San Francisco-based Magic, which develops AI models to write software, is reportedly in talks with investors to raise a fresh $200 million.

The raise would come at a $1.5 billion valuation — triple its previous valuation from just five months ago — per a Reuters report. Magic has no revenue and no product for sale, the report says.

The startup last raised a $117 million round in February led by NFDG Ventures, which also included participation from CapitalG and Elad Gil.

Investors in the new round would include Jane Street Capital, according to the report.

Hot sector

While everything in AI is hot, software development seems to be something investors have specifically keyed in on when exploring the best near-term uses for the tech.

Not only does AI hold the promise to speed up application and software development, but also could cut down the cost of software developers — as well as the problem of just finding them to hire in the first place. It could also possibly make them more productive.

Other startups that have raised cash in the space include London-based Builder.ai, which raised a $250 million-plus Series D led by Qatar Investment Authority last year.

Earlier this year, Palo Alto, California-based Augment locked up a $227 million Series B round at a $977 million post-money valuation. Augment helps developers and software teams by giving them AI coding assistance.

That same week, San Francisco-based Cognition reportedly locked up a $175 million investment led by Founders Fund at a $2 billion valuation. The 6-month-old startup has developed an artificial intelligence-powered coding assistant called Devin.

Founded in 2022, Magic has raised $145 million, per Crunchbase.

Related reading:

• Eye On AI: OpenAI Goes On A Buying Spree As AI Looks To Open Up M&A, IPO Markets

Illustration: Dom Guzman

Lots of big rounds last month, including two huge ones well over a half-billion dollars. While June started slow, it ended in a flurry of massive-money deals — making this list tough to crack.

1. Cruise, $850M, autonomous cars: In for a penny, in for a pound. That clearly seems to be how General Motors feels about Cruise. The auto giant agreed to pump another $850 million into the San Francisco-based startup. Cruise’s saga has been well documented. In 2021, Cruise snagged the largest round of any venture-backed U.S. startup when it upsized a round to $2.75 billion, valuing the company at  more than $30 billion. However, the tide started to turn in early 2022 when SoftBank did not release a promised $1.35 billion to Cruise as part of an agreed-upon deal when the autonomous carmaker completed a commercial deployment of vehicles. Instead, General Motors acquired SoftBank’s equity ownership stake in Cruise for $2.1 billion. Then, late last year, Cruise suspended its self-driving taxi program across the country after losing its permit to operate in San Francisco due to an incident with a pedestrian. That announcement came almost exactly a year after another autonomous vehicle startup — Ford Motor-backed Argo AI — shuttered after raising $3.6 billion in funding from investors such as Ford Motor, Volkswagen Group and Lyft. Cruise is now restarting its driving programs in Phoenix, Dallas and Houston. Clearly GM is betting — big — the autonomous driving and robotaxi market comes back.

2. AlphaSense, $650M, artificial intelligence: AI-driven market intelligence platform AlphaSense raised $650 million in funding co-led by Viking Global Investors and BDT & MSD Partners at a $4 billion valuation — a 75% increase from just nine months ago. As part of the deal, AlphaSense acquired expert research startup Tegus for $930 million. Last September, the company locked up a $150 million Series E led by Bond Capital at a $2.5 billion valuation — an increase of nearly 30% from its $100 million round at a $1.8 billion valuation in April last year. The New York-based startup’s market intelligence and search platform — powered by AI and natural language processing — helps clients form corporate and investment strategies. In total, the company has now raised $1.4 billion since its founding, per Crunchbase.

3. Sila Nanotechnologies, $375M battery: A next-generation battery materials company pulled in a huge round in June. Alameda, California-based Sila, a next-generation battery materials company, announced it raised a $375 million Series G led by existing investors Sutter Hill Ventures and funds and accounts advised by T. Rowe Price Associates. The new cash will help the  company finish construction of its Moses Lake, Washington, plant — scheduled for the first quarter of next year — for the production of its Titan Silicon anode material. Founded in 2011, the company has raised $1.4 billion, per Crunchbase.

4. Formation Bio, $372M, biotech: Formation Bio, an AI-enhanced pharma company, raised a $372 million Series D led by a16z. The New York-based startup, launched in 2016 as TrialSpark, has built AI-enabled platforms and processes to accelerate drug development and clinical trials — integrating large language models, AI models and applications throughout its platform. More and more biotech startups are using AI to help with their drug processes and investors are clearly taking note. Founded in 2013, the company has raised $528 million, per Crunchbase.

