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B Capital's Raj Ganguly on the Liquidity Crisis and AI Hype
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By Yuliya Chernova, WSJ Pro
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Good day. B Capital Group has raised $2.1 billion for its third growth fund and companion funds to invest mainly in enterprise software, health-tech and fintech globally. The firm raised $820 million for its second fund in 2020 and last year raised $250 million for an early-stage fund. We spoke with co-founder and managing partner Raj Ganguly, who called in from Davos, Switzerland, to discuss the firm’s recent fundraising and the venture market. Here’s an excerpt from the conversation.
Why did you raise a much larger fund when deal sizes and valuations are declining at the growth stage?
We want to support our companies for longer. We are not sure how long this liquidity crisis will last, we want to be sure we have the reserves to support companies for multiple rounds. About a third of the fund is for reserves. We’ll also expand our exploratory program, where we write smaller checks to earlier, Series B companies.
What concerns you most in today’s market?
There are good companies out there that should raise to grow, that are instead massively slowing down because they don’t want to raise at current valuations. There’s a spread between the bid and ask in the last couple of quarters. I think that will close.
We also see flat rounds and round extensions with special terms. We tell our founders it’s better to take a clean term sheet, whether flat, or up, or even down.
The bigger concern is if people forget the lessons of 2021 after just a year. We already see the hype around AI and other areas. We all have to really be more disciplined and understand that new tech will take longer to have an impact.
And now on to the news...
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GIC's Jeffrey Pichet Jaensubhakij said Thursday in Davos, Switzerland, the fund was thinking more soberly about startup investment. PHOTO: STEFAN WERMUTH/BLOOMBERG NEWS
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‘Only have ourselves to blame.’ A top official at Singapore wealth fund GIC said the fund is “much chastised” and “thinking much more soberly” about venture capital and startup investment amid a wave of losses and red ink in the sector, The Wall Street Journal reports.
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Jeffrey Pichet Jaensubhakij, group chief investment officer of GIC, said on a panel at the World Economic Forum in Davos, Switzerland, Thursday that 2021 saw many times the standard level of investment in the sector, a surge that should have given investors pause.
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“There are only so many good ideas that can be funded at any one time that will make you money,” he said. “Investors—ourselves, as well as the venture firms and the growth firms—we only have ourselves to blame.”
More: At Davos, Efficient, Profitable Operations Take Center Stage
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New FTX Chief Says Crypto Exchange Could Restart
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FTX’s new chief executive, John J. Ray III, said he is looking into the possibility of reviving the bankrupt crypto exchange as he works to return money to the failed company’s customers and creditors, WSJ reports. In his first interview since taking over FTX in November, Mr. Ray said that he has set up a task force to explore restarting FTX.com, the company’s main international exchange. Although top FTX executives have been accused of criminal misconduct, some customers have praised its technology and suggested that there would be value in rebooting the platform, he said. “Everything is on the table,” Mr. Ray said. “If there is a path forward on that, then we will not only explore that, we’ll do
it.”
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Lawmakers Call for Oversight of Telehealth Ads Promoting Drugs
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Congressional leaders involved in healthcare policy making are calling for more oversight of telehealth advertising, WSJ reports. Federal regulators must work to address regulatory gaps that were made apparent after The Wall Street Journal published an analysis showing companies flouting advertising rules, according to several members of Congress. While the Food and Drug Administration closely monitors advertising by pharmaceutical companies, and the Federal Trade Commission scrutinizes advertising generally, an apparent lack of oversight of telehealth startups makes it possible for consumers to get bombarded on social media by ads promoting prescription drugs with no risk disclosures and for uses that aren’t FDA
approved, the Journal reporting has found.
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SPAC Deals Shrink After Speculation Wanes
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Some of Wall Street’s most speculative investors are scaling back their ambitions, doing deals that are a 10th the size of their flashy, top-of-market acquisitions, WSJ reports. Creators of special-purpose acquisition companies, or SPACs, are valuing companies they seek to take public at the lowest levels since the boom began nearly three years ago, figures from Dealogic show. The average announced SPAC merger value has fallen to about $200 million so far in January, down from more than $2 billion for much of 2021 during the sector’s peak. “It reflects the change in the broader market and investor sentiment,” said Brian Dobson, a senior research analyst at investment bank Chardan focused on the sector. “Investors are
much more interested in steady-Eddie companies than potential highfliers.”
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Funds
Sony Ventures Corp. completed a final closing of its Sony Innovation Fund 3 LP with 26.5 billion Japanese yen (about $206 million) in commitments. Limited partners included SMBC Group, Daiwa Securities Group, Sumitomo Mitsui Trust Bank, Kawasaki Heavy Industries Ltd., International Christian University and Development Bank of Japan Inc.
Sequoia Capital raised $195 million for its fifth dedicated seed fund to invest across the U.S. and Europe. The firm closed on the same amount for its preceding seed fund in 2021.
Deal Box, a capital markets advisory and secure token offering packaging platform, launched a venture capital arm. Deal Box Ventures, which will invest $125 million in Web3 technologies, has so far backed Total Network Services, Rypplzz and Forward-Edge AI.
