⭐️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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💎 Spanish startups reached €100 billion in aggregate value last year
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➡️ If 11 figures is your attention threshold, you may be interested in learning that the combined enterprise value (EV) of Spanish startups surpassed €100 billion in 2023, according to Dealroom’s latest report on the Spanish tech ecosystem.

➡️ As we’ll see, venture investment into Spanish startups also held up quite well, with €2.2BN raised across some 850 funding rounds.

Spain’s venture capital tally was lower last year than in 2021 and 2022; that’s no surprise as these years were outliers. Unlike other places, though, the country hasn’t fallen below pre-pandemic levels of activity. In 2019, for reference, Spanish startups had collectively raised €1.9BN in venture capital.

➡️ But first, there are several ways to look at Spain’s 11-figure startup EV. On the one hand, it puts Spain ahead of Norway, Italy or Portugal. On the other hand, with a combined value of $191BN, Cambridge’s tech ecosystem alone is almost worth double Spain’s. (With $1 worth €0.92 today, please forgive us for skipping conversions.)

🔗 Adding time as a factor, France reached €100BN in combined startup EV six years ago, and Germany nine years ago. But the value of Spanish tech is also one of the fastest growing in Europe, Dealroom noted in a slide. Give them more time, and maybe some Spanish startups will become decacorns and more, too.

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💬 A venture capital firm looks back on changing norms, from board seats to backing rival startups
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🔗 Last month, one of the Bay Area’s better-known early-stage venture capital firms, Uncork Capital, marked its 20th anniversary with a party in a renovated church in San Francisco’s SoMa neighborhood, where 420 guests showed up to help the firm to celebrate, trade tips, and share war stories.

There’s no question the venture scene has changed meaningfully since Uncork got its start. When firm founder Jeff Clavier launched the firm, he was mostly using his savings to write six-figure checks to founders. Now Clavier and his contemporaries, including Josh Kopelman of First Round Capital and Aydin Senkut of Felicis, collectively oversee billions of dollars in assets.

🔗 Zooming out, the whole industry has gotten a whole lot bigger. In 2004, venture firms plugged roughly $20 billion into startups. In 2021, that amount reached a comparatively jaw-dropping $350 billion.

🔗 As the industry’s scale has changed, numerous rules of the road have changed, too — some for better, some for worse, and some because the original rules didn’t make a lot of sense in the first place.

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