5. CData Software, $350M, data integration: In a round that likely slipped under most folks’ radar was data connectivity company CData Software’s massive $350 million growth round from two big-named firms. The round was led by Warburg Pincus, with participation from Accel. The Chapel Hill, North Carolina-based company develops data products and connectivity solutions that provide access to live data from hundreds of on-premises and cloud applications. Founded in 2016, the company has raised $510 million, per Crunchbase.

6. (tied) Creatio, $200M, customer relationship management: Low-code and no-code startups are not seeing the funding they did a couple of years ago, but it clearly has not dried up completely. Creatio achieved unicorn status after landing a $200 million round led by Sapphire Ventures. The new cash, a minority investment, values the startup at $1.2 billion and will be used to help the company expand globally as it continues to grow revenue 50% year to year. The Boston-based startup is a developer of a no-code platform to automate customer relationship management and enterprise workflows. Not surprisingly, the company has an AI angle — creating a new generative AI copilot to help automate different marketing and sales tasks. Founded in 2014, Creatio previously raised $68 million in 2021 in a round led by Volition Capital, per Crunchbase.

6. (tied) Foodsmart, $200M, healthcare: Foodsmart locked down a massive $200 million round led by TPG’s global impact investing platform, The Rise Fund. The San Francisco-based company has developed a telenutrition and food benefits management platform. Founded in 2010, Foodsmart helps those facing chronic disease and food insecurity by partnering with health plans and providers to give patients access to affordable healthy eating options, virtual nutrition counseling, meal plannning and ways to buy food affordably. Foodsmart has raised nearly $315 million, per Crunchbase.

8. Marea Therapeutics, $190M, biotech: This big biotech round is actually the combination of two rounds. Marea Therapeutics, a clinical-stage biotechnology company developing medicines for cardiometabolic diseases, launched with $190 million in a combined Series A and B financing. The Series A round was led by Third Rock Ventures — where the startup was incubated — and the Series B round was co-led by Forbion Capital Partners, Perceptive Advisors, Sofinnova Investments and VenBio Partners. The company didn’t split out the rounds, so we record it as one.

9. Sidecar Health, $165M, healthcare: Healthcare is a mess — nearly everyone can agree on that. Sidecar Health, a health insurance company providing major medical coverage to businesses, closed a $165 million Series D led by Koch Disruptive Technologies to try to untangle it at least a little bit. The El Segundo, California-based startup offers plans that eliminates the need for prior authorizations, referrals and networks for doctors — allowing patients to go where they want. Sidecar Health believes a free-market approach will ensure healthcare is more accessible and affordable. Founded in 2018, the company has raised 328 million, per Crunchbase.

10. Huntress, $150M, cybersecurity: Maryland-based Huntress became the newest cybersecurity unicorn after it raised a $150 million Series D at a $1.5 billion-plus valuation. The new round was led by Kleiner Perkins, Meritech Capital Partners and existing investor Sapphire Ventures. The startup focuses on security services for small business to small enterprise customers — an often overlooked sector in cyber as many companies chase Fortune 500 companies. Huntress currently is realizing more than 70% year-to-year revenue growth for the past two years as it continues to “approach $100 million in annual recurring revenue.” Founded in 2015, Huntress has raised nearly $310 million, per Crunchbase.

Big global deals

While Cruise’s raise was the largest globally for the month, the secondest largest came from Asia

• Indian grocery delivery startup Zepto raised a $665 million round, doubling its valuation to $3.6 billion.

Methodology

We tracked the largest rounds in the Crunchbase database that were raised by U.S.-based companies for the month of June 2024. Although most announced rounds are represented in the database, there could be a small time lag as some rounds are reported late in the month.

Illustration: Dom Guzman

We’ve already looked at how Coatue has slowed and SoftBank has had a rough year. One large firm not yet examined, however, has been Dragoneer. Because it has been so quiet recently, it is perhaps easy to overlook.

