What is Happening in Venture Capital?

What is Happening in Venture Capital?


By Keith Teare • Issue #22 • View online

Are Micro VCs eating the startup world, or is it Tigers?

Content

Editorial

No apologies for the apparent similarity of my recent newsletter themes. The changes in Venture Capital are exercising my mind, and reading, a lot recently and this newsletter is the sum of my weekly reading.

Tracking the evolution of startup investing is an important signpost of the near future. And a lot is happening in that space.

This week Forbes claims that the “crop” of Micro-Funds are “punching above their weight” while also indicating that there are fewer Micro VCs than before.

For those taking the pulse of the venture market from the online discourse, micro VCs seem everywhere. But the data suggest a different story: there aren’t more of them — they’re just amplified, using specialized approaches and savvier Internet distribution to punch above their weight. “For those who are raising now, there is a different breed of VC,” Bahn says. We have no choice but to be self-promoting. Gone are the days that you just needed to raise the capital and people will come to you.”

The truth is rather different as this graph of Micro VCs operating since 2005 shows

Based on CrunchBase queries

The growing number of Micro VCs is complemented by their growing importance in early-stage financing. These are line graphs showing the total $ value of Micro VC-led rounds since 2005. Series A and B rounds are now often led by funds in this category.

Based on CrunchBase queries

Why is this important? The reason is to do with understanding the makeup of the venture ecosystem across all three asset classes — seed, venture, and growth. Micro VCs are growing in importance in the first two. But the growth stage is also changing. In prior weeks we mentioned Tiger Global. This week Crunchbase published an overview of the fund, including the following from authors Gené Teare and Marlize Van Romburgh:

The 20-year-old New York-based investing firm — part hedge fund, part private equity investor — has not only quietly become the most prolific investor in billion-dollar startups, it is also significantly picking up the pace at which it deploys capital in 2021, according to our analysis.

How did the firm, now with an estimated $65 billion in total assets under management, become one of the biggest startup investors in the world? And how does Tiger, which first began investing in private companies in China and India less than two decades ago, now routinely outmaneuvers some of Silicon Valley’s most sophisticated venture investors?

With these questions in mind, we decided to take a closer look at the strategy and portfolio for Tiger Global, which Crunchbase data shows is investing in startups in 2021 at 10x the pace it did just a year ago.

The article is an excellent deep dive into understanding the firm and what it approach changes in the late-stage investing asset class.

My own fascination with this area is selfish. I believe that the seed stage of investing will become as much of a recognized asset class as the venture and growth stages. My stealth startup SignalRank Corporation is building data analytics and investment models that would allow it to invest in up to 200 of the best unicorn candidates in each three-year cohort of seed-funded companies. It is possible because of the excellence of the Micro VC funds themselves and their contribution to the creation of future value.

Just looking at the 175 unicorns that have reached the status in 2021, they did just over 1500 rounds of financing between them with an average of just over 3 investors per round. 304 Micro VCs invested in at least one of them. But only 30 invested in more than 4.

Here is the leaderboard of Micro VCs in 2021 unicorns with associated scores:

More in this week’s video


What is Happening in Venture Capital?

How Venture Capital’s New Crop Of Micro Funds Punch Above Their Weight

Micro funds are becoming louder and more specialized as they compete to show the value they can add to early-stage companies.

For those taking the pulse of the venture market from the online discourse, micro VCs seem everywhere. But the data suggest a different story: there aren’t more of them — they’re just amplified, using specialized approaches and savvier Internet distribution to punch above their weight. “For those who are raising now, there is a different breed of VC,” Bahn says. We have no choice but to be self promoting. Gone are the days that you just needed to raise the capital and people will come to you.”

www.forbes.comShare

Under The Hood: How Tiger Global Earned Its Stripes As The World’s Biggest Unicorn Hunter — Crunchbase News

The 20-year-old New York-based investing firm — part hedge fund, part private equity investor — has not only quietly become the most prolific investor in billion-dollar startups, it is also significantly picking up the pace at which it deploys capital in 2021, according to our analysis.

How did the firm, now with an estimated $65 billion in total assets under management, become one of the biggest startup investors in the world? And how does Tiger, which first began investing in private companies in China and India less than two decades ago, now routinely outmaneuvers some of Silicon Valley’s most sophisticated venture investors?

With these questions in mind, we decided to take a closer look at the strategy and portfolio for Tiger Global, which Crunchbase data shows is investing in startups in 2021 at 10x the pace it did just a year ago.

Tiger Global executives rarely speak to the media and the firm likewise declined to comment for this article. What follows is an analysis of its business, sourced from Crunchbase data unless otherwise noted.

news.crunchbase.comShare

Billionaires are racing to sidestep President Biden’s plan to raise their taxes

President Joe Biden. | Brandon Bell/Getty Images

How Silicon Valley might beat the Tax Man.

President Joe Biden could soon find out that raising taxes on billionaires is more complicated than it seems.

