Good day. When even the best companies are being buffeted by economic headwinds and tough market conditions, identifying startups with the potential for long-term growth can take on added challenges.

In assessing startups, the biggest change in down markets “typically involves a shift towards profitability versus hyper-growth,” said Christian Munafo, chief investment officer at New York-based Liberty Street Advisors Inc. and portfolio manager of The Private Shares Fund, which invests in late-stage venture-backed companies.

High growth is still important, Mr. Munafo said, but in hard times it can become necessary for startups to pull back on spending, “which makes it more challenging for sustained hypergrowth.”  

He says investors need to follow a disciplined due-diligence playbook, especially after years of free-flowing capital across the startup ecosystem.

His own playbook includes a rigorous assessment of a startup’s market size and dynamics, its business and pricing model, market fit, the competitive landscape, public and private company comparables and valuation multiples, among a long list of other metrics.

“The most disciplined investors follow these types of playbooks in all market environments,” Mr. Munafo said.

And now on to the news ...

Andreessen Horowitz backs Flow. Venture-capital firm Andreessen Horowitz is investing in Flow, a real-estate startup led by former WeWork executive and co-founder Adam Neumann, The Wall Street Journal reports.

• The firm, known as a16z, is investing $350 million in Flow at a valuation above $1 billion, said a person familiar with the matter, making it one of the largest-ever investments for an early-stage startup. Flow was founded earlier this year.
   
• Andreessen Horowitz co-founder Marc Andreessen said in a blog post that Flow would seek to address problems in the rental-housing market, which he described as the inability for renters to own equity in their homes and a lack of social bonding between neighbors.

Under Chairwoman Lina Khan, the Federal Trade Commission issued 42 letters of investigation over mergers or similar transactions during the 2021 fiscal year, almost double the number in 2020 and the highest in more than 10 years, WSJ reports. That’s prompting some deal makers, antitrust attorneys and Republicans to complain that the agency is slowing down deals where there isn’t a credible threat to competition. Bankers and boards of directors are now more aware of the risk that antitrust enforcers will investigate, which has sometimes led companies to postpone merger plans, said Eric Swedenburg, co-head of the mergers and acquisitions practice at Simpson Thacher LLP: “You have to assume you’re not going to get a pass on anything.”

Private-equity firms Apax Partners, MSD Partners and Sixth Street Partners led a $170 million investment in Guesty Inc., which provides software that helps businesses manage short-term rentals listed on multiple platforms such as Airbnb, Vrbo and Booking.com, WSJ Pro reports. MSD Partners, an investment firm backed by technology billionaire Michael Dell’s family office, and Sixth Street are new investors in the Tel Aviv-based software company. European buyout firm Apax led a previous investment of $50 million in Guesty last year. Other existing investors who also participated in the latest round include Israeli asset manager Viola Group and London-based Flashpoint Venture Capital.

The climate-and-energy legislation that Congress just passed includes spending for both renewables startups and fossil-fuel producers—a broad, even if seemingly contradictory, strategy that many on Wall Street are already pursuing, WSJ reports. Although fundraising in both areas has slowed during this year’s market volatility, the ratio of green-to-fossil-fuel financing has stayed roughly similar, according to Dealogic. That’s partly because many clean-energy startups plan to use natural gas for several years and are backed by established energy and utility companies, analysts say.

People

Transportation investor FM Capital added Joe Hinrichs as venture partner. He was most recently president of Ford Motor Co.’s global automotive business.

Nuvocargo Inc., a digital platform focused on U.S.-Mexico cross-border trade, named Nicholas Vernald as head of sales, U.S. He was most recently at Flexport. Nuvocargo has raised over $40 million from investors including Tiger Global Management, QED Investors, NFX and Y Combinator.

Exits

Boston Scientific Corp. acquired Obsidio Inc., whose technology is used for embolization of blood vessels, for an undisclosed amount. Good Growth Capital and IAG Capital Partners list Obsidio in their portfolios.

Gorgias, a helpdesk provider for e-commerce merchants, secured $30 million in Series C financing. Transpose Platform’s Alex Bangash and Shopify’s Bram Sugarman led the round, which saw participation from SaaStr’s Jason Lemkin, Sapphire Ventures’ Rajeev Dham, CRV and Alven Capital Partners.

GrowthSpace Inc., a New York-based talent development platform, landed $25 million in Series B funding. Lead investor Zeev Ventures was joined by M12 and Vertex Ventures in the round.

CareHarmony, a Brentwood, Tenn.-based care coordination services provider, closed a $15 million Series A round. Maverick Ventures led the investment, with Managing Director Prateesh Maheshwari joining the company’s board. Nashville Capital Network also invested in the round.

Northbeam, a San Francisco-based business analytics provider, completed a $15 million Series A round led by Silversmith Capital Partners.

.bit, a decentralized identity protocol built on the blockchain, fetched $13 million in Series A funding from investors including HashKey Capital, Qingsong Fund, GSR Ventures and GGV Capital.

Naborforce, a Richmond, Va.-based startup connecting older adults to a network of trusted community members for on-demand support and social engagement, snagged $9 million in Series A funding. Led by Translink Capital, the round included contributions from Claritas Capital, The Artemis Fund and TechStars. 

EvaBot, a San Francisco-based corporate gifting platform, nabbed $8.3 million in Series A funding, in addition to $2.5 million in debt. Comcast Ventures led the investment, which included participation from Alumni Ventures, Bloomberg Beta, Precursor Ventures, Forefront Venture Partners and Silicon Valley Bank.

BankiFi, a U.K.-based provider of embedded banking solutions for small and medium businesses, picked up a $4.8 million investment led by Praetura Ventures.

Regression Games, an artificial intelligence gaming and esports startup, closed a $4.2 million seed round. New Enterprise Associates led the funding, with additional participation from Andreesen Horowitz, BBQ Capital, Roosh Ventures and others.

Violet, a Brooklyn, N.Y.-based cultural competence credentialing and upskilling platform for clinicians, raised $4.1 million in seed funding from investors including SemperVirens, Northwell Holdings, The Venture Collective and HopeLab. Allison Baum Gate, general partner at SemperVirens, will join the board.

Closinglock, an Austin, Texas-based real estate transaction platform, was seeded with a $4 million investment. LiveOak Venture Partners led the round, which included support from RWT Horizons and GTMfund.

• Streaming services deal with more subscribers who ‘watch, cancel and go’ 
   
• Unity Software Inc.’s board opposes AppLovin’s $17.5 billion buyout offer 
   
• Dan Loeb’s Third Point calls for Disney to spin off ESPN and refresh its board 
   
• Walmart reaches streaming deal with Paramount+ 
   
• Crypto is taking a few small banks on a wild ride

This newsletter was compiled by Matthew Strozier, Angus Loten and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

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