Dragoneer, which counts companies such as Alibaba, Slack and Uber among its previous investments, significantly ramped up its investing pace in 2021. That year, the San Francisco-based firm took part in 80 different announced fundraisings, with those rounds totaling a whopping $28 billion, according to Crunchbase data. 

Important to note, however: The amount any investor—including Dragoneer—invests as a specific stake in a round is not usually divulged.

Some of the large rounds Dragoneer took part in last year included:

• Co-leading Roblox’s $520 million Series H in January.
• Taking part in Databricks’ $1 billion Series G in February and $1.67 billion Series H in August.
• Co-leading Faire’s $596.2 million Series G in November.
• Taking part in Lacework’s $1.3 billion Series D, also in November.

This year has presented a very different story. The firm has dramatically pulled back as the venture market has continued to slow every month. Through nearly three quarters of this year, Dragoneer has made only 21 deals, with those rounds totaling just more than $4.1 billion, according to Crunchbase data. 

The firm has not taken part in an announced deal thus far in the third quarter.

That does not mean the firm has pulled out of deals, or even big deals. In January it led Lyra Health’s $235 million Series F, as well as SpotOn’s $300 million Series F in May. It also participated in Checkout.com’s $1 billion raise in January.

Unicorn hunting

However, Dragoneer is on pace to add the fewest number of unicorns to its portfolio since 2020, according to Crunchbase data. Last year, the firm was one of the top investors in bringing aboard $1 billion-plus companies when it added 35 to its portfolio. This year, that number stands at only eight, the same number it added in 2019.

The slowing pace—and price—of deals is not surprising considering the softening venture market witnessed through the course of this year, with many saying it really started in late 2021. Dragoneer’s numbers would seem to bear that out, as the total value of deals in Q1—which likely closed in Q4 of last year—was substantially down from any quarter in 2021.

Many firms—especially large growth equity firms that must find a balance between their private and public market investments—have significantly pulled back in the venture market this year as inflation, interest rates and geopolitical issues have roiled the economy.

Large, late-stage growth rounds have been most dramatically affected in the market—a spot where Dragoneer thrives—as investors seem unwilling to pay for high valuations.

Whether that will change and valuations will come down, or investors will re-open their wallets remains a question we may not have answers to until next year.

Dragoneer did not respond to requests for comment.

Methodology

The total dollar amount of rounds the firm participated in reflects the total investment in those rounds, not the particular firm’s stake in those rounds—which is normally not released. All numbers relating to deals and deal size are from Crunchbase data.

Further reading:

• Bessemer Venture Partners Slows From 2021 Pace
• SoftBank’s Vision Fund Deals Show Slowing Pace, Smaller Rounds
• Coatue’s Funding Numbers Take Significant Dip in First Half Of Year
• Accel’s Deal Size Shrinks As Venture Market Pullback Continues

Illustration: Dom Guzman

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For retailers, this has translated into fewer buyers for items like clothes, furniture and gadgets. Walmart shares tanked earlier this week after the retailer said it is having to cut prices to reduce merchandise levels, which brings profits down. Items like kitchen appliances and exercise equipment that were backlogged a year ago are now overflowing stores and warehouses. 

The slowdown also has extended to providers of backend software and services to online retailers. This week, Shopify—the stock market poster child for the e-commerce boom of 2020 and 2021—posted a quarterly loss and downwardly revised forecasts, and said it will cut 10% of its workforce.

Shopify shares, down about 80% from highs last fall, are also emblematic of broader sector woes. Others in the e-commerce software space, including relatively recent market entrants like BigCommerce and Global-e, are also down sharply.

For startup investors in the retail-focused SaaS startups, meanwhile, all of this is happening at a particularly inconvenient point in time.

That’s because last year, investment in e-commerce software companies hit an all-time high, with more than $4.8 billion in global venture funding, per Crunchbase data. This year started hot as well, with a decline in funding in the past couple months only slightly offsetting a rollicking first quarter. For perspective, we chart out investment to the space for the past 5+ years below:

Where did venture investments go in 2022?

Salsify, a provider of tools for retailers and brands to beef up their e-commerce presence, was the largest equity funding recipient in the space this year, per Crunchbase data. The Boston-based company closed on a $200 million Series F round in April at a $2 billion valuation.  

Other big funding recipients included:

• Austin-based Cart.com, developer of an analytics platform for brands to accelerate online growth, was another big funding recipient, raising $240 million in a February debt and equity round.