The new president wants the rich to pay much more in taxes, in order to finance a $1.8 trillion plan to invest in things like child care, education, and tax cuts for the poor that are meant to reduce inequality.

But standing in the other corner of the ring is a sophisticated wealth management and accounting industry that is ready to fight, eager to temper every aggressive proposal and exploit every loophole to please their clients who pay them big bucks to defend every dollar.

www.vox.comShare

Techies aren’t moving to Miami. They’re moving to Austin.

Good morning! This Wednesday, tech workers head to the Lone Star State, Spotify rails against Apple’s anti-steering rules, a bunch of senior employees are leaving Facebook and the WarnerMedia-Discovery combo gets a new, boring name.

(Was this email forwarded to you? Sign up here to get Source Code every day.)

The Big StoryWhere are all the tech workers moving?

If it seems like a lot of tech workers are leaving the Bay Area, well … they are, at least according to LinkedIn data published by Bloomberg. The biggest recipient of tech workers, though, isn’t Miami like the VC hype train would like you to believe.

Austin is the destination of choice for the most tech workers, according to LinkedIn data, which was used to calculate the rates of people moving in versus leaving.

  • Other southern cities are popular too: Nashville and Charlotte rounded out the top three.
  • Miami may be one of the buzziest destinations, but it placed 11th behind other Florida spots like Jacksonville and Tampa Bay.

The biggest loser was the San Francisco Bay Area, which saw the biggest outflow of tech workers, followed by Boston and Chicago. Despite the “New York is dead” narrative, it placed fifth behind Cincinnati.

www.protocol.comShare

Tuesday Capital, formerly Crunchfund, casts a wide net with a fourth, $30 million fund — TechCrunch

Tuesday Capital, formerly Crunchfund, casts a wide net with a fourth, $30 million fund TechCrunch

Tuesday Capital, a 10-year-old seed-stage fund that was founded by longtime VC Patrick Gallagher and TechCrunch founder Michael Arrington, has changed considerably over the years. Arrington now leads a crypto hedge fund. Tuesday was formerly known as CrunchFund. Gallagher now runs the outfit with partner Prashant Fonseka, who joined the fund in 2015 as an associate.

Tuesday has also formed a tight relationship over the years with the industrial design shop Frog Design, which is a limited partner in the fund and sold a portion of its venture portfolio to Tuesday early last year. (Tuesday obtained stakes in nine startups in the deal.)

techcrunch.comShare


Twitter Goes After Clubhouse

Twitter redesigns its mobile app to make Spaces the center tab — TechCrunch

Twitter is updating its app to make its audio chat room feature, Twitter Spaces, a central part of the user experience. Today, the company will begin to roll out a dedicated tab for Twitter Spaces in the main navigation bar of its mobile app, initially on iOS to select users. The feature will see Twitter […]

techcrunch.comShare


China Syndrome

Apple’s Supplier List Shifts Towards China Despite Trade War

Apple has disclosed the list of its top 200 suppliers for the first time in two years, revealing an increased reliance on Chinese companies — even as some of them have expanded production to Vietnam and India to avoid U.S. tariffs and export controls. Meanwhile, the company relied less on suppliers based in either Japan or the U.S.

The shift toward China reflects the eagerness of Chinese suppliers to undercut foreign rivals on price for the chance to work with the consumer electronics giant, which can build up their technical expertise and prestige and boost share prices, according to former Apple employees involved in its supply chain. It also comes despite pressure from the Trump administration over the past few years to relocate production back to the U.S. from China.

www.theinformation.comShare


Bitcoin is a Savings Account?

Bitcoin Is A Savings Account With An Average Growth Of Over 100% A Year

The solution to the problem facing billions of people around the world: access to a cheap, secure and reliable savings account.

bitcoinmagazine.comShare


African Startups

Venture Capital funding to Nigeria & Africa expected to hit record levels in 2021 — CNBC Africa

Writer and Advisor on African Tech, Jake Bright says Venture Capital funding for Nigeria and Africa are likely to hit record levels this year. African tech companies Flutterwave and Chipper Cash both reached unicorn status this year following their respective fundraises. Jake Bright joins CNBC Africa for more.

www.cnbcafrica.comShare


Startup of the Week

Photo Sharing App Poparazzi Reportedly Raising $20M Series A, Fresh Off Buzzy Launch

The reported funding news comes days after the app’s buzzy public launch, which vaulted it to the top of Apple’s App Store.

news.crunchbase.comShare


Tweet of the Week

United Airlines agrees to purchase 15 Boom supersonic airliners

United Airlines is the first official U.S. customer for Boom Supersonic, a company focused on making supersonic commercial flight a reality once again. Boom unveiled its supersonic sub-scale testing aircraft last year, and intends to start producing its Overture full-scale commercial supersonic passenger jet beginning in 2025, with a planned 2029 date for the beginning […]

techcrunch.comShare


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