The week's developments in investing & technology, explained | 04.04.24

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This week, the VC "megafund" era is drawing to a close as global fundraising dips to $30.4 billion early in 2024, with US figures dropping to the lowest rate in 7 years. Meanwhile, the crypto VC sector is bucking the trend, surging 52.5% to $1.16bn in March, heralding a revival in crypto enthusiasm.

Meanwhile, DeepMind's Demis Hassabis cautions against the blinding glare of AI funding which, despite its transformative promise, risks overshadowing real scientific advances. Yet the AI funding hype isn’t over yet as experts find that investors continually underestimate the long-term impact of AI.

Read on to find out more — including why ChatGPT is unsurprisingly not the best day trader, Altman’s cut from OpenAI’s startup fund, and why Trump’s money-losing startup is not comparable to the others..

—Charlie and the Research & Intelligence Team

Ps. We’ve just launched The CogX Transatlantic Accelerator; a joint campaign with the UK Government to connect the most innovative UK startups with US markets. If you are or know a UK startup they can apply for over $20k worth of support to attend, exhibit and network at CogX Festival in LA on 7th May here

The investment ecosystem

💼 VC fundraising reckons with the end of the "megafund" era, with global totals at $30.4 billion in early 2024, including only $9.3 billion in the U.S. This decline, driven by investor caution and limited exit strategies, poses challenges for startups and could shrink the VC sector unless exits increase or new sectors like AI drive growth.

🌍 Europe equities are too cheap to ignore, poised for a boost from spending pandemic savings and policy shifts. With signs of market undervaluation, Europe stands out as an attractive investment compared to the US where the market has leaned heavily on tech and AI gains. 

💰 Crypto VC investment soared by 52.5% to $1.16 billion in March, the highest since April 2022, focusing on infrastructure and decentralised finance projects. This surge, marking the first monthly total over $1 billion since November, coincides with rising crypto market enthusiasm and the introduction of Bitcoin ETFs in the US.

📈 9 crypto VCs on why Q1 was so hot, with $2.52 billion raised, spurred by legal wins and rising interest in decentralised finance and cryptocurrency. The sector experienced a surge in deals and valuations, fostering a competitive, founder-friendly market. 

Chart of the week

Venture capital investment in Foodtech declined significantly in Q4 2023, with the largest funding drops in online grocery, food waste, and fermented protein. Categories like novel ingredients and molecular engineering saw funding increases, suggesting a shift in investor focus amidst a challenging exit environment.

How AI is transforming investing 

🤖 Huge AI funding leads to hype and grifting overshadowing genuine scientific progress warns DeepMind's Demis Hassabis. The investment frenzy, akin to the crypto boom, directed $42.5 billion into AI startups last year. However, Hassabis remains optimistic about AI's transformative power.

📊 Is ChatGPT any good at day trading? Probably not. Tests show it can generate buy-sell portfolios with positive returns, yet it sometimes buys and sells the same stock. The AI favours large, stable companies and can spot short-term mispricings, but its day trading reliability is questionable.

 🧠 Investors continue to underestimate the long-term impact of AI, as financial analysts consistently fall short in predicting the adoption of general-purpose technologies like AI, smartphones, and the internet. Morgan Stanley views AI as a key investment area, anticipating major productivity gains beginning in 2025.

🖥️ Investing in AI is really investing in bigtech, as tech giants like Microsoft, Amazon, and Meta dominate the sector, benefiting from their resources and talent in developing AI models. Companies supplying infrastructure to AI, such as Nvidia and Vertiv, also see gains, indicating a broader investment opportunity in the AI supply chain.

Startups

📉 Why is Trump’s money-losing startup different from the others? Unlike typical startups with growth potential, TMTG has not attracted a significant user base or investment, and being publicly traded limits its financial manoeuvring. Consequently, its overvaluation and unstable financial status cast doubts on its long-term viability.

🚪Sam Altman removed from controlling OpenAI’s Startup Fund, which invests in AI startups aiming for global impact. After a year of Altman’s unusual direct control, Ian Hathaway now leads the fund, clarifying its management structure and continuing its mission to foster AI innovations.

Jobs

• Senior Analyst | Capital Group | Los Angeles | $132k - $211k

• Senior Wealth Advisor | Exchange Street | London | £120k

• Head of Finance | Kerry Roberts | London | £130k

• CFO | Didi Hirsch | Los Angeles | $265k - $295k

• Head of Finance | CMC Consulting | London | £90-100k

Noteworthy deals

• Onego Bio, a Helsinki-based developer of animal-free egg protein, closed a $40 million Series A led by NordicNinja.

  
  

• Robovision, an AI computer vision startup, raised $42 million from Target Global to scale in the US.

  
  

• Halio, an AI chip startup has raised $120 million despite big tech dominance in their industry 

  
  

• Flip, LA-based social shopping platform raised a $144 million Series C led by Streamlined Ventures to rival TikTok.

  
  

• CryoTherapeutics, a Belgian developer of medical devices intended to prevent heart attacks, raised a €10 million Series B.

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Disclaimer: This content is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice.