The Exchange
Auto Added by WPeMatico
Optimism reigns at consumer trading services as fintech VC spikes and Robinhood IPO looms
With the Coinbase direct listing behind us and the Robinhood IPO ahead, it’s a heady time for consumer-focused trading apps.
Mix in the impending SPAC-led debut of eToro, general bullishness in the cryptocurrency space, record highs for some equities markets and recent rounds from Public.com, M1 Finance and U.K.-based Freetrade, and you could be excused for expecting the boom in consumer asset trading to keep going up and to the right.
But will it? There are data in both directions. While recent information could indicate that some of the most lucrative trading activity at companies like Robinhood could be slowing, there’s also encouraging app download information that paints a more bullish picture regarding the durability of the boom in consumer interest regarding savings and investing, which The Exchange has had an eye on for some time.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
Our question today is this: How bullish are companies in the space about continued consumer interest in equities and other asset trading? And why? We’ll also put similar questions to their backers.
We’ve compiled notes from Accel’s Sameer Gandhi about views concerning Public as one of its backers and Index’s Jan Hammer about Robinhood and its market, as well as comments from Public.com and M1 Finance about what they see regarding consumer trading interest in the future. Thoughts from Robert Le, PitchBook’s senior emerging technology analyst, cap things off.
We’ll start with a short look at some data to help ground ourselves regarding where consumer trading demand appears to be today, then consider what the companies in the ring and their backers are thinking. We’ll close with a synthesis of all the perspectives to come up with hype-adjusted expectations for the rest of 2021.
Bullish data, bearish data
Coinbase executed its direct listing on the back of one of the most impressive quarters we’ve ever seen in the realm of business results, meaning it began to trade when it looked just about as good as a company can. Will the same hold true for Robinhood and company?
Powered by WPeMatico
What can the OKR software sector tell us about startup growth more generally?
In the never-ending stream of venture capital funding rounds, from time to time, a group of startups working on the same problem will raise money nearly in unison. So it was with OKR-focused startups toward the start of 2020.
How were so many OKR-focused tech upstarts able to raise capital at the same time? And was there really space in the market for so many different startups building software to help other companies manage their goal-setting? OKRs, or “objectives and key results,” a corporate planning method, are no longer a niche concept. But surely, over time, there would be M&A in the group, right?
During our first look into the cohort, we concluded that it felt likely that there was “some consolidation” ahead for the group “when growth becomes more difficult.” At the time, however, it was clear that many founders and investors expected the OKR software market to have material depth.
They were right, and we were wrong. A year later, in early 2021, we asked the same group how their previous year had gone. Nearly every single company had a killer year, with many players growing by well over 100%.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
OKR company Ally.io grew 3.3x in 2020, for example, while its competitor Gtmhub grew by 3x over the same time period. More capital followed. Ally.io raised $50 million in a Series C in the first quarter, while Gtmhub put together a $30 million Series B during the same period.
They won’t be the final startups in the OKR cohort to raise this year. We know this because we reached out to the group again this week, this time probing their Q1 performance, and, critically, asking the startups to discuss their level of optimism regarding the rest of 2021.
As before, the group’s recent results are strong, at least when compared to their own planning. But notably, the collection of competing companies is more optimistic than before about the rest of the year than they were before Q1 2021. Things are heating up for the OKR startup world.
A takeaway from our work today is that our prior notes about how impressively deep the software market is proving to be may have been too modest. And frankly, that’s super-good news for startups and investors alike. So much for SaaS-fatigue.
In a sense, we should not be surprised that OKR startups are doing well or that the startup software market is so large. You’d imagine that the historic pace of venture capital investment that we’ve seen so far in 2021 in Europe and the United States was based on results, or evidence that there was lots more room for software-focused startups to grow.
Interestingly, while these companies look similar to outsiders, they are each betting on strategies and differentiators that could help them win in their selected portion of the OKR space. Which also means that the sector may not be as crowded as it seems.
Don’t take our word for it. Let’s hear from Gtmhub COO Seth Elliott, Workboard CEO and co-founder Deidre Paknad, Koan CEO and co-founder Matt Tucker, Ally.io CEO and co-founder Vetri Vellore, and Perdoo CEO and founder Henrik-Jan van der Pol about just what the software market looks like to them.
We’ll start with how the startups performed in Q1 2021, dig into how they feel about the rest of the year, and then talk about how differentiation among the cohort could be helping them not step on each other’s toes.
