Group, told the board of the $300 billion California State Teachers’ Retirement System last month.
|
|
|
|
|
Funds
The Business Development Bank of Canada launched a 500 million Canadian dollar investment platform to support Canadian women-led businesses. The initiative includes Thrive Venture Fund, a C$300 million direct investment fund to make seed to Series B investments in Canadian technology startups, along with a C$100 million lab and C$100 million indirect investment envelope.
Starburst Ventures launched a new early-stage fund focusing on aerospace, defense and security. So far, the vehicle has participated in funding rounds for sustainable satellite and Earth return company Outpost and machine learning training startup Strong Compute.
Seattle-based Digsbury Ventures launched a fund focused on the outdoor industry and has invested in carbon fiber bike frame manufacturer Bridge Bike Works.
People
Sozo Ventures, which has offices in Redwood City, Calif., and Tokyo, said Rob Freelen has joined the firm as a managing director. He joins Sozo from Silicon Valley Bank.
Digital commerce fraud prevention startup Forter appointed Eran Vanounou as chief technology officer. He was previously chief executive of Varada. Last year, Forter raised a $300 million Series F round from Tiger Global Management, Third Point Ventures, Bessemer Venture Partners, Sequoia Capital, Scale Venture Partners and others.
Mental healthcare provider Quartet Health appointed Michael Lipp as chief medical officer and Sherry Dubester as chief clinical strategy & quality officer. Dr. Lipp was most recently CMO at ArchWell Health. Dr. Dubester was previously CMO at Beacon Health Options. Quartet Health is backed by investors including Oak HC/FT, GV, F-Prime Capital Partners, Polaris Partners, Deerfield Management and Echo Health Ventures.
|
|
|
|
OpenStore, a Miami-based startup that acquires Shopify businesses, picked up a $32 million investment led by Lux Capital. Previous investors in the company include Atomic, Founders Fund, General Catalyst and Khosla Ventures.
Hadean, a London-based metaverse infrastructure technology developer, raised $30 million in Series A funding. Molten Ventures led the round, which included participation from 2050 Capital, Alumni Ventures, Aster Capital, Entrepreneur First and In-Q-Tel.
Immunefi, a bug bounty and security services platform for Web3, landed $24 million in Series A financing. Framework Ventures led the round, which included contributions from Electric Capital, Polygon Ventures, Samsung Next, P2P Capital, North Island Ventures, Third Prime Ventures and Lattice Capital.
Gigs, a platform that enables companies to offer phone and data plans through an API, nabbed $20 million in Series A funding. Lead investor Gradient Ventures was joined by Y Combinator Continuity, Crane Venture Partners, Speedinvest, BoxGroup and others in the round.
Zartico Inc., a Salt Lake City-based provider of data intelligence and analytics to tourism organizations, collected $20 million in Series A funding. Lead investor Arthur Ventures was joined by Peterson Partners in the round.
Brightflow AI, a Walnut, Calif.-based financial intelligence platform for small businesses, raised a $15 million Series A round led by Haymaker Ventures, and a previously unannounced $4.2 million seed round led by Bonfire Ventures. The company also said it secured $100 million in debt from i80 Group.
Codacy, a Lisbon-based startup providing intelligence to software engineering teams, snagged a $15 million Series B round. Bright Pixel Capital led the investment, which included additional support from Armilar Venture Partners, Faber Ventures, Join Capital, Caixa Capital, EQT Ventures and Iberis Capital.
Inclined Technologies Inc., a Sausalito, Calif.-based life insurance policy refinance startup, closed a $15 million Series A round. HSCM Ventures led the investment, with Partner Vikas Singhal joining the company’s board. Anthemis Group and others also participated in the round.
Leuko, a startup developing an at-home, noninvasive white blood cell monitoring device, secured $5 million in Series A financing from investors including HTH, Good Growth Capital, IAG Capital Partners and Nina Capital. The company has offices in Boston and Madrid.
Surge, a San Francisco- and Paris-based startup focused on optimizing treatment for patients undergoing surgery, fetched a $2.6 million investment co-led by HCVC and Boutique Venture Partners.
|
|
|
|
|
Binance said it has a global compliance team of more than 750 people. PHOTO: BENOIT TESSIER/REUTERS
|
|
|
|
|
|
|
|
|
|
|
|