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The Venture Pullback’s Effect on Emerging Hubs
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Good day. Last week we asked what the venture investing pullback means for startup communities outside of the major hubs in California, New York and Massachusetts. Here are some responses:
Steve Case, chairman and CEO of venture firm Revolution and author of “The Rise of the Rest: How Entrepreneurs in Surprising Places Are Building the New American Dream”: “It is a mixed bag. While fundraising is certainly harder for almost all startups, leadership teams outside of the major tech hubs are typically more capital efficient. Why? Because they’ve had to be. From our perspective, companies outside of the major tech hubs are still on the rise as pandemic-era trends of more mobile talent and capital continue. Our research also found that nearly 1,500 new venture firms launched outside of the Bay Area, New York and Boston in the last decade, proving that the venture-capital ecosystem is now much more developed across the country. It’s important to note that this isn’t about Silicon Valley losing out, rather the Rise of the Rest is about an
expanding industry that can create a more geographically inclusive innovation economy."
Jenny Fielding, co-founder and managing partner of Everywhere Ventures: “In less developed tech ecosystems, early-stage funding is always more difficult to secure. This stems from the dearth of local angel investors, coupled with fewer successful exited founders who want to support the next generation of entrepreneurs. So any downturn or pullback in tech will disproportionately impact tier two and three tech hubs as the funding goes from minimal to nonexistent. We see this happening firsthand in places like Austin, where the ability to rally small syndicates into early preseed rounds is getting much more difficult. Eighteen months ago, we could help bring together a million-dollar round in just a few days. Now, it can take two or more months.”
Chris Olsen, co-founder and partner at Drive Capital: “All venture firms seem to be spending more time closer to home, and Drive is no different, but we're fortunate enough that the geography where we focus continues to see a large increase in activity relative to where we were five or 10 years ago. While the two-year trend for investments may be down, the five- and 10-year trend is still extremely promising.”
Lindsey Taylor Wood, founder and general partner of The Helm, said regional venture firms may be part of the solution to the relative lack of access to capital outside the major technology hubs. “It’s been exciting to see more region-specific venture firms emerge, and maybe they’re able to be helpful and thoughtful in solving for that exact thing.”
This week’s question: How does the slump in startup valuations and investment change how venture investors view secondaries? Please email responses to vcnews@wsj.com.
And now on to the news...
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FTX founder Sam Bankman-Fried was questioned at a hearing in federal court in New York City as part of his fraud trial over the collapse of the cryptocurrency exchange he founded. PHOTO: JANE ROSENBERG/REUTERS
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Sam Bankman-Fried says FTX actions were guided by lawyers. FTX founder Sam Bankman-Fried previewed a potential defense Thursday when he told a federal judge that he relied on the blessing of lawyers to make business decisions such as deleting communications and making loans to himself, actions that prosecutors said allowed him to commit the crimes that led to the implosion of his crypto exchange, The Wall Street Journal reports. Bankman-Fried, on trial for fraud, money laundering and other offenses, had been expected to testify in front of a Manhattan federal jury on Thursday afternoon. Instead, in what amounted to an unusual practice session after the jury was dismissed for the day, U.S. District Judge
Lewis Kaplan required the FTX founder to walk through several subjects that were in dispute so the judge could rule on what Bankman-Fried could say to jurors.
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Apple Faces Potential Watch Import Ban After Federal Trade Ruling
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A U.S. federal trade agency on Thursday found that Apple violated the patent of a rival tech company, a ruling that could lead to an import ban for certain models of the company’s smartwatch, WSJ reports. The case revolves around medical technology company Masimo, which alleged in a 2021 complaint to the U.S. International Trade Commission that Apple violated its patents related to measuring blood-oxygen levels. Apple has included a sensor, called a pulse oximeter, in most new models of the Apple Watch since 2020.
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U.S. Trade Loophole Fuels Rise of China’s New E-Commerce Firms
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A law that allows low-price packages to enter the U.S. duty-free and with little customs scrutiny has enabled the breakneck growth of two e-commerce companies with roots in China: Shein and Temu, WSJ reports. Packages valued under $800 can enter the U.S. under simplified procedures known as the de minimis exemption. Lawmakers and some U.S. businesses say it is a loophole that the Chinese companies are using at a huge scale, allowing shipments of products that are unsafe or made with forced labor, while avoiding taxes.
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U.S. Economy Grew a Strong 4.9%, Driven by Consumer Spree
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U.S. economic growth surged this summer at the fastest pace since 2021, as consumers spent at a blockbuster rate that will be difficult to sustain, WSJ reports. Gross domestic product expanded at a 4.9% seasonally- and inflation-adjusted annual rate in the third quarter—more than double the second quarter pace—the Commerce Department reported Thursday. The acceleration won’t change the Federal Reserve’s plans to hold rates steady at their meeting next week.
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Funds
Flourish Ventures secured a new commitment of $350 million to continue making fintech investments across the U.S., Africa, Asia and Latin America. The San Francisco-based firm now has $850 million under management.
Europe-focused life sciences investor Sofinnova Partners closed its Sofinnova Digital Medicine I fund at $200 million. The new fund has made five investments to date.
The House Fund, a preseed and early-stage investor focused on startups with a connection to the University of California at Berkeley, raised $115 million for its Fund III.
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Triveni Bio, a Waltham, Mass.-based developer of precision medicines for the treatment of immunological and inflammatory disorders, scored $92 million in Series A funding from Atlas Venture and others.
AgentSync, a Denver-based insurance infrastructure builder, added $50 million in funding from investors including Craft Ventures.
Abridge, a Pittsburgh, Pa.-based developer of generative AI technology for clinical documentation, landed $30 million in Series B funding led by Spark Capital.
Arteria AI, a Toronto-based startup building documentation infrastructure for institutional finance, snagged $30 million in Series B funding led by GGV Capital U.S.
CentML, a Toronto-based software platform for deploying machine learning models, completed a $27 million seed round led by Gradient Ventures.
Cranium, a Short Hills, N.J.-based enterprise AI security provider, raised $25 million in Series A funding led by Telstra Ventures.
Omnidian, a Seattle-based solar asset-management provider, closed a $25 million funding round from National Grid Partners and others.
Traba, a marketplace for light industrial staffing with offices in Miami and New York, grabbed a $22 million investment led by Founders Fund.
Signos, a San Francisco-based metabolic health and weight loss platform, picked up $20 million in Series B funding led by GV and Cheyenne Ventures.
Opal Camera, a San Francisco-based webcam startup, closed a $17 million Series A round led by Founders Fund.
Siro, a New York-based AI coach for offline sales, secured $14 million in Series A financing led by CRV.
Rhizome, a Washington, D.C.-based climate resilience planning platform for utilities, launched with $2.5 million in funding from investors including Intelis Capital, Streetlife Ventures and Everywhere Ventures.
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Here is our weekly roundup of stories from across WSJ Pro that we think you'll find useful. They are unlocked for WSJ subscribers.
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Taking a cue from Apple’s approach to third party applications, GM released a set of open source APIs. PHOTO: GENERAL MOTORS
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