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There Are No Easy A’s in Venture Capital These Days
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By Matthew Strozier, WSJ Pro
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Good day. Venture capitalists are making startups work for their A’s.
It takes, on average, about 2½ years for a company in the U.S. to reach Series A, according to a Crunchbase analysis of startups with at least $1 million in initial pre-seed or seed funding. Back in 2015, it took about a year and a half. The average timespan dropped slightly last year, but then rose again this year.
Fewer startups overall are even reaching the Series A milestone. Just 11% of all startups that raised pre-seed or seed funding from 2020 to July 15 of this year have gone on to raise a Series A, according to data provider Crunchbase. The graduation rate is 21.7% for the 2020 cohort, but plummets to 2.8% for the 2024 class. Graduation rates might rise over time, so these numbers could improve if venture activity rebounds.
What’s going on?
Blame AI. Or credit it.
The winners in the generative artificial intelligence race have achieved surging valuations and secured ever-larger funding rounds. Others have had to shift strategies, particularly startups that launched before the unveiling in November 2022 of OpenAI’s ChatGPT, powered by the GPT 3.5 model.
The companies that were built before ChatGPT “are having to replatform and rethink their businesses in a way that the newer companies haven’t or don’t need to because they’ve built AI-native,” said Tomasz Tunguz, general partner at Theory Ventures.
Milestones that startups once needed to hit have now “moved meaningfully because of AI,” he said.
To be sure, startups face plenty of other challenges in today’s market. High interest rates, a moribund IPO market and lackluster investment activity have stalled startups across funding stages since 2022.
Read the full article.
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And now on to the news...
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Myriad Genetics headquarters in Salt Lake City. The company last week received $200 million in financing from OrbiMed. PHOTO: KRISTOFFER TRIPPLAAR/SIPA USA/ASSOCIATED PRESS
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Financing alternatives. Healthcare investor OrbiMed Advisors has closed its largest royalty and credit fund, raising $1.86 billion to provide businesses with financing alternatives as equity capital becomes more costly, WSJ Pro’s Brian Gormley reports.
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New York-based OrbiMed beat its $1.75 billion goal for OrbiMed Royalty and Credit Opportunities Fund V. The fund, which closed on Friday, follows the $1.71 billion OrbiMed raised for its fourth royalties and credit fund in 2022.
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OrbiMed, which makes equity investments through other funds, uses royalty and credit vehicles to lend and acquire rights to royalty payments or revenue interests in products.
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13%
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Ahead of Figma’s offering, IPOs this year rose an average 13% in their first day of trading, according to Dealogic. Figma’s jumped 250%.
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Figma Had a Dazzling IPO. It Could Have Been $3 Billion Better.
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Shares in software maker Figma posted eye-popping gains in their stock-market debut Thursday. Also eye-popping: the $3 billion the company left on the table by underpricing its shares. Figma and selling shareholders raised $1.2 billion in the IPO. They could have pocketed much more had the initial shares, priced at $33 apiece, been priced higher.
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Bankers often say pricing an IPO is an art, not a science. Companies and selling shareholders want to raise as much money as they can in their IPOs. But they also want the morale boost that comes with their stocks rising on their first day of trading.
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Private Equity Worries Trump Might Bundle Crypto Into 401(k) Order
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For months, Wall Street has been expecting the Trump administration to issue an executive order that will help private-fund managers get into Americans’ defined-contribution retirement accounts. The move would assist private-equity firms in realizing their long-held dream to manage some of the nearly $9 trillion held in 401(k) savings plans. But now the Trump administration appears intent on expanding 401(k) access even more broadly, letting in digital assets such as cryptocurrencies along with private funds. The addition of digital assets to the administration’s plans has caused consternation among some private-fund firms, who tried to push back on the idea.
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Funds
CRV raised $750 million for its CRV XX fund to continue making seed and Series A investments.
Antler launched Criticality, a new $65 million fund that makes seed and Series A investments in U.S.-based startups focusing on deep tech and underserved sectors.
People
Edge computing company Zededa appointed Kevin McGee as chief revenue officer and John Jendricks as senior vice president and chief operations officer. The company also promoted Padraig Stapleton to senior vice president and chief product officer.
Identity security platform Permiso Security appointed Brian Crockford as chief revenue officer; and promoted Ian Ahl and Sanjeev Williams to chief technology officer and senior vice president of product, respectively.
Renewable hydrogen production technology provider Vema Hydrogen appointed Jim Kueser as chief financial officer.
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Legion, an AI security operations center platform based in New York and Tel Aviv, emerged from stealth with $38 million in seed and Series A funding from investors including Coatue, Accel and Picture Capital.
Unmind, a workplace mental health platform, added $35 million in new funding led by Telus Global Ventures.
Prophet Security, a Palo Alto, Calif.-based agentic AI security operations center platform, scored $30 million in Series A funding. Accel led the round, which saw additional support from Bain Capital Ventures.
QuamCore, an Israel-based quantum computing startup, raised $26 million in Series A funding. Sentinel Global led the round, which included participation from Arkin Capital, Viola Ventures, Earth & Beyond Ventures and others.
Qbeast, a data optimization platform based in Bellevue, Wash., and Barcelona, landed $7.6 million in seed funding led by Peak XV's Surge.
Handwave, a Latvian developer of a palm-based payment and identity platform, was seeded with a $4.2 million investment led by Practica Capital.
Comp AI, a San Francisco-based compliance automation platform, secured $2.6 million in pre-seed funding co-led by OSS Capital and Grand Ventures.
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ILLUSTRATION: JAMES STEINBERG
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