ℹ️ Iceland is dodging the VC doldrums as Frumtak Ventures lands $87 million for its fourth fund
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© Iceland’s startup scene is punching above its weight. That’s perhaps in part because it kept the 2021 hype in check, but mostly because its tech ecosystem is coming of age. Iceland attracted the most venture capital per capita of all Nordic countries in 2023, but that stat is somewhat skewed by its relatively small population of fewer than 400,000 inhabitants.

More tellingly, foreign co-investments in Icelandic startups reached a record in 2023. In this context, it makes sense to see VC firms raise more funding.

© Frumtak Ventures is a perfect example. The firm just closed an $87 million fourth fund that was oversubscribed — and significantly larger than its third $57 million fund.

Most of Frumtak’s limited partners are Icelandic pension funds. “We were in a very good position that all our existing LPs were happy to back us again,” Kristinsson said. As for geographic scope, he added, Frumtak will back Icelandic founders, but “focus on local innovation with global potential.”

© Iceland’s tech scene skews toward early-stage startups, as does Frumtak, whose name roughly translates to “early catch.” But Kristinsson is confident that as the scene matures, more exits will follow. “Looking 10 or 20 years forward, my vision is that we will have fueled some of the biggest listed companies in Iceland in the next decades,” he said.

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⭐️AI startup Hebbia raised $130M at a $700M valuation on $13 million of profitable revenue
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💡 Hebbia, a startup that uses generative AI to search large documents and respond to large questions, has raised a $130 million Series B at a roughly $700 million valuation led by Andreessen Horowitz, with participation from Index Ventures, Google Ventures and Peter Thiel.

⭐️And its funding demonstrates that 50x annual recurring revenue (ARR) is becoming the norm for AI startups, especially ones that have booked millions of profitable revenue early in their journey.

The formal funding announcement confirmed most of the details previously reported by TechCrunch, although Hebbia continued to raise more funds, another $30 million, after our report. But Hebbia has not yet filed an updated disclosure on this funding round to the SEC, and the latest one at this time still says it was raising around $100 million of new equity.

Hebbia, which was founded by George Sivulka while he was working on his PhD in electrical engineering at Stanford, had ARR of $13 million and the company was profitable when it was pitching investors on the deal, according to a person with knowledge of the matter.

⭐️ The $700 million valuation implies that investors valued Hebbia at about 54 times ARR. Such heady valuations were common at the height of the pandemic-infused boom and are now routinely assigned to buzzy AI startups. Hebbia’s closest analogues, Glean and Harvey, had valuations of slightly over 60x ARR, according to the Information’s reporting.

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💎 Index Ventures raises $2.3bn across two new funds to double down on AI
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💻 Global VC investor Index Ventures, a backer of German AI unicorn DeepL and UK neobank leader Revolut, has raised $2.3bn across two new funds to double down on AI investments.

Along with its new $800m venture fund and $1.5bn growth fund, Index is also still investing out of a separate $300m seed fund.

💻 The firm says that the new funds will have a strong focus on AI, at a time when the technology is developing at pace and the availability of talent globally is increasing.

“AI alone will revolutionise virtually every sector of the economy and open up whole industries to venture that have remained virtually untouched,” said Shardul Shah, partner at Index Ventures. “Meanwhile, hundreds of thousands of people have worked in hypergrowth startups globally and can transfer those lessons to the next generation of companies.

💻Index has historically focused on enterprise software, SaaS, fintech, marketplaces and consumer; but has done several AI deals recently. It was an early investor in French AI darling Mistral — which is now Europe’s most valuable startup in the field, at €5.8bn.

At a combined $2.3bn, these two funds are smaller than the equivalent funds raised at the top of the market in 2021; a $900m venture fund and a $2bn growth fund, totalling $2.9bn.

💻 Index has also slowed down its pace of deployment; the two new funds have arrived three years after the previous ones. In 2021, Index raised its venture and growth funds just one year after its predecessors.

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📎 Central eastern Europe’s most active early-stage VCs
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📱 In central eastern Europe’s young startup ecosystem, early-stage investments make up the vast majority of VC transactions. In 2023, 92% of the 818 deals closed in the region were at pre-seed (611) or seed (144), according to data platform Dealroom.