• Lehi, Utah-based Route, a provider of package-tracking tools for online orders, raised $200 million in a January Series B at a $1.25 billion valuation.
• Boston-based Zoovu, developer of an AI-enabled platform for online customers to find products, raised $169 million in a June Series C. 
• Toronto-based Shoplazza, which pitches itself as a commerce platform aimed at helping online brands “go borderless,” raised $150 million in a January Series C round led by SoftBank Vision Fund.

Notably, big financings followed several quarters of sharply rising revenue for funded companies.

Salsify, for instance, said it generated over $110 million in annual recurring revenue in 2021, up over 50% from 2020. Cart.com, meanwhile, said its revenue grew over 400% in the year leading up to its last funding round.

Market conditions, however, are sharply different from even a couple quarters ago. And the swell in online shopping that began in the early days of the pandemic has since receded. 

As Shopify CEO Tobi Lütke pointed out in a letter to employees this week, when the COVID pandemic set in, almost all retail shifted online, and demand for software to help with that shift skyrocketed. 

“We bet that the channel mix—the share of dollars that travel through e-commerce rather than physical retail—would permanently leap ahead by five or even 10 years,” he wrote. “It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-COVID data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful five-year leap ahead.”

For venture-funded e-commerce software software startups, it’s likely a similar trajectory will apply. Consumers haven’t abandoned their online shopping carts. And it’s reasonable to expect steady growth ahead. But the environment is now one in which supercharged growth will likely be much harder and costlier to achieve.

Illustration: Li-Anne Dias

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Just in recent weeks alone, several firms have announced monster new commitments to funds. On July 12, Menlo Park, California-based Lightspeed Venture Partners raised more than $7 billion for four funds to invest in early- and growth-stage companies. Two days later, Boston-based Battery Ventures locked up $3.8 billion across two funds. Others, such as CIBC Innovation Banking, Drive Capital, Telegraph Hill Partners, Crossplane Capital and Resolute Capital Partners, all have announced funds in recent weeks ranging from several hundreds of millions of dollars to more than a billion.

In fact, even as venture funding to startups has slowed, firms raising investment funds are doing better than ever. Already this year, firms have publicly announced nearly $144 billion in funds being raised, according to Crunchbase data. That nearly matches the almost $149 billion announced for all of last year.

Those in the business of advising on alternative assets say the numbers show a few different things. Raising funds can be a lagging indicator of the market, as well as the fact venture has proven to be a strong driver of return in the past decades.

Funding up, funding down

However, those high numbers and the many funds being raised seem to be in direct contrast to a startup ecosystem in which valuations keep getting slashed, funding is difficult to come by, and layoffs are occurring daily.

“The numbers (for new funds) don’t mean anything right now,” said Kelly DePonte, managing director at Probitas Partners.

DePonte said some of the fundraising being announced now actually started in 2021—before the market started to tail off late last year and well before Russia’s invasion of Ukraine sent it off a cliff.

“From my perspective, you are looking at a slow-motion train wreck,” he said.

The heat from the market in recent years made VCs very eager to raise funding, with some starting new raises just 18 months after a previous fund closed, DePonte said. That has led to some of the large fund announcements currently making headlines—which could dry up.

He expects a very different second half of 2022.

“We have LPs telling us (the market) has gotten worse in the last two or three months,” said DePonte, adding some LPs have told him they are done for the year in terms of contributing to funds.

Good return

Alan Wink, managing director of the Eisner Advisory Group, who helps with capital sourcing, said the numbers he sees also put the current total of VC fundraising this year nearly at what it was all of last year. Given fundraising’s general performance in the last decade and the returns it has produced, he said he is not surprised.

“VC has been a good place to put money these last 10 years,” he said. “Thus far, I don’t see any slowdown in the numbers.”

Wink agrees a slowdown is likely in the second half as momentum from 2021 dies down and LPs are forced to rebalance portfolios sent into disarray by the sharp tumble of the stock market.

“There will be more rebalancing and that will affect fundraising,” he said. 

The shutdown of the IPO and SPAC pipeline could affect LPs also, Wink said. With that exit for many startups being blocked by the cooling markets, LPs are not seeing returns they would normally use to reinvest.