Rapid growth
WorkBoard is having a strong start to 2021. Paknad’s company, which raised in both March of 2019 and January of 2020, told The Exchange that it hired 82 people in the first three months of 2021, and that it plans on doing it again in the current quarter. WorkBoard is “investing heavily,” Paknad said via DM, and “made [its] Q1 targets.”
Powered by WPeMatico
Building a creator-focused OS
Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading.
A week ago TechCrunch covered Pico’s $6.5 million funding round and described it as “a New York startup that helps online creators and media companies make money and manage their customer data.” The Exchange has also covered Pico before, most recently during a mid-2020 dive into the world of indie pubs and subscription media.
While our own Anthony Ha did an inimitable job covering the Pico round, I got on a Zoom call with the company, as well, as their new capital came with a relaunch of sorts that I wanted to better understand.
The Pico team walked me through what’s changed at their business by describing the historical progress of creative digital tooling. They said earlier eras in the space focused on content hosting and distribution. In the startup’s view, a new generation of creative-focused tooling will bring the market to an era in which content management systems, or CMSs — say, Substack or WordPress — will not own the center of tooling. Instead, monetization will.
That’s Pico’s bet, and so it’s building what it considers to be an operating system for the creator market. My gut read is that a creative digital world that centers around monetization sounds like one that is more lucrative than what preceding eras brought us.
Pico’s view is that regardless of where someone first builds their audience, they eventually go multi-SKU — or multi-platform, perhaps — so keeping a single, centralized register of customer data may prove critical.
The startup’s revamped service is a bit of a monetization tool, as before, along with a creator-focused CRM that sits atop your CMS or other digital output on any particular platform. So far customer growth at the company looks good, growing by about 5x in the last year. Let’s see how far Pico can ride its vision, and if it can help build out a middle class in the creator economy.
The grocery revolution will be IRL
Somewhat lost in our circles amid the hype regarding Instacart’s epic COVID period is the fact that most folks still go to stores to buy their fruit and veg, as our friends in the UK might say.
Grocers did not forget the fact. But their historically thin margins and rising competition for customer ownership in the Instacart era hasn’t left them too secure. How can they pursue a more digitally enabled strategy without outsourcing their customer relationship to a third party?
Swiftly might be part of the answer. The startup is building technology that may help grocery chains of all sizes go digital, take advantage of modern mobile technology, and generate more incomes via ads, while offering consumers more shopping options. Neat, yeah?
The startup has raised a little over $15 million to date, per Crunchbase data, but came back into our minds thanks to the launch of a deal with the Dollar Tree company, a consumer retailer that has around one zillion stores in America.
I’ve been aware of Swiftly for ages, having met its co-founder Henry Kim back when he was building Sneakpeeq, which later became Symphony Commerce. The latter company was eventually bought by Quantum Retail. But during my chats with Kim over the years in and around San Francisco, he consistently brought up the grocery market, a space he’d had experience in before building Symphony Commerce.
After hearing Kim hype up the possibilities for grocery and digital for a half decade or so, to see the company that came out of his hopes and planning land a major partner is fun.
Swiftly provides two main products, a retail system and a media service. The retail side of its business provides checkout services, loyalty programs, personalized offers and the like for mobile shoppers. And the media side allows IRL grocers to snag a bit of the consumer packaged goods (CPG) ad spend that they often miss out on, while looping in analytics to provide better attribution to the impact of ads sold.
I expect that Swiftly will raise more capital in the next few quarters now that it has a big, public deal out. More when we have it.
UiPath, SPACs, and a neat venture capital round
Over the past two weeks The Exchange has written quite a lot about the UiPath IPO. Probably too much. But to catch you up just in case, the company’s first IPO pricing range looked like a warning for late-stage investors as the resulting valuations were a bit lower than anticipated. Next the company raised that range, ameliorating if not eliminating our earlier concern. Then the company priced above its raised range, though still at a discount to its final private round. Then it gained ground after starting to trade, and its CFO was like, we did good.
To dig even more into the company’s private-public valuation saga, The Exchange asked B2B investor Dharmesh Thakker, a general partner at Battery Ventures, about his take on the company’s final private round in the context of it landing a bit higher than where the company eventually priced its IPO. Here’s what he had to say:
[T]here was smart money involved in that round. These are people who understand that material value creation happens 3-5 years post IPO, as we have seen with Twilio, Atlassian, MongoDB, Okta, and Crowdstrike who have increased value 5-10x post IPO.
