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| Hey Insiders, Today we are bringing you an analysis of the continued slump in global private market fundraising and why Michigan Angel investment is expected to rebound this year. Scroll down for some quick hits, then let us know if you'd like to see more in future issues! Karan
p/karan-chafekar |
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| 1 | | In Q1 2023, global investors raised $210.8B worth of private Capital funds, including PE, VC, real estate, debt, secondaries, and fund of funds. Private capital fundraising had already dipped below 2021's record-setting totals in 2022, ending the year $318.8B lower than the previous year's tally. The trend has continued this year. So far this year, both fund count and value are trailing behind 2022's totals from the same quarter. The data suggests that private capital fundraising will continue to trail behind, considering the global economic conditions, which have not improved significantly since last year. VC fundraising reached record totals in 2022, with the year ending with 52 mega funds worth more than $1B. This year the situation is different, as even VC funds are finding it difficult to raise fresh funds from limited partners. As a result, VC funds share of the total private capital funds slumped to 14% in Q1 2023, down from 22.6% in 2022. VC share of private capital fundraising reached its peak of 25.6% in 2018. PE funds continue to rake in the maximum share of the funding, corresponding to 46.1% of the entire private capital raised in Q1 2023. The 12-month rolling VC fundraising activity shows that fundraising came in nearly closer to 2018 levels in the first quarter of this year. Meanwhile, the 12-month rolling fund count plummeted to levels seen in late-2014. VC fund managers have to contend with a challenging fundraising environment in 2023. Even established fund managers are now having difficulty raising new funds as LPs become more conservative with capital allocation due to the drop in public markets. Fundraising challenges have amplified for emerging fund managers, which already faced significant headwinds last year. The share of funds raised by emerging managers dropped by 12% between 2022 and 2023 compared to 2008 and 2021. LPs have curbed their capital deployment due to a frozen exit environment, making it impossible for them to realize gains on existing investments, which would generate cash for future commitments. Several fund managers have postponed their fundraising to next year, hoping the fundraising landscape would be supportive by then. Due to the combination of factors, including lack of exit opportunities, volatility in public markets, slumping valuations, and economic instability, the quarterly VC fundraising total in the first three months of this year dropped 72% YoY to $29.5B. Asian venture funds raked in nearly half of the global funds raised in Q1. Three of the top 10 largest VC funds closed in the quarter were domiciled in China. North American VCs accounted for 52% of the fund count, indicating their robust fundraising ecosystem. Despite the grim current fundraising climate, global VCs already had $548.4B dry powder available for deployment, which should come in handy when they eventually decide to resume their normal pace of investing. | | |
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| 2 | | Angel investors invested $46.3M into 79 Michigan-based startups in 2022, down 29% from 2021, per a new report by Michigan Angel Community. The total amount invested by angel investors throughout the year was the lowest annual figure across the past five years. The decline in funding was in line with the global VC funding slump due to rising inflation and market uncertainty. Now that inflation has shown signs of easing, interest rates have peaked, and the threat of bank failures has passed, angel investments in the state will likely start rising as the year progresses. Michigan Angel Community's managing member Mike Flanagan shares the same view as he remains "optimistic" about angel investments in the state. Flanagan, also the managing director of Michigan Angel Fund, has already seen an increased deal flow in the first quarter of 2023, further substantiating his predictions. He adds, "What we're finding is there's a good number of angels investing, and I think as the macro environment improves, we'll see improvement and angel investing bouncing back. We had some macro headwinds last year, and it seems like some of that is starting to taper and not be as pronounced as we were worried about maybe a couple of months ago." While angel funding declined overall in the state in 2022, investments remained strong across several counties in the southwestern Lower Peninsula, including Grand Rapids and Kalamazoo. Sixteen technology startups in the region nabbed $18.2M in funding, up from 2021's $16.4M invested across 17 deals. In 2022, information technology startups raked in $17M from angel investors through 31 deals. While the honors for the highest deal count went to information technology startups, life sciences startups were able to secure the highest funding at $23M from just 24 deals. Nine mobility startups nabbed $3M, whereas advanced materials and manufacturing and consumer products startups nabbed $2M each. Investments in startups led by founders from diverse backgrounds continued to increase over the last five years. In 2022, 35 women-owned startups secured angel investments, up from 20 in 2021 and 14 in 2017. Thirty-three minority-owned businesses secured funding from angel investors last year. While the count was down slightly from 37 such deals in 2021, the figure was still five times more than six deals in minority-owned businesses in 2017. Flanagan added, "At the end of the day, investors are just wanting to invest in the best companies that are there, and so it seems the cream rising to the top happen to be women- and minority-owned businesses over the last few years." Michigan Capital Network had 16 angel groups last year, with a combined 686 active angel investors in their network. Overall 933 angel investors invested in Michigan-based startups last year. | | |
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| 3 | | Today's Funding: - Indian consumer appliances brand Atomberg secured $86M in Series C funding led by Temasek and Steadview Capital. New investor Trifecta Capital participated in the round along with existing backers Jungle Ventures and Inflexor Ventures.
- EV charging infrastructure startup Weev raised £50M ($62M) in funding from Octopus Investments.
- San Francisco-based healthcare firm Carrum Health nabbed $45M in Series B funding. OMERS Growth Equity led the funding round with additional backing from Revelation Partners, Tiger Global Management, Wildcat Venture Partners, Cross Creek, and SpringRock Ventures.
- CE Innovation Capital led a $20M Series A funding round into British Web3 payment infrastructure startup Transak. Participants in the funding round include SBI Ven Capital, Azimut, Signum Capital, and others.
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- British VC firm Talis Capital secured $175M in capital commitments towards its third fund to invest in European and American seed to Series A stage startups across data, AI, insurtech, proptech, commerce, digital health, and sustainable farming startups.
- Tribe Capital is planning to launch a $250M fund dedicated to backing Indian startups.
- Italian state lender Cassa Depositi e Prestiti (CDP) is establishing an investment fund to back AI startups in the nation. The fund is poised to launch with a $165M (€150M) investment from the government.
- German VC firm Alpine Space Ventures, led by former SpaceX executive Bulent Altan, is raising a €60M ($64.4M) fund. The fund is set to receive backing from the European Investment Fund (EIF), the European Recovery Programme (ERP), InvestEU, and European Space program's investment division CASSINI.
- BlackRock has slashed Indian edtech startup Byju's valuation to $8.5B. This is the second time BlackRock has marked down Byju's valuation after it nearly halved its valuation from $22B to $11.5B earlier this year.
- AI investments: Harness the power of a technology expected to add $15.7 trillion to the global economy by 2030.*
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Term of the Day Gross domestic product: Gross domestic product (GDP) is a measure of the total value of goods and services produced within a country’s borders in a given year. Read More Question of the Week Should companies take steps to avoid employee burnout, or should it be the individual's responsibility to manage it themselves? Join the conversation |
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| | Karan Chafekar Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield |
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