Europe’s economic downturn has hit the region hard — and 2023 saw startups raise less early-stage funding than 2022. In 2022, CEE startups raised €140m in pre-seed funding and €324m in seed funding; in 2023, that dropped to €99.8m at pre-seed and €278m at seed, according to Dealroom.

📱 Local investors have been involved in most of those deals, with two Bulgarian VCs — Vitosha Venture Partners and Innovation Capital — doing more deals than any other investors in the region in the past 12 months.

Using data from Dealroom, Sifted has selected the CEE investors that did the most new (not follow-on) pre-seed and seed deals in the last 12 months:

1/ Vitosha Venture Partners

2/ Innovation Capital

3/ Baltic Sandbox Ventures

4/ Metaplanet

5/ SMOK Ventures

6/ Specialist VC

7/ Sofia Angels Ventures

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🍔 AI received 30% of global investments in Q2 2024
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👍 In the second quarter of 2024, the venture capital market revived slightly. The volume of global startup financing amounted to $79 billion, which is one of the largest figures since 2023. AI has become the leading sector — for the first time since the launch of ChatGPT.

The results of the last quarter can be found in the Crunchbase analysis.

👍 In the second quarter of 2024, global startup financing increased to $79 billion, which is 16% more than in the previous quarter and 12% more than in the second quarter of 2023, when $71 billion was invested. Most of the growth in this quarter is accounted for by mega-rounds — investments in excess of $100 million.

According to Crunchbase, the volume of financing has been at a low level for the eighth or ninth consecutive quarter. Although the past quarter was one of the highest investment volumes since the first quarter of 2023, this does not necessarily indicate a revival of the venture capital market.

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ℹ️ The growth of investments in AI
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© As the Crunchbase data analysis showed, And became the leading sector for the first time since the launch of ChatGPT from OpenAI. Despite investor concerns about revenue and high valuations, total funding in the second quarter was $24 billion, the largest amount raised in the AI sector in recent years.

© AI companies have received five of the six rounds of funding in the amount of $1 billion or more.

💎 Elon Musk's xAI raised $6 billion, and AI infrastructure provider CoreWeave raised $1.1 billion.

💎 The developer of Wave driverless driving technologies, the Scale AI data preparation campaign and the BioTech company Xaira Therapeutics have each raised $1 billion.

💎 Beyond And the $1 billion round was closed by the cybersecurity company Wiz.

© Healthcare and biotechnology became the second largest sector, which attracted $17 billion. Hardware manufacturers have raised $11 billion, largely due to investments in AI infrastructure and semiconductors. Fintech companies (at the peak of the market in 2021, they were usually one of the two leading sectors) received $9.8 billion.

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⭐️Investments in the late-stages have increased
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💡 Financing for late-stage startups reached $36 billion, compared with $33 billion in the second quarter of 2023. Large sums were received by companies that work in the field of developing basic AI models and infrastructure, autonomous driving, electric vehicles, cybersecurity, drug development and quantum computing.

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ℹ️ From Ethan Choi to Spencer Peterson, venture capitalists continue to play musical chairs
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© When Keith Rabois announced he was leaving Founders Fund to return to Khosla Ventures in January, it came as a shock to many in the venture capital ecosystem — and not just because Rabois is a big name in the industry.

© It was surprising because unlike in many other fields, venture capitalists don’t traditionally move around very much — especially those who reach the partner or general partner level as Rabois had.

VC funds have 10-year life cycles and partners have good reason to stay that course. In some instances, they may be a “key man” on a firm’s fund, meaning that if they leave, the fund’s LPs have the right to pull their capital out if they choose. Many partners and GPs also have some of their own money invested in their firms’ funds, which gives them further reason to stick around.

© So, while big-name investor moves in venture capital aren’t common, they seem to have become so in recent months. So far this year, there have been notable instances of investors returning to old firms, striking out on their own or taking a pause from investing entirely.

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🍔 AI-powered Regard nabs $61M to find missed illness, boost hospital revenue
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👍 People in tech often say that data is the new oil. That phrase, coined by British mathematician Clive Humby, of course implies that data is valuable.
The results of the last quarter can be found in the Crunchbase analysis.

