Slim Pickings

Seed Startups Face Cash Crunch, Vertu Nets $300 Million for First Fund, and a Startup Flexes its Funding Muscle.

Author

Adam from VC Brags
March 24, 2023

Welcome Shareholders,

In this daily edition of the Brags Newsletter, we'll cover how Series A funding is shrinking amidst a cash crunch, a Toronto VC bags $300 million for its first fund, and a data collaboration startup finds the winning formula with its recent funding round.

So sit back, grab a snack, and enjoy!

Venture Today 👏

  • As venture capital funding contracts, seed-funded startups face increasingly slim odds of securing Series A investments, with the latest data showing the lowest quarterly total being raised in over two years.

Series A investment has declined for five consecutive quarters since its peak in late 2021 yet it remains significant, with nearly $4.5 billion invested this year nationwide. Investors have written substantial checks, including five startups receiving $100 million or more and around 35 rounds surpassing $30 million. However, Series A funding has largely been uneven, with some areas like biotech seeing more investor interest than others.

Fintech and Web3 have seen the most decline in Series A funding compared to the previous year. Despite fintech being the leading venture investment sector in 2022, only 30 Series A rounds totaling $598 million have been announced this year, compared to $2.15 billion last year. Surprisingly, AI funding has also decreased, with $371 million in Series A investments this year, down from $1.08 billion during the same period last year.

Who's Raising?

  • Toronto-based Vertu Capital has successfully closed its first fund, securing over $300 million in commitments.

Vertu Partners Fund I is supported by New York State Common Retirement Fund, BDC Capital, BMO Capital Partners, funds managed by BMO Global Asset Management, CIBC, EDC, Manulife Investment Management, and other undisclosed asset managers, family offices, and industry executives.

Vertu, founded in 2017 by Lisa Melchior, a Canadian private equity technology investor, exceeded its cap with oversubscribed commitments. The firm aims to identify promising investments and partner with software and software-enabled firms to drive returns for its investors. Vertu has completed two investments so far, including in Dejero Labs, a global communications technology provider, and PathFactory, an intelligent B2B content platform.

Startup of the Day

  • Data Collaboration Startup Hex has just raised $28 million in a new funding round led by Sequoia Capital, with participation from existing investors, including Andreessen Horowitz, Amplify, and Snowflake.

Hex raised $52 million from investors through a Series B round in February 2022 and said that it still hasn't used the funds from that round. However, since Sequoia's Matt Miller approached them with an offer that provided minimal dilution and an additional 2-3 years of runway, the company found it to be an attractive proposition. With the new funding, Hex has raised over $100 million since its founding in 2019 and says that it now has enough money for at least five years of runway.

The Investor interest from Sequoia is a result of the company's growth, which has seen a fourfold increase in revenue, and a tenfold user base expansion within a year, thanks to a new tier offering broader access. The company now boasts 450 paying customers, featuring prominent firms such as Brex, Notion, Toast, and Chegg.

Memes and Other Things


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