Good day. Initial public offerings had a rough 2023. And venture investors and limited partners say the possibility of another bleak year is among their biggest concerns for 2024.

A depressed IPO market can dissuade investors from backing companies because it could push future returns even farther beyond an expected horizon. Last year, there were 170 venture-backed IPOs globally, the fewest since 2013, according to analytics firm CB Insights.

Asked in a November survey what the key challenges are to profit generation in venture capital for the next 12 months, 75% of limited partners cited the “exit environment” as their top concern, the same proportion as in a year-earlier survey by Preqin.

To be sure, the IPO outlook among venture investors is better than it was a year ago. In the survey, 41% of venture fund managers said there will be more IPOs in the next 12 months, a figure well up from the 8% expecting more IPOs a year earlier.

Luke Carroll is chief investment officer of Reference Capital, a Geneva, Switzerland-based firm that advises LPs, including European family offices and institutional firms, on their investments in venture capital funds and startups. Carroll said many LPs are reacting to the depressed IPO market by exercising greater caution.

Many of them are seeking more information from funds they’re already invested in and from ones they are reviewing as possible investments, Carroll said. LPs want more detail on how much the funds might return to investors and on their exit strategies, he said.

“LPs are now more focused on understanding how funds plan to navigate the challenging exit environment and realize returns in the absence of a robust IPO market,” Carroll said.

David York, founder and managing director of Top Tier Capital Partners, a limited partner for VC funds, including for Andreessen Horowitz and Accel, said he’s hopeful that mergers and acquisitions will help generate liquidity this year as corporations and buyout firms become more active, even if IPOs continue to languish.

The IPO market, he said, won’t return to a robust level until the Fed lowers interest rates.

“IPOs are what create the outsized returns in venture capital,” York said. “So we need that ecosystem to ultimately normalize, which I think might take 18 months.”

And now on to the news...

Fundraising struggle. The credit arm of Summit Partners has ceased making new investments after it struggled with its latest fundraising, stepping back as other asset managers have piled into what has been a hot corner in an otherwise difficult private-markets environment, WSJ Pro reports. Boston-based Summit, which had assets of about $31.8 billion under management as of March 2023, is one of many private-markets fund managers facing a reckoning amid difficult market conditions over the past couple of years.

Corporate cybersecurity leaders are looking for ways to spend less in 2024 and still focus on securing technologies for business operations as companies face continued hacking threats, WSJ Pro reports. High priorities include protecting artificial intelligence and cloud computing, which have seen increasing corporate use, and reducing the number of cyber suppliers, chief information security officers say. Company budgets, including for cybersecurity, came under pressure last year and security chiefs expect more of the same in 2024.

Puck tapped the former Twitter executive Sarah Personette as chief executive officer of the news startup, where she will be tasked with shepherding its expansion into new coverage areas and markets.

The two-year-old publication, whose writers focus on covering power brokers in tech, media, finance and politics, has amassed around 40,000 full-paying subscribers and surpassed $10 million in revenue in 2023, according to a person close to the company, WSJ reports.

“We believe that Puck has the ability to be a big business,” Jon Kelly, a Puck co-founder and its editor in chief, said in an interview. He said Personette will help Puck continue to grow through expansion of existing products including events and podcasts and possible new categories like the art business. The company hosted 25 events in 2023.

Corrections & Amplifications: Generative AI arrived with a splash this past year, but its ripples were barely felt in the world of industrial climate tech, said Claire Yun, an investor with Piva Capital. In 2024, the more interesting models will be outside of natural language, generating everything from synthetic data to 3D models to product designs, she added. The comments were incorrectly attributed to Jillian Noel of Piva Capital in the Dec. 22 newsletter.

Data

Startup valuations in Series A financing rounds saw a significant bump in the last quarter of 2023, according to preliminary quarterly data collected by Carta, a cap-table management software company that aggregates information across its clients. Median pre-money valuations for private companies raising Series A rounds rose to $45.5 million in the last three months of the year across 243 deals tracked by Carta. The median Series A valuations rose from $38.8 million in the third quarter. Series A values have been trending up since a trough of $35.2 million reached in the fourth quarter of 2022. —Yuliya Chernova

Funds

TCG Crossover, which invests in both public and privately-held life sciences companies, closed its second fund with $1 billion in commitments, exceeding the original hard cap of $900 million. Founded in 2021, TCGX has raised more than $1.8 billion in total capital to date, and has investment teams in Palo Alto, Calif., and New York.

Early-stage investor Exponent Founders Capital launched with $125 million raised to date, including a new $75 million fund. The New York-based firm invests in sectors including enterprise software, fintech and payments, infrastructure, applied AI, and vertical software-as-a-service across the U.S., Canada and Europe.

People

Biopharmaceuticals investor Frazier Life Sciences added Lin Mu as a senior associate based in the firm’s Palo Alto office. He was previously a management consultant with Boston Consulting Group’s healthcare practice.

Healthcare investor Omega Funds promoted Francesco Draetta to managing director. Prior to rejoining Omega in 2016, he was part of the investment teams at Commonfund Capital and Brookside Mezzanine Partners.

Medical technology-focused Vensana Capital promoted Amrinder Singh, Cynthia Yee, Greg Banker and Mike Kramer to partner, and Steve Schwen to partner and chief financial officer. The firm also appointed Bill Hoffman as a venture partner. Vensana has offices in Minneapolis and Vienna, Va.

Bioscience-focused Breakout Ventures promoted Dana Watt to partner, Nima Ronaghi to principal and Renée Shenton to chief of staff. The San Francisco-based firm also appointed Susanna Harris as director of community.

OnCusp Therapeutics, a New York-based biopharmaceutical startup focusing on developing treatments for cancer, scored a $100 million Series A investment from OrbiMed, F-Prime Capital and several others.

Aqua Security, a cloud security platform with headquarters in Israel and Burlington, Mass., added $60 million in Series E funding led by Evolution Equity Partners, giving the company a valuation of more than $1 billion.

Robin AI, a London- and New York-based startup building an artificial intelligence platform for the legal sector, raised $26 million in Series B financing. Temasek led the round, which included participation from QuantumLight and Plural.

Arbital Health, a San Francisco-based startup focused on accelerating the healthcare industry's transition to value-based care, landed $10 million in Series A funding. Transformation Capital led the round, with Partner Scott Rosen joining the company’s board.

• Google is finally killing cookies. Advertisers still aren’t ready.
   
• EV startup Fisker ditches Tesla-style direct sales model
   
• Mobileye crashes into auto-chip pileup
   
• Peloton partners with TikTok for workout content hub
   
• Rocket Cos. hires former Airbnb CMO Jonathan Mildenhall as its CMO

• The internet's biggest businesses have a looming growth problem (Business Insider)
   
• Big Tech layoffs shattered industry, worker confidence (Axios)
   
• Quantum computing is taking on its biggest challenge: noise (MIT Technology Review)

This newsletter was compiled by Matthew Strozier, Marc Vartabedian 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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