👍 Data about a person’s health can also provide meaningful insights and improve outcomes, but only 3% of patient data is currently used by physicians, according to the World Economic Forum. Although doctors know they can glean useful information from patient data, they don’t have the time to review every detail in the medical record.

Regard, a digital health startup founded in 2017, wants to help physicians save time and increase the accuracy of diagnosis by analyzing patients’ health data using AI. Regard announced on Thursday that it raised a $61 million Series B round led by Oak HC/FT, with participation from Cedars-Sinai Health Ventures and existing investors TenOneTen, Calibrate Ventures and Techstars. The company is now valued at $350 million, according to a person familiar with the matter.

The company grew its revenue by 4.5 times in 2023 and is on a path to do a “similar amount of growth this year,” Ben-Joseph said. The company expects to reach profitability within the next two years.

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💎 More ex-military officials are becoming VCs as defense tech investment reached $35B
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💻 The distance between Silicon Valley and the Pentagon just keeps getting smaller. As venture capitalists continue to pour money into defense tech startups, they’re turning to a new hiring pool: veterans and ex-Department of Defense officials.

Andreessen Horowitz hired Matt Shortal, an ex-fighter jet pilot, as its chief of staff; Lux Capital brought on Tony Thomas, former head of U.S. Special Operations Command, as an adviser; and Shield Capital’s managing partner Raj Shah served in the Air Force.

💻 Hiring ex-military personnel can be a major advantage for firms, giving them “an understanding of what problems are actually on the battlefield,” instead of just “sitting in Silicon Valley and theorizing,” Ali Javaheri, PitchBook’s emerging tech analyst, told TechCrunch.

💻Silicon Valley pumped almost $35 billion into defense tech startups in 2023, and over $9 billion so far this year, according to a report released last week by PitchBook. This trend is anchored by some blockbuster fundraises.

💻 Shield AI, which produces an AI-powered drone pilot system, raised $500 million last year, and Anduril, Palmer Luckey’s defense tech startup, reportedly secured a fresh $1.5 billion in funding last month.

Although funding into the sector has slowed this year, Javaheri said it’s still shown “resilience” in the context of a brutal overall fundraising environment.

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⭐️'BOOOM' - the new €17m fund from solo GP Felix Plapperer
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💡 This week Felix Plapperer is officially joining the ranks of Europe’s solo GPs, as his VC firm, BOOOM, announces a final close of its first fund at €17m.

⭐️ The Berlin-based fund will invest in European B2B software startups at pre-seed and seed, with a particular focus on supply chain and procurement tech startups.

If you’re thinking that sounds familiar, it is — this is far from the only B2B SaaS-focused solo GP fund in Europe — but BOOOM has a twist. The three founders of German logistics unicorn sennder — David Nothacker, Julius Köhler and Nicolaus Schefenacker — “co-initiated the fund” and have committed to mentor all of its portfolio companies, Plapperer tells Sifted.

BOOOM will write cheques of €100k-€400k in around 30 companies. Like many solo GP funds, it won’t seek to lead deals.

⭐️ Investors in the fund include partners from well-known VC firms Accel, Index and Creandum, along with a handful of institutional investors and founders of tech companies including Celonis, King, Flix and sennder.

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🟢 Halo Industries Secures $80M for AI-Driven Semiconductor Innovation

➡️ Thomas Tull's US Innovative Technology Fund has led an $80 million Series B funding round for Halo Industries, valuing the company at $300 million post-money. Founded by Stanford researchers in 2014, this Bay Area startup is revolutionizing silicon wafer production for semiconductors using cutting-edge laser manufacturing technology.

➡️Halo's innovative approach to creating silicon carbide wafers is crucial for powering AI data centers, EV charging infrastructure, and electric grids. The company's environmentally friendly and cost-effective process offers a significant advantage over traditional mechanical and thermal methods. With revenue generation beginning in Q2 2023, Halo aims to scale its technology commercially and potentially go public within 3-4 years.

📌 This investment highlights the growing interest in next-generation semiconductor startups, driven by the increasing energy demands of AI technologies and the push for onshore semiconductor production. As AI continues to reshape various industries, the need for more efficient and powerful semiconductors becomes ever more critical.