“I think right now there are a lot of macro economic factors you have to keep an eye on,” he added.

With nearly 30 funds of over $1 billion already raised this year, those in the industry think new firms raising their first funds may be the most affected by a slowdown in LP investing.

Raising a fund

One firm that did not face much difficulty raising a new fund this year was New York-based Tusk Venture Partners. Early this year the firm announced the close of its new $140 million fund— double its last fund which closed in late 2019. 

Jordan Nof, a co-founder and managing partner at Tusk Venture Partners, said the fund took less than a year to raise, but did say that competition for money had increased. He also has witnessed some fund managers struggle to meet their fund target size.

However, firms that have performed well and have strong relationships with LPs can raise—especially as more people look to enter the LP market and get into the venture world, Nof said. He added most LPs understand venture and know the market has its own twists and turns.

“The VC market is made for long-term investment and LPs know that,” he said. “They have seen many cycles before.”

Illustration: Dom Guzman

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Nash’s platform allows businesses to manage and track local same-day deliveries (think things like small parcels, catering and meal kits). Nash pulls together delivery providers so businesses can pick the one that works best for them, and gives the businesses visibility to track an order from the beginning to delivery.

Andreessen Horowitz led the Series A, with participation from investors including Y Combinator and Rackhouse Venture Capital, according to TechCrunch. Nash was founded in 2021 and is based in San Francisco. 

The Nash network

“The Nash platform is built for flexibility. As a business, you can use Nash to run on-demand, scheduled, or even multi-drop off routes,”  Andrew Chen and Olivia Moore of Andreessen Horowitz wrote in a blog post.  “If you already have a fleet in some or all of your markets, you can add these drivers to Nash. The platform will optimize between internal and third-party drivers, saving valuable ops team time.”

The funding comes as many businesses are competing with Amazon to offer same-day delivery to customers who have grown accustomed to getting their orders fast. 

The company raised a $125,000 pre-seed round led by Y Combinator in August 2021, according to Crunchbase. Nash also raised a previously unannounced $7.8 million seed round led by Andreessen Horowitz late last year, according to TechCrunch. 

Since then, Nash “has also become a critical part of the logistics infrastructure for many larger enterprise and consumer companies—even marketplaces,” Chen and Moore wrote in their blog post.

Nash’s network is available in all 50 U.S. states and Canada. The new round will be used to scale the company and support more small and medium-sized businesses and enterprise customers, according to Andreessen Horowitz. 

Illustration: Li-Anne Dias

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Last year saw a record 109 companies reach unicorn status after an early-stage funding round—defined as seed, Series A or Series B, according to Crunchbase data. This year has offered a very different environment for raising venture capital, yet there has been almost no drop in that record pace, with 50 early-stage unicorns minted in the first half of the year.

While this year’s pace is slightly slower, it is worth noting that out of the nearly 600 new unicorns minted last year, early-stage unicorns made up about 18%. This year, of the 237 unicorns created in the first half, 21% were created after an early-stage round.

This year also still far outpaces those years before 2021, which normally witnessed only a few dozen such companies minted so early in their fundraising exploits. 

While there has been a pullback in venture funding—especially in later-stage growth rounds— the early-stage unicorn numbers seem to indicate there is still a strong appetite among investors for young companies with high valuations if they believe in the business model.

Crypto’s impact

Not surprisingly, crypto startups led the way when it came to minting new unicorns at the largest valuations. The three biggest valuations to create new unicorn startups all went to the crypto space:

• Seychelles-based KuCoin closed a $150 million Series B in May at a $10 billion valuation, minting it not just a unicorn but a decacorn.
• San Francisco-based FTX US raised $400 million in January at an $8 billion valuation.
• Binance.US—the American franchise of Binance—raised more than $200 million in a seed round in April at a pre-money valuation of $4.5 billion.

Others in the cryptocurrency space such as Miami-based Yuga Labs and Hong Kong-based Babel Finance also were minted as unicorns this year after early-round financings.

However, that is not to say it was only early-stage crypto-corns to join the herd, as others such as New York-based fintech startup Clear Street, San Francisco-based cybersecurity firm Vanta,

San Francisco-based job portal company AngelList Talent, and Austin-based construction tech startup ICON all became unicorns with valuations of more than $1.5 billion after Series Bs in the first half of the year.