Right now, UIPath has only 1% penetration at $608M revenue in a $60B automation market, and the urgency around intelligent process automation for repetitive tasks is only increasing post-COVID. Companies need help managing their costs with automation. So, as the company penetrates its target market and grows over time, UIPath will drive ongoing value, which pre-IPO and IPO stage investors realize. They will be patient.”
He’s bullish, in other words. A more acerbic take on the UiPath IPO came in from PitchBook analyst Brendan Burke. Here’s what he had to say about the company and its market:
RPA has scaled rapidly due to the demand for automation yet remains a limited solution that may lack durable value. Due to its reliance on custom scripts, we view RPA as a bridge technology to cloud-native AI automation that faces competitive risk from AI-native challengers. The future of enterprise automation is for front-line users to deploy cloud-native machine learning models that can adapt to dynamic data streams and make accurate decisions. UiPath’s implementations are not cloud-native and require third party integrations with around 75 AI model vendors for intelligent decision-making. Additionally, the company lists the ability to recruit AI engineers as a risk factor for the business. UiPath’s ability to expand across the AI value chain will be critical for its long-term prospects.
I include that remark as it can be, at times, hard to get actual negative commentary out of the broader analyst world, as people are so terrified of being rude.
Scooting along, there’s a new SPAC deal out this week that I wanted to flag for you: SmartRent is merging with Fifth Wall Acquisition Corp. I. SmartRent raised more than $100 million while private, according to Crunchbase data, from RET Ventures, Spark Capital and Bain Capital Ventures, among others.
So this particular SPAC deal, which puts a $2.2 billion equity valuation on SmartRent, is a material venture-backed exit. You can check its investor deck here. We care about the company as it appears to work in a similar space to Latch, which is also going out via a SPAC. Dueling OS companies for rental units? This should be fun. (More on Latch’s SPAC deal here.)
Finally for our main work today, HYPR raised $35 million this week. Among all the venture capital rounds that I wish I could have written about this week but didn’t get to, HYPR is up there because it promises a password-free future. And having just raised a Series C, it may have a shot at pulling it off. Please god, let it happen.
Various and sundry
I got to cover a few rounds raised by recent Y Combinator graduates this week, including Queenly and Albedo’s recent funding events. Check ‘em out.
Oh, and Afterpay’s recent earnings show that the buy-now-pay-later market is still growing like all hell,
Powered by WPeMatico
After going public, once-hot startups are riding a valuation roller coaster
To close out the week, a short meditation on value, or, more precisely, how assets are valued in today’s markets.
Do you recall the pre-direct-listing hype Coinbase enjoyed? After reporting its estimated first-quarter financial performance, interest in the domestic cryptocurrency trading giant ran red-hot.
When Coinbase set a $250 per-share direct listing reference price, it was broadly viewed as modest, if not downright low. Of course, a reference price is just that — a reference — so it wasn’t too big a deal. But it also wasn’t surprising that Coinbase shares traded as high as $429.54 on their first day, according to Yahoo Finance data.
Coinbase equity hasn’t topped $400 in any following day and is now under the $300 mark, with more declines set to arrive as trading commences. Its reference price looms, and suddenly a price that felt intensely conservative before Coinbase began to trade is starting to look nearly reasonable.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
There have been other notable declines in value among some recently public, more technologically differentiated companies. The Exchange has watched with something akin to polite confusion as the value of Root, a neoinsurance company, fell to a third of its public-market highs after going public, even though it beat growth expectations in its most recent quarterly report.
We could toss UiPath into our trend of wildly meandering value. The company’s initial IPO price range targeted a price as low as $43 per share. Today it’s worth $76.75 per share in pre-market trading.
No one knows what anything is worth, again. This is the feeling I get while watching the markets work to determine how to value assets as diverse as startups crossing the private-public divide to the value of Bitcoin, which was supposed to keep going up. Until it suddenly reversed gear.
Frankly, we’re still dealing with new-enough models — or big-enough guesses about the future baked into business models — that it’s hard to really value the most uncertain (and therefore most exciting) companies, let alone cryptocurrencies. Let’s discuss.
Value?
Powered by WPeMatico
How are VCs handling diligence in a world where deals open and close in days, not months?
The global venture capital market had a cracking start to the year. Coming off a 2020 high, VC totals in the United States, in Europe, and among competitive verticals like insurtech and AI are on pace to set new records in 2021.