The substantial funding secured by Halo Industries underscores the potential for significant growth in the AI infrastructure sector. As we witness the rapid advancement of AI technologies, investments in companies like Halo become crucial for sustaining this progress.

Keep an eye on this space, as innovations in semiconductor technology will play a pivotal role in shaping the future of AI and its applications across industries.

🔗 Source #VentureNews

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🟢 Sequoia Capital Confirms Stripe's $70B Valuation, Offers Liquidity to Early Investors

➡️ Sequoia Capital, a major investor in payments giant Stripe, has made a significant move to offer returns to its limited partners (LPs) in funds raised between 2009 and 2011. The venture firm has proposed buying up to $861 million worth of Stripe shares, reflecting both investor demand for liquidity and Sequoia's confidence in Stripe's future.

➡️ This development comes amidst a dry IPO market, with only four venture-backed tech IPOs in 2024 so far. Stripe, once valued at $95 billion in March 2021, saw its valuation drop to $50 billion in 2023 before climbing back to $70 billion, as confirmed by Sequoia's recent 409A valuation.

➡️ Sequoia's total investment in Stripe since 2011 amounts to $517 million, with their current position valued at $9.8 billion. The firm remains optimistic about Stripe's durability across economic cycles and its future prospects. This move by Sequoia, along with Stripe's recent tender offer, suggests that the fintech giant may not be planning an IPO in the near future.

Sequoia's creative approach to offering liquidity highlights the evolving dynamics in the venture capital world, especially for long-held private investments. As Stripe continues to grow impressively, crossing $1 trillion in total payment volume in 2023, it remains a key player to watch in the fintech space, whether it chooses to go public or remain private.

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🟢 Menlo Ventures and Anthropic Launch $100M 'Anthology Fund' for AI Startups

➡️ Menlo Ventures, a major investor in AI startup Anthropic, has announced a collaboration to create a $100 million initiative called the "Anthology Fund". This fund aims to invest in pre-seed, seed, and Series A artificial intelligence companies, leveraging Menlo's close relationship with one of the world's leading foundational model companies.

➡️ The Anthology Fund will write checks starting at $100,000 and provide startups with $25,000 worth of credits to use Anthropic's models. This move comes after Menlo's recent investment of over $750 million in Anthropic, making it one of the company's top backers.

➡️ Tim Tully, a partner at Menlo Ventures, emphasized the opportunity to identify great companies building on Anthropic's technology or AI more broadly. The fund will use a proprietary machine learning tool to score and rank applications, with a more streamlined due diligence process compared to typical investments.

The Anthology Fund represents a strategic move by Menlo Ventures to capitalize on its strong position in the AI sector and foster innovation among early-stage AI startups. By offering both capital and access to Anthropic's models, this initiative could play a significant role in shaping the next generation of AI companies and technologies.

🔗 Source #VentureNews

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🟢 Pro Rata Funds Emerge as New Trend in VC Investing

➡️ A new trend is emerging in venture capital: dedicated funds to help seed VCs exercise their pro rata rights in later funding rounds. Companies like Alpha Partners, SignalRank, and SaaS Ventures are raising capital specifically to support early-stage investors in maintaining their ownership percentages. This trend addresses the challenge seed VCs face when larger firms lead later rounds and try to squeeze out earlier investors.

➡️ SaaS Ventures, for example, recently closed a $24 million fund for this purpose. The strategy allows smaller VCs to continue participating in their successful portfolio companies' growth, even as valuations skyrocket. This approach is gaining traction as later-stage deals become more competitive and early investors seek ways to maintain their stakes in potential unicorns.

This trend could mean more support from your early investors throughout your startup's growth journey. It may also lead to more complex cap tables and negotiations in later rounds. Consider how you can leverage this trend to maintain strong relationships with your seed investors while still attracting larger VCs for growth rounds.

Be prepared to navigate the potential conflicts between new and existing investors, and consider how pro rata rights might impact your future funding strategies.

🔗 Source #VentureNews

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🗣️ Climate VC Funds Gain Traction with Institutional Investors

➡️ Climate-focused venture capital funds are experiencing a significant surge in popularity among institutional investors. In the first half of 2024, 3% of all VC funds were dedicated to climate startups, tripling from five years ago. These funds have attracted nearly 5% of all LP capital commitments this year, defying the general fundraising slowdown.

