VC FUNDING TRENDS JULY '22

The world of Venture Capital (VC) has hit a plateau, with the total capital raised remaining stagnant compared to last month. Fintech continues suffering, biotech is on the rise and attracting funds isn’t getting easier.

Tension reigns in the tech industry. Meta saw its first-ever quarterly revenue decline and Amazon ran at a $2 billion loss — while its stock went up. A total of 186 companies experienced layoffs and Q2 cryptocurrency losses reached $670 million.

Below are our observations for July 2022, including year-on-year (YoY) and month-to-month comparisons as well as leading industries and companies most deserving of attention.

General Overview

This July, the total?number of companies that raised funding was 1,242, compared to 981 in July of last year. This is a 27% YoY increase. The?total funding raised was $26.08 billion, with a 17% YoY decrease; last year, July clocked in at $31.35 billion. The median deal size was?$6 million, which is on par with last year.

Leading Countries

*based on the number of companies that raised funding (not total funding)

1. USA?— with?647?companies?(36% YoY increase),?$16.2B?in cumulative investment (19% YoY decrease) and a median deal size of?$7M?(30% YoY decrease)

2. UK?— with?93?companies?(12% YoY increase),?$1.57B?in cumulative investment (24% YoY decrease) and a median deal size of?$6.02M?(47% YoY increase)

3. India?— with?83?companies?(24% YoY increase),?$1.08B?in cumulative investment (1% YoY decrease) and a median deal size of?$3.1M?(41% YoY increase)

4. Canada?— with?60 companies?(94% YoY increase),?$717M?in cumulative investment (23% YoY decrease) and a median deal size of?$5M?(50% YoY decrease)

5. Singapore?—?(new to list)?with?25 companies?(on par with last year),?$1.07B?in cumulative investment (173% YoY increase) and a median deal size of?$9M?(80% YoY increase)

Conclusion:?When compared to last month, the number of companies that raised funding and the total capital raised have remained virtually the same. Singapore has made it to the list for the first time since the inception of this report (Sept. ‘21).

1. Fintech

168 companies?(33% YoY increase),?$5.4B?in cumulative investment (3% YoY decrease) and a median deal size of?$9.59M?(8% YoY decrease).

The top 3 biggest funding rounds are attributed to?Capchase ?(helps SaaS organizations finance the development of their tasks with cash restricted in future regularly scheduled installments) -?$400M?(total funding: $949.6M),?Xpansiv ?(ingests data sourced from the commodity lifecycle and converts it into intelligent commodities and digital assets) -?$400M?(total funding: $578.5M)?and?Casavo ?(digital residential platform redesigning the experience of selling and buying homes in Europe) -?$307.3M?(total funding: $761.1M).

2. Biotechnology

113 companies?(41% YoY increase),?$4.14B?in cumulative investment (34% YoY increase) and a median deal size of?$14M?(23% YoY decrease).

The top 3 biggest funding rounds are attributed to?Cytokinetics ?(biopharma company developing therapies for debilitating diseases) -?$450M?(total funding: $1.14B),?Normax Biomed ?(mRNA vaccine research, development and manufacturing company) -?$301.4M?(total funding: $301.4M)?and?Revolution Medicines ?(innovative organization of expert biologists, chemists, pharmacologists and clinical scientists) -?$264.5M?(total funding: $751.4M).

3. AI

108 companies?(4% YoY decrease),?$1.15B?in cumulative investment (58% YoY decrease) and a median deal size of?$5M?(17% YoY decrease).

The top 3 biggest funding rounds are attributed to?Tecton ?(provides an enterprise-ready feature store to make ML accessible to every company) -?$100M?(total funding: $160M),?BigHat Biosciences ?(protein therapeutics company developing an antibody design platform guided by AI) -?$75M?(total funding: $99.3M)?and?AI21 Labs ?(develops AI systems with an unprecedented capacity to understand and generate natural language) -?$64M?(total funding: $118.5M).

4. Ecommerce

92 companies?(18% YoY decrease),?$2.34B?in cumulative investment (51% YoY decrease) and a median deal size of?$6.3M?(2% YoY increase).

The top 3 biggest funding rounds are attributed to? McGrath RentCorp ?(provides modular buildings, electronic test equipment, portable storage and tank containment solutions) -?$650M?(total funding: $650M),?Whatnot ?(live stream platform and marketplace enabling enthusiasts to connect, buy and sell verified products) -?$260M?(total funding: $484.7M)?and?Avant ?(lending platform offering alternatives with safe financial products) -?$250M?(total funding: $1.83B).

5. Healthcare

83 companies?(18% YoY decrease),?$1.69B in cumulative investment?(45% YoY increase) and a median deal size of?$6M?(17% YoY increase).