The rapid-fire deal-making and trend of larger venture checks at higher valuations that The Exchange has tracked for some time require private-market investors to make decisions faster than ever. For venture capitalists, the timeline for reaching conviction around a startup’s thesis and executing due diligence has become compressed.
Some venture capitalists are turning to data to move more quickly. Some are spending more time preparing to be vetted themselves. And some investors are simply doing the work beforehand.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
We were tipped off to the concept of pre-diligence during the reporting process for a look into recent fundraising trends in the AI/ML space. Sapphire investor Jai Das, when asked about how he was handling a competitive and swiftly moving market for AI startup investments, said that “most firms are completing their due diligence way before the financing actually happens.”
How does that work in practice? Per Das, startups that raise quick Series A and B rounds are “tracked by [early-stage] investors as soon as they raise their seed financings. So there is no need to do any due diligence during the financing and hence most of these financings are pre-emptive.”
Venture capital: Now more about sales than ever before!
This morning, The Exchange is digging into the question of how VCs are handling diligence in a world where the most attractive deals can open and close faster than ever, and old models of deep diligence and paced deal-making are outmoded.
Getting to yes
One way that investors are betting on themselves in a bid to speed their diligence and decision-making is by investing in their own tech. That may sound obvious, given that venture capital dollars often land in the accounts of tech-focused companies, but in a business that was previously known for its relationship focus — more on that shortly — the trend is worth considering.
Powered by WPeMatico
Insurtech startups are leveraging rapid growth to raise big money
The investment landscape for insurtech startups is off to a hot start in Q2 2021. Since the end of the first quarter, we’ve seen several players in the broad startup category announce new capital, including Clearcover, Alan, Next Insurance and The Zebra.
But, as anyone who’s familiar with startups that offer insurance-related products and services knows, the sector is enough of a mixed bag that one needs to segment down to get clarity on how constituent companies are performing. So while Clearcover’s $200 million round from last week, Next Insurance’s $250 million round from the first of the month and Alan’s $220 million round from yesterday are interesting, this morning we’re going to focus a bit more on The Zebra’s side of the insurtech house.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
The Exchange divides insurtech startups into three categories: neoinsurance providers, insurtech marketplaces and insurtech enablers. (You can see why we need to segment the insurtech genre!)
Briefly, neoinsurance providers are companies like Root, Metromile and Next Insurance, which use technology to underwrite and sell insurance in an updated manner; these companies also often have optimized mobile experiences.
Marketplaces like The Zebra, Gabi, Insurify and others provide a way for consumers to better identify their insurance options. And, finally, there are companies like AgentSync, which fit neatly into our third category of firms that help other companies in the insurance business digitize their operations or otherwise modernize.
Insurtech marketplaces came back into our view when The Zebra put together a $150 million Series D earlier this month and released a host of metrics regarding its growth, and Insurify dropped the news that it is partnering with Toyota.
This morning, let’s discuss insurtech’s 2020 as a whole, peek at some preliminary 2021 venture data and then dive deep into what we’ve collected regarding growth among insurtech marketplace players. The Exchange has data and other details from The Zebra, Insurify, Wefox and more.
Covering longitudinal progress of specific startup categories is one of our favorite things to do. So, please, walk with us!
2020 to today
PitchBook data regarding the insurtech category in 2020 underscores how large the startup niche has grown. Per the data company, $18.3 billion was spent last year on insurtech startups across venture capital, private equity and M&A activity. That was a billion dollars under its 2019 result, but given the pandemic’s onset, 2020’s final result is somewhat impressive — who expected insurance investing to hold up during an unprecedented global catastrophe?
This year is proving lucrative for the insurtech market, at least from a venture capital perspective. Normally I’d make a joke about how unprofitable some neoinsurance providers are at this juncture, but because our focus is elsewhere, bringing up the fact that, say, Lemonade’s adjusted losses in the final quarter of 2020 were around 150% of its revenue is kind of irrelevant. So we won’t!
Powered by WPeMatico
European VC soars in Q1
A stunning first quarter in venture capital funding was not restricted to the United States; Europe also had one hell of a start to the year.
According to data from Dealroom and Crunchbase News, an investor, and an analyst from PitchBook, European startups put together an impressive fundraising haul. The venture capital world kicked off its 2021 European investing cycle with enough activity to set the continent on the path that would crush yearly records.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
Inside the data, there’s lots to unpack, including which sectors of European startups stood out in terms of capital raised, rising seed and late-stage deals, and dollar volume. We’ll also need to discuss exits — the Deliveroo IPO and its various woes was not the only transaction from the period worth understanding.
