ESO Fund's top 10 events affecting the private markets for the month of August 2023.
August's Top Ten:
- We talked in our intro about there being no tech IPOs in 20 months. However, there was a SPAC that occurred this month, as Better.com SPAC’ed out with Aurora Acquisition Corp. on the 23rd. There was only one word for what happened to the stock price as soon as it hit the public markets: carnage. The stock price declined over 90% that day, and as of writing this, is currently trading at $0.80 a share, a massive decline from the $17 a share they targeted. Everyone kind of knew this was going to be a trainwreck considering what the current mortgage environment is like right now, but CEO Vishal Garg said that it had to be done so they could tap into capital it would receive from Softbank on exit.
- Surprisingly, there was in fact some other big news that happened in August outside of the IPO news. One of which was Databricks reportedly holding talks with T Rowe Price group on a new fundraising round that would bring the big data software giant’s valuation to more than $43 billion. For context, the company raised a $1.6B Series H round in August 2021 at a $38B valuation.
- Softbank is suing the now defunct company IRL for fraud. Softbank alleges that the company gave them fake numbers, and if they knew what was actually going on at the company, they wouldn’t have invested at the $1.1 billion valuation. In addition to Softbank’s lawsuit, IRL is currently being probed by the SEC to determine whether the app violated security laws by misleading investors.
- It wouldn’t be a 2023 top ten if we didn’t talk about AI. OpenAI is reportedly on track to generate over $1 billion in revenue over the next year, blowing past the company’s previous revenue projections. The AI-giant was last valued at $27 billion earlier this year, and generated just $28 million in revenue last year before charging users for ChatGPT.
- Continuing in the AI news, Hive AI, a San Francisco-based software company that uses AI to moderate digital content, is reportedly working to raise $200 million in a funding round, with a valuation of up to $4 billion. The funding round would come two years after Hive was valued at $2 billion in an earlier round.
- Fintech startup Ramp had one of the biggest fundraising rounds of August, raising $300 million in a funding round co-led by existing backer Thrive Capital and new investor Sands Capital at a post-money valuation of $5.8 billion. This is notably a 28% lower valuation than they raised last March 2022.
- There were a decent number of unicorn fire sales this month. Most notably, Yieldstreet is nearing a deal to acquire real estate tech startup Cadre at a valuation around $100 million. This is a sharp discount from Cadre’s peak valuation of $800 million from six years ago. Additional fire sales this past month include Hopin selling its core business to RingCentral, and storage startup Clutter being sold for pennies on the dollar to a backer.
- Lack of liquidity has plagued many VCs over 2022 and 2023, and Tiger has recently been in the spotlight for this. Notably this month to try to get some money back for their investors, Tiger is close to a deal to sell part of its stake in artificial intelligence startup Cohere that values the startup at about $3 billion. This deal will value the startup 40% higher than its most recent June financing for a $63 million stake.
- The Biden administration put out an executive order this past week that will restrict U.S. private equity and venture capital investments in Chinese technology. More specifically, Biden is targeting investments in technologies like semiconductors, quantum computing, and artificial intelligence on concerns that China’s advancements in those areas run counter to U.S. national security interests.
- With Betterup’s recent layoff off of 16% of its staff, employees seem to have one burning question, “If the company can’t afford to keep its total workforce, how can it afford to keep Prince Harry on as Chief Impact Officer?” Harry has been with the company since 2021, but according to one staffer, his day to day responsibilities include “zero things.”
Why this matters: It appears that there is a dichotomy forming in the VC ecosystem between the explosion of AI and the opening of the IPO market and also stories of down rounds and fire sales for other once hot VC-backed companies. There is clearly a shift that has been going on for a while in the post Covid and 2021 boom that VC experienced, and its sink or swim for late stage companies that were not able to exit in time.
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