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Down Rounds Reach New Heights
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By Yuliya Chernova, WSJ Pro
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Good day. Venture investors are dealing with a hangover from the most recent boom.
Down rounds, where a company’s value declines compared with the previous financing, jumped to an unprecedented 27% of all venture deals in the fourth quarter globally, up from 14.5% in the prior quarter, according to research firm Preqin. Down rounds represented a tenth of all deals in the past five years on average, according to the firm.
In recent years, the period with the smallest proportion of down rounds was the first quarter of 2022, when just 4.2% of venture deals globally had lower valuations, according to Preqin.
The surge in down rounds appeared across stages, with 40% of Series D rounds registering a lower valuation in the fourth quarter, as well as 20% of Series A rounds, Preqin said.
Down rounds squeeze venture returns, as the unrealized value of venture portfolios gets marked down. Venture market performance declined 4.7% in 2023, according to Preqin, underperforming private equity and the S&P 500 index returns.
“Our near-term outlook for VC remains clouded by low activity and declining performance. Recovery will likely be uneven and performance dispersion could increase,” Preqin analysts wrote in their report.
Add to that the likely delayed timeline for the Federal Reserve to cut interest rates and the venture market appears to have a hard slog ahead.
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And now on to the news ...
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A Meta company booth exhibiting virtual-reality headsets. PHOTO: KRISZTIAN BOCSI/BLOOMBERG NEWS
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Safety measures. Major artificial-intelligence companies including OpenAI, Meta Platforms and Google agreed on Tuesday to incorporate new safety measures to protect children from exploitation and plug several holes in their current defenses, The Wall Street Journal reports.
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A host of new generative-AI powered tools have supercharged predators’ ability to create sexualized images of children and other exploitative material. The goal of the new alliance is to throttle the creation of such content before these tools can proliferate and hurt more children, according to Thorn, the child-safety group that helped organize the initiative along with the nonprofit organization All Tech Is Human.
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78%
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The increase in small-business chapter 11 bankruptcy filings in the U.S. in February, compared with the same month a year ago, according to bankruptcy data provider Epiq.
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FTC Bans Noncompete Agreements That Restrict Job Switching
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The Federal Trade Commission on Tuesday banned employers from using noncompete contracts to prevent most workers from joining rival firms, achieving a policy goal that is popular with labor but faces an imminent court challenge from business groups, WSJ reports.
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The measure, approved by the agency’s Democratic majority on a 3-to-2 vote, marks the first time in more than 50 years that FTC officials have issued a regulation to mandate an economywide change in the way companies compete.
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Funds
14Peaks, a venture firm based in Cham, Switzerland, closed its first fund at $30 million. Led by General Partner Edoardo Ermotti, the firm invests in pre-seed and Series A startups in the enterprise software sector, with a focus on fintech and future of work.
Deals
AutoAlign, a Toronto-based AI safety company that provides generative AI security, said it spun off from Armilla AI.
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BforeAI, a predictive security platform headquartered in New York and France, raised $15 million in Series A funding led by SYN Ventures.
Pipedream, an Austin, Texas-based startup that is building underground tunnels to facilitate autonomous urban deliveries, raised $13 million in a round led by Starship Ventures, with participation from Cortado Ventures, Myelin and others. The company is also developing an alternative system for drive-thru order pickups
Texture, a New York-based data and communication platform for the distributed energy economy, was seeded with a $7.5 million investment from Equal Ventures, Lerer Hippeau, Abstract Ventures, Day One Ventures and others.
Bump, a wealthtech and financing platform for creators, said it has raised $3 million in seed financing. Bump said it enables creators across YouTube, Instagram, Spotify and TikTok to discover and track all income sources and manage their market value in order to grow their digital assets, business and wealth. The capital will expand Bump‘s servicing of creators and their businesses throughout the U.S., Europe and Africa, the company said.
Clueso, whose tool allows customers to create video tutorials, raised a $1.4 million seed round from f7 ventures and Y Combinator.
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HashiCorp’s software helps companies set up their infrastructure in the cloud.
PHOTO: RAFAEL HENRIQUE/ZUMA PRESS
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IBM nears acquisition of software provider HashiCorp, sources say
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Tesla accelerates rollout of more-affordable EVs as profit drops sharply
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China’s EV price war is just getting started
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Why the AI industry’s thirst for new data centers can’t be satisfied
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Big tech leads market rally ahead of earnings
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TikTok isn’t going away—at least not yet. Here’s what to know.
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Elon Musk criticizes Australia for ordering removal of stabbing video
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Advisers on trillions in IRAs must now put your interest first
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Ericsson lays off more than 200 employees in China
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SK Hynix plans additional $14.6B AI chip investment in South Korea
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How G.M. tricked millions of drivers into being spied on (including me) (New York Times)
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Ripple says $10 million penalty enough, rejects SEC’s ask of $1.95 billion fine in final judgment (Coindesk)
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It’s the end of the Web as we know it (The Atlantic)
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