As with our prior looks at AI startup fundraising and the United States’ own blistering start to the year, we’ll lean on multiple sources to ensure that we have a wide lens. And we’ll keep in mind that all venture capital data lags reality somewhat, as many deals from a particular period are not disclosed or discovered until long after they actually occurred.
In this case, it makes the numbers all the more impressive. Let’s get into the data.
The big numbers
Dealroom was first out of the gate, reporting that European startups had a record quarter in Q1 2021 back when April just got started. Its preliminary results for the first quarter indicated that startups on the continent raised €16.6 billion, or $19.9 billion at today’s exchange rates.
That total was not only a record, but what Dealroom described as double the results of Q1 2020. While we’ve become slightly inured in recent months to the venture capital market’s rapid pace and capital-rich environment, it’s worth considering for a moment, as the first quarter of last year ended, how few of us would have guessed that just a year later — as COVID-19 still harms public health and disrupts life and business — we’d see numbers like this.
The Dealroom data, however, was not all records. Round volume by the group’s estimates was down from the year-ago period, if slightly better than the last few quarters. The general move toward the later-stage and larger-round venture capital market is alive and well in Europe.
Powered by WPeMatico
Coinbase’s direct listing alters the landscape for fintech and crypto startups
Coinbase’s direct listing was a massive finance, startup and cryptocurrency event that impacted a host of public and private investors, early employees, and crypto-enthusiasts. Regardless of where one sits in the broader tech and venture world, Coinbase storming north of a $100 billion valuation during its first day of trading was the biggest startup happening of the year.
The transaction’s effects will be felt for some time in the public market, but also among the startups and capital that comprise the private market.
In the buildup to Coinbase’s flotation — and we’d argue especially after it released its blockbuster Q1 2021 results — there was a general expectation that the unicorn’s direct listing would provide a halo effect for other startups in the space. Anthemis’ Ruth Foxe Blader told The Exchange, for example, that “the Coinbase listing shows this great inflection point for crypto,” with another “wave” of startup work in the space coming up.
The widely held perspective raised two questions: Will the success of Coinbase’s direct listing bolster private investment in crypto-focused startups, and will that success help other areas of financially focused startup work garner more investor attention?
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
Presuming that Coinbase’s listing will positively impact its niche and others around it is not a stretch. But to make sure we weren’t misreading sentiment, and to get deeper into the why of the concept, The Exchange reached out to venture capitalists who invest in the broader fintech world to get their take. We even roped in an analyst or two to round out our panel.
The answer is not a simple yes. There are several ways to approach investing in the cryptocurrency space — from buying coins themselves, to investing in mainstream-ish institutions like legal exchanges, to the more exotic, like supporting efforts on the forefront of the decentralized blockchain world. And while it is somewhat clear that most folks expect more capital to be available for crypto projects, it’s not clear where it may end up inside the market.
We’ll wrap by considering what impact Coinbase’s direct listing will have, if any, on non-crypto fintech venture capital investing.
After yesterday’s examination of how blazingly hot the venture capital market looked in the first quarter, we’re again trying to gauge the private market’s temperature. Let’s talk to some folks on the ground and hear what they are seeing.
Are crypto startups less risky now?
Coinbase’s direct listing floated a company that is worth more than all but two major blockchains, namely Ethereum and Bitcoin. Several other chains have aggregate coin values in the 11-figure range, but a 12-digit worth is still rare among crypto assets.
The scale of Coinbase’s valuation post-listing matters, according to Chainalysis Chief Economist Phillip Gradwell. Gradwell told The Exchange that “Coinbase’s $100 billion valuation today demonstrates that venture investors can make great returns from putting money into crypto companies, not just cryptocurrencies. That proof point is good for the entire ecosystem.”
More simply, it is now eminently reasonable to invest in the companies working in the crypto space instead of merely putting capital to work hard-buying coins themselves. The other way to consider the comment is to realize that Coinbase’s share price appreciation is steep enough since its 2012 founding to rival the returns of some coins over the same time frame.
Cleo Capital‘s Sarah Kunst expanded on the point, telling The Exchange in an email that “it’s now credible to say you’re a crypto startup and plan to IPO [versus] having acquisition or ICO be the only proven exit paths in the U.S.”
Powered by WPeMatico
Inside the US’ epic first-quarter venture capital results
It’s no surprise that the venture capital market was incredibly active in the United States during the first quarter of 2021, but precisely how strong has only recently become clear. This morning, we’re digging into the data.