Money and trends

Although the numbers would seem to point to a very robust venture market with so many young—at least in terms of funding—unicorns, there are some signs of possible concern.

The first half has started off strong for early-stage unicorn creation, but the second quarter minted only 20 compared to the first quarter’s 30.

Plus there could be a more substantial drop in the second half of the year if crypto continues to stumble. Funding numbers in the sector have fallen in the last two quarters, per Crunchbase data. If that trend continues and less venture money comes to startups in the sector, fewer new unicorns will be minted—especially in early rounds of funding.

The numbers also illustrate a drop in valuations, even for these upstart unicorns. Last year, early-stage unicorns had a total post-money valuation of $212.6 billion, according to Crunchbase. Through the first half of this year, the total valuation of the 50 unicorns created had a post-money valuation of $88.1 billion—slightly behind 2021’s pace.  

Total funding also lagged compared to last year. This year’s crop raised about $7.4 billion in total for the rounds that minted them unicorns. Last year, the total amount for rounds that minted early-stage unicorns was $9.1 billion in the first half of the year and $27.3 billion for the entire year.

Nevertheless, while the numbers may be off of 2021’s highs—which was a year unlike any before—numbers for early-stage unicorns are well ahead of any previous year.

Even in the midst of a venture pullback, it appears investors are still willing to bet big on a young startup if they like what they hear.

Illustration: Dom Guzman

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Tejas Hullur had been posting regularly on TikTok for about eight months before he partnered with a company for his first brand deal.

Venmo reached out to Hullur, who creates videos about ways to make money online and how creators build careers online, in April 2021 and asked for his rate. The payments giant wasn’t the first brand to contact Hullur, but it was the first partnership he wanted to do, and he was unsure of his rate. Venmo offered $1,000, and he negotiated it up to $1,500.

That deal marked a turning point: Now Hullur was not just a business, but a creator.

“When I got word of that first brand deal that was $1,500, I was like, ‘Oh my gosh,’ ” Hullur said. “I was like, ‘OK, I’m going to get this done, I’m going to continue, and I’m going to see what else comes my way.’ ”

Hullur has amassed more than a half-million followers on TikTok, where his content offers a behind-the-scenes view of the life and career of an online creator. He formed a limited liability company, produces content for clients, teaches courses and consults for businesses. In other words, he’s a business unto himself.

Hullur is one of an estimated 50 million people who consider themselves creators, and among the growing crop who successfully monetize their audiences as part of the so-called “creator economy.”

Loosely, the creator economy encapsulates the industry of people who create online content and make money off of it, independent of a third-party brand. That could mean posting dance videos on TikTok and getting sponsorship deals, reviewing beauty products on YouTube, or writing about current events for paying subscribers on Substack.

“The beauty of this industry is there’s no textbook to it,” Hullur said. “It’s a blank canvas and it’s being built out in this moment.”

VCs move in

Increasingly, venture capitalists are also backing the creator economy: not by investing in the creators themselves, typically, but rather in the fast-growing industry of services that cater to those creators, from specialized credit cards to business management tools.

Funding to venture-backed startups focused on content creators so far this year has reached $637 million, putting it on pace to surpass last year’s record by far, according to Crunchbase data. Funding to VC-backed creator economy companies in 2021 was $939 million—double 2020 levels.

“For the first time ever, you have people who can make a living creating this content for other people, and finding ways to support themselves too,” said Eric Wei, co-founder of Karat Financial, a startup best known for its credit card for content creators. “So I think for VCs they’re thinking, ‘Oh here’s a new business type that’s forming.’ And every business has to go through challenges of how do you get customers, how do you monetize customers, how do you support and scale those operations?”

What is the creator economy?

The way we see it, the industry surrounding the creator economy can be loosely categorized into three buckets: the platforms, the payment tools, and the operations systems.

Platforms are typically social media companies like TikTok, YouTube or Instagram, where creators publish their content and build and reach their audiences.

Once a creator has enough of an audience, they typically start monetizing. Once you start making money, you’re a business. A crop of startups has developed payments tools specifically for people who monetize their online content. Companies in this category include Patreon and Creative Juice.

Lastly, there are companies that help with the operations of being a creator, like marketing and payroll. One example of that is Monet, which focuses on the “finances and back office of the creator economy.”