The top 3 biggest funding rounds are attributed to?Jubilant Pharma ?(committed to providing solutions to the pharmaceuticals industry across the value chain) -?$400M?(total funding: $400M),?ASG Eye Hospital ?(chain of super-specialty eye hospitals) -?$187.8M?(total funding: $251.8M)?and?Everside Health ?(direct primary care provider offering convenient on-site, near-site and virtual care for its members) -?$164M?(total funding: $329M).

Conclusion:?The capital raised in the fintech space shrunk by nearly 2x compared to last month. Biotechnology is gaining momentum moving, from 4th to 2nd place this month with +$1B in total funding vs. last month.

Monthly Highlights

From Riches to Rags

With Q2 wrapped up, everyone’s waiting to see how?the tech market?weathers the storm. Crunchbase reported that?~$120 billion was invested into startups ?in Q2 ‘22. Although that’s ~27% lower compared to Q2 ‘22 and Q1 ‘21, it’s still a larger result than in any quarter of 2020.

Here's a rundown of the?key industries' performance?in Q2 ‘22:

• Fintech?funding fell 33% to $20.4 billion compared to Q1 ‘22 and is down nearly 46% compared to the $37.6 billion raised in Q2 ‘21. The space still accounts for one in every five venture dollars invested in Q2 ‘22.
• Ecommerce?funding reached $19.8 billion, down 25% in relation to Q1 ‘22 and down 43% compared to Q2 ‘21.
• Healthtech?funding reached $11 billion, down 13% compared to Q1 ‘22 and down 47% vs. Q2 ‘21. Looking at all sectors, healthtech decreased the least compared to Q1 ‘22 and remains on track to outpace 2022 funding.
• Foodtech?funding cooled off significantly, with $5.7 billion raised — a 43% drop compared to Q2 ‘21, down to levels last seen in 2019.
• Gaming?funding reached $4.8 billion, up 37% from Q1 ‘22. Despite this year’s economic headwinds, this year looks promising for video game deals.
• Edtech?funding went to $537 million in Q2 ‘22, down 64% compared to Q1 ‘22. Corporate learning is the space’s most popular user vertical, followed by K-12 and higher education.

Startups across all sectors are?struggling to raise funds?out in the wild. Dropbox-owned doc-sharing platform DocSend released data showing that founders have sent?up to 10.9% more pitch decks ?than Q2 ‘21, while investor activity with pitch decks fell 7.2%.

VC firm Tiger Global will?slow startup investments ?in the next two quarters. Its hedge fund losses throughout May account for?52% of all the gains ?it made in the stock funds since its founding in 2001. Sources speculate that Tiger is sitting on billions in cash reserves. Rawr.

Sit Down, Be Humble

Companies have presented their?quarterly earnings reports. Let’s take a look at the highlights.

• Apple’s fiscal Q3 (ending June 25) profits reported a?3% YoY increase in iPhone revenue ?even as?smartphone shipments are down globally . Compared to last year, Mac saw a 10% drop in revenue. The Apple Watch, AirPods and HomePods revenue fell by 8%. Nonetheless, Apple saw a 2% YoY revenue increase driven by a 12% increase in services revenue.
• Amazon?ran at a?$2 billion loss . Surprisingly, Amazon’s?stock went up ; the company’s sales increased 7% to $121.2 billion vs. Wall Street’s estimate of $119.3 billion. However, the company’s stock is still down 32% year-to-date.
• Meta?experienced its?first-ever quarterly revenue decline . Earlier this year, Facebook lost about 1 million daily active users — its first-ever YoY user drop. Are Zuck’s glory days behind him or are we yet to see the comeback of the offbeat visionary?
• Netflix?lost 970k subscribers in Q2 , which is 5x as many as in Q1. Still, it’s good news because the company expected to lose twice that many. Netflix co-CEO Ted Sarandos?blamed subscriber loss on inflation , a decline in smart TV sales and its exit from Russia. The plan is to add one million subscribers in Q3 now that Netflix introduced its long-awaited low-cost, ad-based model after?naming Microsoft as its partner .
• Snap?took a beating with its Q2 earnings ?and the social media platform’s stock dropped 40% as unhappy investors drastically adjusted their expectations.
• Alphabet?saw?weaker-than-expected Q2 earnings and revenue ?despite bringing in more money — $16 billion, to be exact, which is nice but down from last year’s $18.5 billion.
• Roku?reported?total net revenue growth of 18% YoY ?but its shares went down by 25% due to not hitting revenue growth expectations. Stock dropped by ~63%. The blame’s being placed on the paid advertising slowdown.
• Tesla?saw its?gross profit go up 41% YoY ?but experienced a quarterly decline in revenue and earnings due to supply chain troubles, a long shutdown in China and inflation. The company sold 75% of its Bitcoin holdings, gaining $64 million in sales. Also gained a few new future employees (#Elonbabies ).

