Deal of the Week
Is the world healing? I previously touched on the zombicorn overhang. In many cases, these are great companies that may just have got over their skis valuation-wise in the ZIRP era.
Recently, we had Airtable’s exit to Bending Spoons (great podcast from the Bending Spoons founder) at around a $2.25B price, including cash, when the company had previously been valued at $11B. And before that, we discussed Brex hitting business-model gravity in its $5B acquisition.
This week, we have Berkeley co-founded Headspace’s $200–300M acquisition by Sword Health. Headspace was last valued at $1B.
I don’t view these as bad outcomes; they are just the course of a cycle. Many companies got overvalued versus their terminal values when the discount rate was effectively zero.
You are now seeing these get worked through the system. What is maybe interesting is that a lot of these have been strategic buyers rather than private equity buyers, who were once lauded as the exit path if the venture path became untenable.
The private equity route was always perhaps too simple, because a typical PE transaction is looking for:
An efficient business / ability to cut costs rapidly
Ability to take on lots of leverage (debt)
Some form of pricing power or an uncompetitive market
Control — and some VC investors might not be incentivized to sell at a low price
Because venture is a power-law game, VCs aim to back companies they believe can become breakout winners in large TAM markets — or Berkeley founders, as they are so good 😃.
Firms destined to be the fourth or fifth player in a big market are rarely a fit for private equity: they may lack pricing power and remain vulnerable to new entrants, especially with people fearful of AI disruption.
First King in the North from Berkeley?
This one tickled me — surely this has got to be the first King to attend UC Berkeley? Haakon VIII was crowned the new King of Norway (King in the North!). Per Wikipedia, he did his BA at Berkeley.
Also an interesting life story from his father, King Harald: exiled at age three to escape the Nazis, he spent much of his childhood in the US. He later studied at Oxford (Queen Victoria was his great-great-grandmother), competed in three Olympics, and married his high school sweetheart.
The end of the SaaSpocalypse?
I’ve spoken before about the zeitgeist in the age of AI, using Oracle as one example. We now have another: the SaaSpocalypse and the “cybersecurity companies are dead” narrative.
The prevailing view was that Anthropic’s Mythos would make cybersecurity obsolete and that everyone would just vibe-code their own SaaS.
Since the nadir, a basket of SaaS stocks is up maybe 60%, while leading cybersecurity companies like Palo Alto Networks and CrowdStrike are up around 100%. Turns out we are probably going to need a lot more cyber, not less. Anthropic’s own Project Glasswing has already uncovered more than 10,000 high- or critical-severity vulnerabilities — and, somewhat ironically, CrowdStrike and Palo Alto are both partners in the project.
And maintaining your own vibe-coded SaaS takes time that could otherwise be spent growing your business. Quite the reversal in the space of six months 🙂
Hats off to Marc Benioff and Salesforce, one of the big early casualties of the narrative, who are going all-in on making Salesforce the system of record and Slack the substrate for AI. There are now some numbers behind it: Agentforce and Data 360 ARR reached nearly $3.9B last quarter, up more than 210% YoY, while Slack posted its fastest quarterly net-new annual order value growth since the acquisition. Maybe all these AI investments are starting to show ROI!?
Benioff even brought Matthew McConaughey in to signal that Salesforce was back. The stock jumped 22% after earnings.
Remember: in the age of AI, only the phoenixes survive.
Quick takes
Cool video from Berkeley founded Skild AI on robotics improvements.
More details about the OpenAI agents with a flourish around civilisations.
Good reminder that I have a long way to go on the investing side and just how wonderful venture capital is when it works. Well done Kevin Durant on his ~239x multiple if the $13B Hugging Face acquisition happens.
Guyana (population ~850k) found an enormous oil field a few years ago that went into production in December 2019. They have now taken over the US on a GDP per Capita. Who needs AI!?
This is pretty impressive reacceleration for OpenAI’s coding product. Coding just has insane product market fit. Berkeley founded Factory and a few others also growing like a weed.
Summary by the #️⃣ & 💰:
8 Berkeley-founded companies funded
$765M of capital raised from the 24th August to 31st August
💡 Got any ideas or feedback on how to improve this weekly digest? Just hit reply.
Acquisitions
🧘 Headspace. $300.0M Acquisition 🇺🇸 Digital mental health platform. 💰 Sword Health
🐻 Karan Singh, COO. BA Economics. Article
🛠️ Deductive AI.85.0M Acquisition 🇺🇸 AI-powered production incident debugging. 💰 Elastic
🐻 Sameer Agarwal, Co-Founder & CTO. MS & PhD EECS. Article
🩺 Livara Health. Acquisition 🇺🇸 Value-based musculoskeletal care platform. 💰 Switchboard Health
🐻 Kamshad Raiszadeh, Founder & Chief Medical Officer. BA Biochemistry. Article
Closed Rounds
🤖 Generalist. $600.0M Series B 🇺🇸 General-purpose robotics foundation models. 💰 8VC, Radical Ventures, Union Square Ventures
🐻 Andy Zheng. Co-Founder & CSO. BA Maths. Article
💵 Fasset. $68.0M Series C 🇦🇪 Stablecoin-powered global neobank. 💰 SBI Group, Speedinvest
🐻 Mohammad Raafi Hossain, CEO & Co-Founder. BS Environmental Economics & Policy. Article
⚡ Voya Energy. $35.0M Series A 🇺🇸 Aluminum-fueled clean power systems. 💰 Energy Impact Partners, Founders Fund, StepStone Group
🐻 Steven Kaye, Co-Founder & CTO. PhD Chemistry. Article
🧠 Onos Health. $17.0M Series A 🇺🇸 Behavioral health clinical intelligence. 💰 Costanoa Ventures, Flare Capital Partners, CVS Health Ventures
🐻 Suhaas Prasad, Co-Founder & CTO. BS EECS. Article
👜 Atorie. $9.5M Seed 🇺🇸 AI-powered luxury fashion marketplace. 💰 a16z speedrun, Night Capital, Lightspeed Venture Partners
🐻 Redouane Ramdani, Co-Founder & CEO. Berkeley degree undisclosed. Article
🔋 Teragen Energy. $6.0M Pre-Seed 🇺🇸 Advanced modular fuel-cell systems. 💰 Breakthrough Energy Ventures, Energy Capital Ventures, AP Ventures
🐻 Ruofan Wang, CEO & Co-Founder. Haas MBA. Article
🧬 ProFound Therapeutics. $20.0M Investment 🇺🇸 Novel protein drug discovery. 💰 Gates Foundation
🐻 Vinidhra Mani, Co-Founder & CIO. BS Bioengineering Article
🛍️ Bonafide. $9.2M Undisclosed 🇺🇸 Generative AI commerce infrastructure. 💰 Javelin Venture Partners
🐻 Layton Han, Co-Founder & CEO. Haas MBA. Article
Date Built By Berkeley Started | Companies Funded | Total Raised ($M) |
7/8/24 | 848 | 234,007 |
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