According to a report from PitchBook, venture capitalists unleashed a wave of capital in the first three months of the year. So much, in fact, that funding in the United States nearly doubled compared to the same quarter of 2020.
We’ll dig into specific numbers and trends regarding aggregate venture capital results in a moment, but what stood out the most while digesting the Q1 dataset was how strong VC results appeared across different states; a solo late-stage boom the quarter was not.
Seed deal volume appeared strong and early-stage venture capital activity could reach new highs in 2021, but late-stage venture capital activity in the United States is already setting records in both deal count and invested dollars.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
We’ll parse the headline numbers and then dive into seed and super late-stage data with the help of Sarah Kunst of Cleo Capital, Jenny Lefcourt of Freestyle Capital, Iris Choi of Floodgate and Laela Sturdy of CapitalG.
With their help, we’ll contextualize the numbers and weave anecdotal observations into what the charts and graphs tell us. Especially in the case of seed data, which is famously laggy, added context is crucial. Let’s go!
A Q1 overview
According to PitchBook’s report, some 3,987 venture capital rounds were closed in the United States during Q1 2021. Those deals were worth $69 billion, a figure up nearly 93% from 2020’s first-quarter results.
In broad strokes, the United States had a crushing venture capital start to the new year, pandemic be damned. That is especially true when we consider 2020’s full-year figures. Last year, venture capitalists deployed some $166 billion into U.S.-based startups across 12,546 rounds. In contrast, if the first quarter’s pace was maintained during the rest of 2021, the United States would see around 16,000 rounds worth around $280 billion.
Of course, we cannot see the future, so those projections are merely shared to underscore how active the first quarter proved to be; we’ll have to wait for at least another quarter’s data to confidently predict full-year records for 2021.
Powering the rapid start to the venture capital year was a holistic boom: Seed deal volume is forecasted to have set a multiyear high, perhaps matching the historically strong Q2 2018 period. Early-stage venture capital during Q1 2021 was also robust, with $14.5 billion deployed across 1,170 rounds. Both numbers set a pace for fresh records in 2021.
Then there was late-stage dealmaking, which soared in the first quarter. In 2020, late-stage venture capital deals were worth $111.4 billion raised from 3,504 rounds. In the first quarter of 2021, some $51.9 billion was invested into late-stage startups across 1,291 deals.
Valuations and round sizes continued to rise across the board. If there was a better time to raise a big whack of venture capital as a U.S.-based startup, we cannot recall it. And the data seems to scream that the good times are now as good, or gooder, than ever.
Powered by WPeMatico
Expect an even hotter AI venture capital market in the wake of the Microsoft-Nuance deal
Microsoft’s huge purchase of health tech AI company Nuance led the technology news cycle this week. The $19.7 billion transaction is Microsoft’s second-largest to date, only beaten by its purchase of LinkedIn some years ago.
For the AI space, the sale is a coup. Nuance was already a public company, but to see Microsoft offer a firm premium over its public-market value demonstrates the value that AI technology can have to wealthy companies. For startups working in the AI space, the Nuance deal is good news; the value of AI revenue was repriced by the acquisition’s announcement — and for the better.
In light of the megadeal, The Exchange dug into the AI venture capital market. What’s happening on the startup side of the coin in the artificial intelligence and machine learning (AI/ML) space?
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
To get a handle on the situation, we’ve compiled Q1 2021 and historical venture capital investment data via PitchBook, spoken to an active venture capitalist with a focus on AI-powered startups, and heard from a couple of startups recently featured on CB Insights’ list of leading AI upstarts for their take on the recent news.
The picture that emerges is one of strong investor interest and the expectation of even more in the wake of the Microsoft-Nuance tie-up. For AI startups, it’s a great time to be in the market.
This morning, we’ll start with a look into recent venture capital activity in the AI/ML market and its historical context. Then we’ll talk to Zetta Ventures’ Jocelyn Goldfein and a few companies in the AI space. Let’s go!
A venture capital rush
According to historical data compiled by PitchBook, venture capital investment into U.S.-based, AI-focused startups is enjoying a strong start to the year. Per the group’s provided dataset, from the start of 2021 through April 12, or the first 101 days of the year, 442 deals in the space were worth $11.65 billion.
In 2020, the same query for U.S.-based startups working in the AI and ML space — the line between ML and AI is blurrier than ever — turned up 1,601 rounds worth $27.49 billion.
Powered by WPeMatico