Good day. Many investors in venture funds are stuck in illiquid portfolios whose value is hard to establish in today’s sluggish venture market. That is fueling a rise in secondary deals that enable limited partners to get cash back without having to wait for IPOs or company sales.

A case in point is the recent sale of a 12% stake in Group 11’s second fund for $20 million to Industry Ventures and StepStone Group. This is Group 11’s third sale of a secondary stake in one of its funds since last year. The deals returned a total of $96 million to the venture firm’s LPs.

“You are giving your investors the options to exit if they wish,” said Dovi Frances, who is the solo general partner at Group 11, of such deals. “It gives you the appreciation of your investors and also the time you need to realize the returns. No one will pressure you,” he said.

Secondary funds are the only type of private funds that have gathered more capital globally this year than last, according to research firm PitchBook Data. Such funds raised $68.1 billion in the first three quarters of this year, up 18% over last year’s total, according to the data. PitchBook includes secondary funds with broad strategies, not just venture capital, in this data.

Venture capital and growth strategies accounted for 14% of the total secondary sales by LPs in the first half of 2023, up from 8% of such deals in the first half of last year, according to a report by investment bank Jefferies. The report attributed that shift to lower portfolio marks.

General partners “are being creative about getting liquidity,” said Aakar Vachhani, partner at Fairview Capital, a firm that invests in venture funds but isn’t an LP in Group 11.

Read the rest of the story at the link.

And now on to the news...

Threats to app-store economy. Monday’s court ruling that Google created an antitrust market with its app store threatens to upend the $500-billion-a-year app store economy, which has evolved into a profit machine for Apple and Google that helped define the smartphone era, The Wall Street Journal reports.

• A jury unanimously sided with Epic Games, saying that Google had harmed the videogame maker by maintaining an illegal monopoly. Google said it plans to appeal the verdict and stands by its business model. In a separate case that concluded in 2021, a federal judge largely ruled against Epic even as she ruled that Apple must allow third-party software makers to steer customers to payment options within their own apps. The outcome might ultimately be decided by the Supreme Court.
   
• Since that ruling, Google and Apple—which tightly control third-party software on most of the world’s billions of smartphones—have seen their control gradually erode as regulators in Europe, Asia and the U.S. have passed laws challenging company policies.

Microsoft is betting nuclear power can help sate its massive electricity needs as it ventures further into artificial intelligence and supercomputing, WSJ reports.

• The technology industry’s thirst for power is enormous. A single new data center can use as much electricity as hundreds of thousands of homes. Artificial intelligence requires even more computing power.
   
• Nuclear power is carbon-free and, unlike renewables, provides round-the-clock electricity. But it faces significant hurdles to getting built, including the daunting and expensive U.S. nuclear regulatory process for project developers.
   
• In a twist, Microsoft is experimenting with generative artificial intelligence to see if AI could help streamline the approval process, according to Microsoft executives.

Treasury Secretary Janet Yellen said the U.S. economy is on the path toward taming inflation without a deep economic slowdown, achieving a so-called soft landing. “To me a soft landing is the economy continues to grow, the labor market remains strong and inflation comes down. And I believe that’s the path we’re on,” Yellen said Tuesday at The Wall Street Journal’s CEO Council Summit.

People

DataTribe, which invests in and co-builds cybersecurity and data science companies, said Robert Lee joined the firm as a venture partner. He will also remain as chief executive officer of Dragos.

True Anomaly, a Centennial, Colo.-based provider of space security, sustainability and accessibility technology, scored $100 million in Series B funding. Riot Ventures led the investment, which included participation from Eclipse, ACME Capital, Menlo Ventures, Narya, Rocketship.vc, Champion Hill Ventures, 645 Ventures and FiveNine Ventures.

Tacto, a Munich-based supply chain operating system for mid-sized industrial companies, picked up a €50 million (about $54 million) investment led by Index Ventures and Sequoia Capital.

Stayntouch, a Bethesda, Md.-based hotel property management system provider, picked up a $48 million strategic growth equity investment. Sixth Street Growth led the financing, with Michael Bauer joining the company’s board.

Vammo, a São Paulo-based startup that rents electric motorcycles supported by a network of battery swapping stations, secured $30 million in Series A equity and debt financing led by Monashees.

Dimensional Energy, an Ithaca, N.Y.-based company whose technology transforms carbon dioxide into sustainable aviation fuel and consumer products, closed a $20 million Series A round led by Envisioning Partners.

Fourth Power, a Cambridge, Mass.-based thermal battery technology startup, grabbed a $19 million Series A round led by DCVC.

Guardz, a cybersecurity startup with offices in Miami, Tel Aviv and Amsterdam, raised $18 million in Series A funding led by Glilot Capital Partners.

Chalk, a San Francisco-based data platform for machine learning and generative AI, was seeded with a $10 million investment led by General Catalyst, Unusual Ventures and Xfund.

Metafuels, a Switzerland-based sustainable aviation fuel startup, obtained an $8 million seed round from investors including Energy Impact Partners.

Noetica AI, a New York-based software platform that benchmarks corporate debt transactions, raised a $6 million seed round led by Lightspeed Venture Partners.

Featureform, a San Francisco-based startup enabling data scientists to define, manage and deploy machine learning features, fetched $5.5 million in seed financing led by GreatPoint Ventures and Zetta Venture Partners.

Comun, a New York-based neobank for Latino families, secured another $4.5 million investment led by Costanoa Ventures, bringing the total raised by the company to $9 million.

• Apple makes security changes to protect users from iPhone thefts
   
• Netflix releases full viewership data for first time
   
• The American store is shrinking
   
• Ukraine’s biggest wireless service knocked offline in attack
   
• It’s not just you: email search is terrible. Here’s how to do it smarter.
   
• Inside the world Excel championships (yes, you read that right)

• Some AI startups find the money’s no longer so easy (The Information)
   
• Stanford launches emerging-tech project co-led by Hoover Institution’s Condoleezza Rice (The Mercury News) 

This newsletter was compiled by Yuliya Chernova 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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