➡️ Notable climate funds raised include Chevron Technology Ventures' $500 million Future Energy Fund III and Norrsken VC's $342 million Fund II. The sector's resurgence is attributed to influential players like Bill Gates' Breakthrough Energy Ventures and Chris Sacca's Lowercarbon Capital. Factors driving this trend include strengthening regulations, public pressure for ESG adoption, successful exits, and increased federal and state grant funding for climate tech startups.

As the energy transition gains momentum, climate VC funds are becoming increasingly attractive to institutional investors. This trend signals a growing recognition of the potential in climate tech innovations and the crucial role of venture capital in driving sustainable solutions. Keep an eye on this space for potential high-growth opportunities in the coming years.

🔗 Source #VentureHighlight

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🟢 28 US AI Startups Raise Mega-Rounds in 2024: A Venture Capital Surge

➡️ The AI sector continues to attract massive venture capital investments in 2024, with 28 US-based AI startups securing funding rounds of $100 million or more. Highlights include xAI's staggering $6 billion Series B, Scale AI's $1 billion round, and Xaira Therapeutics' $1 billion Series A. The funding spans various AI applications, from robotics and drug discovery to enterprise search and coding assistance. Notable investors include tech giants like Microsoft and Nvidia, as well as prominent VC firms such as Andreessen Horowitz, Sequoia, and Lightspeed Venture Partners.

This trend underscores the continued faith in AI's potential to transform industries and create significant returns for investors.

The sheer volume and size of these mega-rounds demonstrate that AI remains a hot sector for venture capital in 2024. As these well-funded startups develop and deploy their technologies, we can expect to see significant advancements and potentially disruptive innovations across multiple industries in the coming years.

🔗 Source #VentureNews

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🟢 Alphabet's Potential $23B Wiz Acquisition: Implications for Venture Capital

➡️ Alphabet is reportedly in advanced talks to acquire cybersecurity startup Wiz for $23 billion, potentially marking its largest acquisition to date. This deal could significantly impact the venture capital and startup ecosystem:

1. M&A Catalyst: The acquisition could revitalize the stagnant startup M&A market, potentially encouraging other large tech companies to pursue similar deals.
2. Exit Opportunity: It represents a massive exit in a period of limited liquidity options for startups, especially late-stage ones.
3. Market Confidence: The deal's size signals strong market confidence in AI and cybersecurity sectors.
4. Limited Ripple Effect: While significant, the deal's uniqueness means it may not substantially alleviate the liquidity crunch for most late-stage startups.
5. Cybersecurity Focus: Highlights the growing importance and value of cybersecurity in the tech industry.

While Alphabet's potential acquisition of Wiz could inject much-needed energy into the startup M&A market, its impact may be limited due to the deal's exceptional size. Nonetheless, it underscores the enduring value of innovative tech startups and may encourage more strategic acquisitions in the near future. Investors and startups should closely monitor how this deal, if completed, influences market dynamics and valuations in the coming months.

🔗 Source #VentureNews

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🗣️ SAFEs Dominate Pre-Seed & Seed Fundraising: Key Trends for Founders

➡️ Recent data reveals SAFEs (Simple Agreement for Future Equity) are now the preferred financing instrument for pre-seed and seed rounds across most startup sectors. Industries like Education, AdTech, and Fintech show over 90% SAFE usage, while more tangible asset-focused sectors like Medical Devices still lean towards Convertible Notes.

📌 Key SAFE trends include:

1. Valuation caps are nearly universal, with 62% having caps only and 29% including both caps and discounts.
2. Post-money SAFEs have become standard, accounting for 85% of 2024 agreements.
3. When discounts are used, 20% is the typical rate for both SAFEs and Notes.
4. SAFEs are more prevalent in major tech hubs, but their adoption is growing across all regions.

Founders, understand these trends to navigate your early-stage fundraising effectively. While SAFEs offer simplicity and founder-friendly terms, consider your industry norms and investor preferences when choosing between SAFEs and Convertible Notes.

🔗 Source #VentureHighlight

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