🏃‍♂️ETF Partners raises €285M for climate startups that will be effective quickly — not 20 years down the road

⚡️While many climate investors focus their efforts on breakthrough, deep-tech solutions, Patrick Sheehan at ETF Partners has other ideas.

#️⃣I’ve actually got nothing against carbon capture and storage, apart from the fact it’s probably going to be commercialized too late, he told TechCrunch. Instead, Sheehan and his colleagues are diving into more software-centric companies that promise to still move the needle.

💫“There are those who say that’s a cop out,” Sheehan said. “The more I look at it, the more I completely disagree with that notion. We need to find companies we can scale rapidly to have an impact within the lifetime of a venture capital fund. That’s 10 years maximum.”

⚡️It’s a sentiment that has helped ETF Partners raise a new, oversubscribed €285 million fund, the firm’s fourth.

💫The firm was founded in 2006, and it has ridden a series of bull and bear markets. Until 2018, Sheehan describes his work as having been “more evangelical.” Since then, he has found limited partners to be much more receptive to climate tech. “It’s become much more of a good institutional product.”

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🚀Alchemist’s latest batch puts AI to work as accelerator expands to Tokyo, Doha
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🔎Alchemist Accelerator has a new pile of AI-forward companies demoing their wares today, if you care to watch, and the program itself is making some international moves into Tokyo and Doha. Read on for our picks of the batch.

💫Chatting with Alchemist CEO and founder Ravi Belani ahead of demo day about this cohort, it was clear that ambitions for AI startups have contracted, and that’s not a bad thing.

🌐“The cost of building a basic LLM is prohibitively high; you get into the hundreds of millions of dollars just to get it out. The question is, as a startup, how do you compete?” Belani said. “VCs don’t want wrappers around LLMs. We’re looking for companies where there’s a vertical play, where they own the end user and there’s a network effect and lock-in over time.”

🔎No early-stage startup today is at all likely to become the next OpenAI or Anthropic — their lead is too huge right now in the domain of foundational large language models.

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⭐️Harlem Capital is raising a $150 million fund

Harlem Capital is raising a $150 million fund, according to documents filed with the SEC.

🏃‍♂️ If raised, this new fund, the firm’s third, would be its largest to date. In 2021, Harlem Capital raised an oversubscribed $134 million, much more than the $40 million it raised for its inaugural fund in 2019.

The firm was founded in 2015 with the goal of backing diverse founders. Its second fund focused on early-stage post-product companies from all sectors but with a particular focus on consumer and enterprise tech. The firm currently has $174 million in assets under management, according to Pitchbook, and has made more than 80 investments since its inception, with 12 exits. Investments include Propense.ai, the fintech Poolit, and the e-commerce platform Gander.

🏃‍♂️ Harlem Capital also focused on raising from diverse limited partners for its second fund, and it’s safe to assume that mission will continue as the firm stays true to its mission of supporting the next generation of diverse founders.

💡The successful raising of this $150 million fund will be not only a show of success for Harlem Capital and its founders but also a testament to the industry’s appetite for still believing in and backing talented, underrepresented communities.

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🔄 Partnering with Dropzone: Automating Security Operations with AI
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🔄 Enterprises spend more on security but aren’t benefitting from the extra spend. Palo Alto Networks’ customers who buy security across 3 platforms spend more than 40x those that secure just one.

The average enterprise uses upwards of 70 security products. Many of these products produce alerts identifying phishing emails or network access issues or odd device behavior.

🔄 The security operations center (SOC) reviews these alerts. Estimates suggest the typical team receives between 5,000 & 11,000 alerts per day - every day. Worse still, every SOC team is short-staffed.

🔄 Leveraging the power of LLMs, Dropzone’s analysts collect alerts, fetch relevant information from other systems, and then triage alerts. These agents also inform copilots that empower security analysts to ask questions of their environment leveraging the insight of the AI analysts.

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💡 From Plaid to Figma, here are the startups that are likely — or definitely — not having IPOs this year
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💫Last year’s investor dreams of a strong 2024 IPO pipeline have faded, if not fully disappeared, as we approach the halfway point of the year.2024 delivered four venture-backed tech IPOs, Reddit, Astera Labs, Ibotta and Rubrik, in March and April, which made it seem like this year could spur the momentum investors had hoped for in 2023.

But secondary investors and IPO lawyers recently told TechCrunch that despite these four successes, macro conditions like the upcoming presidential election and elevated interest rates, means the IPO market won’t fully reopen until 2025.

💫This year is still on track to be better than 2023, and we’ll likely see a few more public filings throughout the year Companies including Klarna and Shein have engaged with bankers and seem close the line, but their IPO timelines are still murky.

🔥For the most part, it may be easier to decipher who isn’t going public this year rather than who is. Some CEOs of late-stage startups have directly stated they won’t IPO in 2024 while other companies have made financial moves that imply a public listing isn’t imminent.

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⚡️Are Software Companies Good Businesses?
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🔆 Research & development costs associated with software should be part of their cost of goods sold. Software companies don’t invest once in R&D & then sell copies of the software as we did in the 90s on CDs.

It’s software-as-a-service. So the costs of developing & maintaining the software are ongoing. If that argument is correct, then the average gross margin of a software company in the public domain would fall from 72% to 47%. Quite a stark difference.

🔆 Profitability for software companies isn’t straightforward. Different accounting rules govern revenue & cost recognition. In 2017, the industry migrated from ASC 605 to ASC 606, which are financial arcana as esoteric as it reads. Overnight, some companies were more profitable & others were not.

⚡️ Software companies top the charts at 3% over the last 20 years, according to data from New Constructs, a financial research firm. For a period from December 9, 2009, to approximately March of 2016, technology companies produced nearly 5% free cash flow yields on average.

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🍔 Quarterly AI Funding Amounts
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🤖 According to a recent Crunchbase report, AI talent is still concentrated in several regions of the world. This has led to a skew in the volume of venture financing to startups in these regions.

San Francisco topped the list, as expected: the number of talented professionals and the amount of venture capital here are second to none. In addition, the headquarters of many of the largest startups in the field of artificial intelligence are located here.

🤖 Data shows that in 2023, $27 billion of venture capital money went to AI startups located in the Bay Area — this is more than 50% of all global venture capital money invested in AI startups.
In terms of the number of transactions, the Bay Area is also a leader — in 2023, 17% of the total number of global rounds were closed here.

🤖 Nevertheless, according to Crunchbase, New York is still the number two city for AI financing and startup launches: in 2023, investors in NY invested $2.9 billion in AI startups.

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