Inside Venture Capital

For July 01, 2024

Thank you to our sponsor

Here’s your VC briefing:

💰 Kleiner Perkins secured $2B from investors towards two new funds
🚀 Venture debt in Europe is poised to touch a new record high in 2024
💵 General Catalyst ventured into non-dilutive funding offering for startups

Thank you.

Karan
p/karan-chafekar

Kleiner Perkins secured over $2B in capital commitments from investors towards two funds. The firm closed its third opportunity fund, KP Select III, at $1.2B, a $200M increase from its predecessor. Additionally, it raised $825M for KP21, its largest early-stage fund to date. The fundraiser, branded with the tagline "Rise with the A.I.," underscores Kleiner's focus on artificial intelligence as a transformative technology.

More:

Kleiner recently led a $80M Series B funding round into legal AI startup Harvey, a $102.5M Series A funding for cloud platform Together AI, a $200M Series D round for AI-driven enterprise software firm Glean, and a $65M Series B funding for AI coding platform Codeium.
The VC firm will use the third opportunity fund to double down on promising portfolio startups.
Former Founders Fund executive Everett Randle, who joined Kleiner Perkins in 2022, will lead the firm’s growth investments.
The firm plans to invest in enterprise software, consumer, healthcare, fintech, and hardtech startups.

Venture debt invested in European startups is expected to reach a new record high this year, per Pitchbook.

What the numbers say: So far this year, European startups have raised about €17.8B ($19.1B) of venture debt, already surpassing 2023's total of €12.9B ($13.8B). This trend contrasts with declining equity rounds, which have fallen to €26.2B ($28.1B) this year, potentially falling short of 2023's figures.

What happened: The surge in venture debt is attributed to cautious investor sentiment and slower equity fundraising. Startups, particularly mature ones, are turning to debt to extend runways and avoid dilution at potentially low valuations.

Relevance: While deal value has increased, deal count remains stable, indicating larger transactions by more established startups. The median venture debt amount has doubled from €1.1M ($1.18M) in 2023 to €2.2M ($2.36M) in 2024. Notable deals include Northvolt's $5B debt facility and Enpal's €1.1B ($1.18B) financing.

A message from our sponsor, OUR SPONSOR.

Location, Location, Location is smart business strategy, too

You have one goal: find the perfect place for your company to grow. You’ve got a host of options nationwide and multiple competing offers for your company’s presence. But you’re one game-changing surprise away from this expansion effort falling through.

You can’t afford to add extra risk or lose time and money. You need a partner who gets it—someone who’s as obsessed with your bottom line as you are, who won’t rest until you have the insight, strategies, and support you need to grow into your vision for the long haul. Ohio is a one-days drive from 60% of North America, putting you at the heart of your suppliers and your customers.

JobsOhio has helped 3,500 companies grow their business and has developed a site selection checklist that you should read through before you sign the dotted line for your next expansion project.

Get The Guide

Matrix Partners is rebranding its India and China affiliates, effective July 1, 2024. The U.S.-based venture capital firm will retain its name, while Matrix Partners India becomes Z47 and Matrix Partners China rebrands to MPC. This move follows a trend among venture firms to distance themself from their international franchises. In 2023, Sequoia split away its Southeast Asia and China divisions into independent businesses.

More:

The rebranding aims to empower each division's localization and organizational independence, each of which has already operated with separate decision-making and back offices since its inception.
Matrix emphasizes that this change will not affect the operational structure, existing funds, or strategy of its affiliates.
Matrix clarified that the affiliates will work as “entities operating under the Matrix name” rather than its own independent units.
This decision reflects a response to regional market dynamics and geopolitical tensions, particularly between China and the U.S.
It underscores a growing trend in the venture capital industry to adapt to local market conditions while maintaining a global presence.

General Catalyst (GC) has expanded its offerings beyond traditional venture capital with its Customer Value Financing program, which provides non-dilutive funding to startups. Over the past five and a half years, GC has provided non-dilutive financing to 40+ companies, primarily funding sales and marketing expenses. The program targets mature companies, offering up to 80% of their monthly marketing budgets.

More:

Insurance business Lemonade is one of the companies backed through the program.
The startup spends between $2M to $20M every month on sales and marketing and generates up to $750M in annual revenue.
Companies repay GC from new customer revenue, with GC assuming the risk if growth targets aren't met.
This approach addresses the high cost of equity financing and the risks associated with debt for growth-stage companies.
The program has scaled significantly, now deploying nine-figure sums monthly and managing ten-figure total assets.
It operates separately from GC's traditional venture funds and has mostly financed companies outside its existing portfolio.

Andrew Ng's AI Fund, an incubator for AI startups, has secured commitments worth $69.75M from 13 investors towards its second fund. The AI Venture Fund II expects to close at $120M, making it smaller than its predecessor which closed at $175M in 2018.

More:

The AI Fund focuses on seed and Series A investments, allowing teams to develop in stealth mode while leveraging Ng's extensive professional network.
The incubator has backed 38 companies to date, including AI observability platform WhyLabs, Landing AI, and AI app-building tool Baseten.
Despite the fund's ambitions, its size reduction may reflect a cooling AI investment landscape.
Recent data shows a significant decline in early-stage generative AI dealmaking, with VC deal value for pre-seed and seed-stage deals dropping 76% from Q3 2023 high of $517.7M to $122.9M in Q1 2024.
This trend aligns with growing enterprise caution about AI implementation, which is due to skepticism over AI productivity gains and concerns about potential risks.

Today's Funding:

Andreessen Horowitz led a $100M Series B funding round into Hebbia, a startup that uses generative AI to search large documents. The funding round values the company between $700M and $800M.
ZeroEyes, an AI-powered gun detection software solution platform, secured $53M in Series B funding led by Sorenson Capital, with added support from Intel Capital, Broadlight Capital, and other existing investors.
Generative AI and computer vision startup Axelera AI closed its oversubscribed Series B funding round at $68M. Investors providing the capital include Invest-NL Deep Tech Fund, the European Innovation Council Fund, Samsung Catalyst Fund, Verve Ventures, CDP Venture Capital SGR, and Fractionelera.

Climate tech

Aether Fuels, a climate tech startup using proprietary technology to develop sustainable fuels for aviation and ocean transportation sectors, raised a fresh funding of $34M. AP Ventures led the Series A round, joined by Chevron Technology Ventures, CDP Venture Capital, and Zeon Ventures.

KKR and Teachers’ Venture Growth led a $140M Series E funding round into SmartHR, a cloud-native HR management platform.

Quick Hits:

Investment banker Stephen Wong is set to join U.S.-based VC firm Valley Capital Partners as a managing director in August. In May, Wong stepped down from the chairman of Hong Kong investment banking and co-head of real estate for Asia roles at Goldman Sachs.
Check Point’s former VP of business development, Alon Kantor, is set to join VC firm 10D as a partner. Kantor will lead the firm’s investments in early-stage Israeli startups, particularly in the cyber and defense sectors.
The General Partnership bagged $300M towards its second fund. The firm offers “sweat equity” contracts in addition to traditional venture capital to startups.
Mandalay Venture Partners is extending the deadline for the final close of its debut fund by six months due to challenging fundraising market conditions. Earlier this February, the firm held the third close of its fund at $17.68M, about halfway to its target of $33M.
Identity.vc, a VC firm that invests in startups founded by members of the LGBTQ+ community, secured commitments of €15M ($16M) towards its debut fund, which has a target of €50M ($53.5M). The firm plans to invest between €250,000 ($267,400) to €1.5M ($1.6M) in pre-seed to Series A startups across Europe.