Courtside Ventures, which invests across the sports, gaming and lifestyle sectors, secured $100 million for its third fund. To date, the new fund has invested in startups including Hypothetic, Matchday, Mojo, Xpoint, Jackpot.com, Venly, Planet Mojo, Bezel, Fliff, Fermat and Fello.
People
Lightspeed said Moritz Baier-Lentz is joining the consumer team as a partner in Los Angeles, where he will lead the firm’s gaming practice. He was previously a partner at Bitkraft Ventures.
CRV, an investor in early-stage enterprise and consumer startups, added Brian Zhan as a new investor. He was previously at Starburst and Meta.
Utah-based Pelion Venture Partners appointed Tyler Hogge as a venture partner. He was previously at Divvy, a startup that Pelion Venture Partners previously invested in.
Cybersecurity investor Evolution Equity Partners appointed Taher Elgamal as a general partner. He was most recently at Salesforce.
San Francisco-based NightDragon, which focuses on the cybersecurity, safety and privacy industries, named Josiah Hsiung as principal. He was most recently at Instacart.
CapitalG, Alphabet’s independent growth fund, promoted Jill Chase and Chengpeng Mou to investment partners. Ms. Chase joined CapitalG in 2020 and played a leadership role in the firm’s investments in executive women’s network Chief and financial data startup MX. Mr. Mou joined the firm in 2017 and focuses on fintech and the metaverse.
Exits
Blattner Technologies, a provider of tools to the data analytics, artificial intelligence and machine learning industries, acquired Superwise, a model observability platform, for an undisclosed amount. Superwise previously raised funding from investors including F2 Venture Capital and Capri Ventures.
Vanta is bolstering its security and compliance automation platform with the purchase of Trustpage. Last year, Vanta raised $150 million in funding from investors including Craft Ventures, Sequoia Capital and Y Combinator. Trustpage was backed by Bonfire Ventures, Ludlow Ventures, Detroit Venture Partners and others.
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PhonePe, an Indian payments app, picked up a $350 million investment led by General Atlantic at a pre-money valuation of $12 billion. The company expects to raise a second tranche of the round, which has a target of up to $1 billion, before the end of next month.
Wallapop, a Barcelona-based marketplace for reused products, added €81 million (about $88 million) in Series G funding, bringing the company’s valuation up to €771 million. Korelya Capital led the round, with contributions from Naver, Accel, 14W and Insight Partners. The company, which currently serves Spain, Italy and Portugal, offers an app for buying and selling reused products.
Outrider, a Golden, Colo.-based startup that automates yard operations for logistics hubs, closed a $73 million Series C round led by FM Capital. New investors including a wholly owned subsidiary of the Abu Dhabi Investment Authority and Nvidia’s venture capital arm also joined the funding, alongside previous backers Koch Disruptive Technologies and New Enterprise Associates.
Cloudian, a San Mateo, Calif.-based hybrid cloud data management startup, snagged a $60 million investment from Digital Alpha Advisors, Eight Roads, INCJ, Intel Capital, Japan Post Investment, Silicon Valley Bank and others.
Tabby, a Dubai-based shopping and financial services app serving the Middle East and North Africa region, scored $58 million in Series C funding, valuing the company at $660 million. Investors included Sequoia Capital India, STV, PayPal Ventures, Arbor Ventures and Endeavor Catalyst.
Summit Nanotech Corp., a Canadian cleantech startup, completed a $50 million Series A2 round. Lead investors Evok Innovations and BDC Capital were joined by Xora Innovation, Capricorn Investment Group, Volta Energy Technologies, NGP, Helios Climate Ventures and Grantham Foundation in the round. The company’s direct lithium extraction technology conserves natural resources and optimizes operations for lithium producers in Chile and Argentina, according to a press release.
MacroFab Inc., a Houston-based technology platform for electronics manufacturing, secured $42 million in new growth funding. Led by Foundry, the round included additional support from BMW i Ventures, Edison Partners and ATX Venture Partners.
Anyfin, a Stockholm-based provider of an app that helps consumers refinance existing loans and improve their financial wellbeing, fetched €30 million (about $33 million) in Series C financing. Northzone led the round, which saw participation from Citi Ventures, Accel, EQT Ventures and others.
EarthOptics, an Arlington, Va.-based agtech startup, secured $27.6 million in Series B financing. Led by Conti Ventures, the round saw additional contributions from investors including Rabo Food & Ag Innovation Fund, Louis Dreyfus Co.’s venture capital program, Cooperative Ventures, Leaps by Bayer, S2G Ventures, iSelect Fund and Route 66 Ventures. EarthOptics develops soil-sensing technologies that give growers insights into the physical characteristics of their soil.
ContractSafe, a Malibu, Calif.-headquartered cloud-based contract management platform, grabbed a $27.5 million strategic growth investment from Five Elms Capital.
aiOla, an Israeli startup whose voice and image recognition technology and artificial intelligence models help digitize, automate and streamline inspection processes, nabbed a $25 million investment. New Era Capital Partners led the round, which included support from Hamilton Lane.
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This marks Alphabet's largest-ever round of layoffs as it copes with a darkened economic outlook.
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