Fake It Till They Slash It

The domino effect of the?overvalued 2021 startup valuations ?continues as a dramatic turn of events unfolds before our eyes.

Klarna?(previously Europe’s most valuable private tech company) saw its worth?drop from $46B to $6.7B .?FTX?will be?purchasing crypto lender BlockFi ?for up to $240M; just last August,?BlockFi?was valued at $4.75 billion — meaning its price tag is now 5% of what it used to be. That comes to having dropped in value by roughly $14.3 million per day.

Stripe?(once the most valuable US startup)?cut the value ?of its internal shares by 28% — lowering its valuation from $95 billion to $74 billion with undisclosed reasoning. Shares of?Zomato?(the first Indian consumer tech startup to go public last year)?dropped 14% and hit a record low? on the final day of the lock-in period.

Airlift?(an instant delivery service and Pakistan’s most valued startup that once raised over $109 million) is?shutting down ?after unsuccessful attempts to secure a new funding round.?Deezer?(a French music streaming service) saw its?shares sink by 35% ?during its market debut. Analysts believe Deezer lacks the financial firepower to take on music streaming giants like Spotify.

Three crypto lenders —?Voyager ,?Three Arrows Capital ?(3AC) and?Celsius Network ?— filed for bankruptcy this month, citing turbulence in the crypto market. Yeah, no kidding.

A Team of No One

As the tech layoff streak continues, July was a bit more merciful than June. A total of 16,104 employees were laid off, which sounds bad until you realize it’s?2% less than last month . A total of?186 companies let staff go?in July, compared to 156 in June. Yay?

More than?117 unicorns have announced layoffs ?this year. Most layoffs have occurred in fintech, followed by crypto and real estate. Here are some of the “lowlights.”

• Twitter?laid off 30% ?of its talent acquisition team amidst its two-month hiring freeze.
• OpenSea?cut ~20% of its staff . The CEO of the preeminent NFT marketplace (last valued at $13.3 billion) cited “an unprecedented combination of crypto winter and broad macroeconomic instability.
• Alphabet?(Google)?will slow down hiring ?and investments until 2023, CEO Sundar Pichai said in an?email to employees? — while asking staff to act “more entrepreneurial” and work “with greater urgency.” Translation: Work harder or GTFO.
• Microsoft?laid off less than 1% ?of its 180,000-person employee base due to “realigning business groups and roles.”
• Shopify?laid off ~10% ?of its 10,000-person staff, with CEO Tobi Lutke citing a bet on?post-pandemic shopping trends that “didn’t pay off.”
• Tonal?laid off 35% ?of its workforce in what the at-home fitness company says was a “responsible” decision made to grow at a more sustainable rate.
• Hopin?laid off 29% ?of its staff as the virtual events platform (once the world’s fastest-growing startup) experienced its second round of layoffs in five months. Also out? The?COO, CFO and CBO . Whether they peaced out on their own volition is unclear.

The Cult of Crypto

The cryptocurrency?losses of Q2 hit $670M ?across the web3 ecosystem and are down 52% from the same period last year. About?97% of losses?were?the result of hacks . Yikes.

OpenSea’s monthly trading volume ?on the Ethereum blockchain has fallen from $4.86 billion in January to $3.49 billion in April, $2.6 billion in May and just $696.6 million in June.?Meta is shutting down Novi , its crypto wallet pilot, though it may repurpose the tech for future metaverse projects.

Although the cryptocurrency market isn’t doing so hot, tech businesses are relentlessly?exploring the possibility of investments?in case things pick up again.?Reddit is launching a new avatar marketplace ?and?Snap is looking to make NFTs into AR filters . So don’t worry. Things may seem all bad, but they’re also weird and confusing.

Startups to Watch

Shares

($39.7M?in latest funding) Shares is a?social investment platform?that allows anyone to invest without minimums. The company intends to use the funds to expand across Europe.

Sweatcoin

($13M?in latest funding) Sweatcoin “pays” users a?digital currency?based on daily steps. With the new funds, it hopes to attract more users and launch a new cryptocurrency called SWEAT.

Pogo

($12.3M?in latest funding) Pogo is a?financial app?that uncovers new ways to earn and save money. The company will use the latest funds to expand operations and its business reach.

Resound

($1.4M?in latest funding) An?AI-based editing app?that automatically removes stuttering and pauses from podcasts, Resound is now working on enhancing its offer.

Stadium Live

($10M?in latest funding) The?sports metaverse platform?allows users to chat in groups, play games, purchase digital collectibles and draft teams during live matches and sports streams. With the new funding, Stadium Live plans to hire engineering and product resources to push out more features that will help retention and monetization and to build their app for Android.