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By Yuliya Chernova, WSJ Pro
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Good day. Has the venture market turned a corner? Some data points to an improvement, but other research says not yet. One thing is clear: the option for startups to limp through a middling existence is narrowing.
The latest doom-and-gloom data comes from Crunchbase. It shows global funding for startups totaled $18.6 billion in July, down about 20% from June and 38% below the year-earlier monthly total. Funding shrank roughly evenly across different stages, the data provider said.
“There’s a wall at the Series A and a wall at the Series B,” said Frank Rotman, co-founder, partner and chief investment officer at venture firm QED Investors.
Venture investors want to see results and higher revenue at each stage to get excited about funding more than they did when capital was plentiful and interest rates were low, Rotman said. Many companies fail because they don’t have the needed business traction, he added.
The rate of startup failures is rising, data show. Startup dissolutions more than doubled in the second quarter of 2023 compared with the year-earlier period, according to data from Carta, which tracks companies that raised at least one priced equity round and used its software.
QED has had a few portfolio companies close their doors recently, Rotman said, after several years with zero failures.
“Darwin went on vacation for three years and now he’s back,” Rotman said.
And now on to the news...
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SoftBank Chief Executive Masayoshi Son said recently that he had devoted himself to artificial intelligence. PHOTO: KIYOSHI OTA/BLOOMBERG NEWS
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SoftBank pursues AI. SoftBank Group posted its first investment gains in a year and a half and said it would cautiously press ahead with new bets in artificial-intelligence-related fields, The Wall Street Journal reports.
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The Japanese technology investor reported $1 billion in investment gains at its flagship Vision Fund unit during the April-June quarter, a result that Chief Financial Officer Yoshimitsu Goto said encouraged the company to look for new places to park its money.
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“I hope that the tide is turning” in the tech startup sector, Goto said at a press conference, referring to the recent rebound in technology shares.
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In a sign of improving market conditions, the company said the number of companies in its Vision Fund 1, Vision Fund 2 and Latin American funds whose value increased during the latest quarter nearly doubled from the previous quarter.
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10
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The number of U.S. regional banks whose credit ratings were downgraded by Moody's Investors Service on Tuesday.
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U.S. to Ban Some Investments in China
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The U.S. is set to ban private-equity and venture-capital investments in some Chinese technology companies under an executive order the Biden administration will release Wednesday, escalating Washington’s efforts to prevent Beijing from developing cutting-edge technology for its military, WSJ reports.
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The executive order is expected to cover direct investments in three technology sectors: semiconductors, quantum computing and artificial intelligence. It would prohibit investments in some forms of those technologies, while requiring Americans doing business in China to inform the U.S. government about investments in the three high-tech sectors more broadly.
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Investors that violate those rules may face fines and be forced to divest themselves of their stakes, according to people familiar with the order. The rules are expected to apply to future transactions and won’t cover portfolio investments in Chinese stocks and bonds, the people said.
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WeWork Raises Doubt About Its Survival
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WeWork on Tuesday raised doubt about its ability to stay in business as the co-working space provider faces losses and a dwindling cash pile amid major changes in the way people work, WSJ reports. WeWork said excess supply of commercial real estate, greater competition for flexible space and uncertain economic conditions resulted in losses in the second quarter.
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The company has seen higher churn and lower demand than it anticipated, with memberships at its locations falling from a year ago, Interim Chief Executive Officer David Tolley said in its quarterly results.
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WeWork’s management also warned that “as a result of our losses…which have been impacted by the recent increases in member churn…substantial doubt exists about the company’s ability to continue as a going concern.”
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Willowridge Amasses $900 Million for Niche Secondary Deals
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Willowridge Partners has wrapped up fundraising on its ninth fund dedicated to acquiring stakes in mature private capital funds, WSJ Pro reports. The New York-based private-equity manager raised $900 million for Amberbrook IX, which closed at the end of last week, the firm’s founder and partner Jerrold Newman told The Wall Street Journal. The firm itself committed $50 million of that amount, or more than 5% of the total.
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Funds
Symbol closed its debut fund with $50 million in commitments to make first round investments of between $500,000 and $3.5 million in Israeli entrepreneurs. The Tel Aviv-based firm has made 10 pre-seed and seed investments to date.
People
Fortem Technologies, an airspace monitoring startup that protects against dangerous drones, appointed Tom Thebes to the post of chief financial officer. He previously worked at companies including Armor Express, Blue Force Gear, Domo Tactical Communications and Protected Vehicles.
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Horizon3.ai, a San Francisco-based autonomous security technology provider, raised $40 million in Series C funding led by Craft Ventures.
Meatable, a Dutch cultivated meat startup, scored a $35 million investment led by Agronomics.
Thunder, a San Francisco-based Salesforce and cloud consulting, implementation and managed services startup, completed a $16 million Series A round. Recognize led the investment, which included participation from Salesforce Ventures.
ConductorOne, a Portland, Ore.-based identity security and access governance startup, added $12 million in Series A funding led by Felicis, bringing the round total to $27 million.
Sweet Security, a cloud security startup, picked up a $12 million seed investment led by Glilot Capital Partners.
Chargeflow, a Tel Aviv-based chargeback automation technology provider, closed an $11 million investment. OpenView Venture Partners led the funding, with Partner Tom Holahan joining the board.
Dropzone AI, a Seattle-based autonomous alert investigation platform for security operations teams, was seeded with a $3.5 million investment led by Decibel Partners.
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Tesla has taken on manufacturing challenges with the Cybertruck, which uses stronger, heavier stainless steel instead of the sheet metal typically used in car bodies.
PHOTO: ROBYN BECK/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Is it cheaper to refuel your EV battery or gas tank? We did the math in all 50 states. (Washington Post)
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Virtual reality has negative side effects – new research shows that can be a problem in the workplace (The Conversation)
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VC optimism is returning but there's more pain ahead in portfolios (Hunter Walk)
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