“One of the biggest pieces that was important for me to understand where we’re headed with this is that creators are the future small business,” said Adams Conrad, a principal at QED Investors who has invested in companies like Stem Disintermedia. “And small business is the foundation of the U.S. economy.”

Timing is key

People making money off YouTube videos or influencers landing lucrative sponsorship deals on Instagram is nothing new. But the idea of the “creator economy” as an industry that could be backed by institutional capital really gained traction among venture capitalists in 2020, when the COVID-19 pandemic hit and everyone turned online.

There wasn’t one event that got VCs to start investing in the creator economy. However, data coming out about TikTok’s engagement was certainly a factor. For Conrad personally, “there was a striking interview around, I believe it was around kindergarten or elementary school students who were more excited to be YouTubers than astronauts.”

The timing of TikTok’s popularity alongside the pandemic created a slew of new creators, and advertisers took notice too. As Hullur points out, advertisers could get more data from social media than traditional advertising, including the number of views, qualitative data from comments, and conversions from links.

In the wake of TikTok’s success, a number of other creator platforms have also formed and raised funding. Social audio app Clubhouse has raised $110 million since it was founded, and paved the way for some users to sign with major talent agencies. Other social media platforms including BeReal, Poparazzi, and Dispo, which was founded by creator David Dobrik, were also founded in the past two years and have attracted funding from VCs.

Opportunities for investment

Creator economy opportunities are tied to what creators care about the most, which is what will help them produce content.

No. 1 is, “anything that helps you make more money,” according to Wei of Karat Financial.

One of the most popular areas is content monetization, an area with a growing number of companies competing in it. Wei believes the company that comes out on top will be the one that  executes best to do that.

There’s also a need for tools that take other aspects of running a business off a creator’s plate. For instance running payroll, managing revenue, hiring employees, and so on. Pretty much any SaaS payment tool that a small or medium-sized business finds helpful could be replicated and tailored for creators, Conrad said.

“The best creators realize what they like to do and they (delegate) out the things they aren’t as good at,” Hullur said.

Some of the companies in the space that have raised money include Karat, Pico and Earnr.

Attention on the creator economy has typically been focused on the creators with the biggest followings. Those are people like Charli D’Amelio or Addison Rae who shot to fame doing dance videos on TikTok. Now they rake in millions from brand deals, partnerships, TV shows and movies.

But there’s a big opportunity for investment in tools to support what’s known as the creator “middle class,” or people who make $50,000 or less from their content, according to Hullur.

There are micro communities on platforms like TikTok and YouTube, Hullur pointed out.

“Everyone right now is trying to build for creators but creators to me are just entrepreneurs,” Hullur said.

Crunchbase Queries Used In This Article

• Funding To Content Creator Startups 
• Financial Services Creator Economy

Methodology

We included funding to venture-backed companies globally that were tagged under “content creator” in the Crunchbase database. For funding to fintech companies focused on the creator economy, we included venture-backed companies in the financial services sector that included “creator,” “influencer,” or “musician” in their Crunchbase descriptions. We did not include crypto companies or NFT marketplaces in this dataset.

Illustration: Dom Guzman

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Vienna-based APEX Ventures is at it again, this time with a second fund dedicated to digital health startups.

The firm is raising $50 million for the fund, which will back seed-stage deep-tech companies with defendable intellectual property. The fund is led by Gordon Euller, partner with APEX, and a radiologist who previously worked at AKH, Vienna’s General Hospital, as well as at McKinsey in London.

Most of APEX Ventures’ investments have been made in the Germany, Austria and Switzerland region, but with APEX Digital Health, the firm is expanding its focus area to include the rest of Europe, Israel and the U.S.

Since the beginning of the year, the firm has made investments in four digital health companies:

• MindPeak, which optimizes workflows in pathological analysis;
• DeepSpin, a company developing an artificial intelligence-powered MRI imaging machine;
• Quibim, a biotech company focused on medical image processing; and
• Novoic, a digital biotech company developing AI-based speech analysis.

Euller discussed the new fund’s strategy with Crunchbase News:

Why is now a good time for your second fund?

Part of it is the natural life cycle of a fund. We are almost four years into our first fund, so we wanted to start looking at a second one right now.

What do you see going on in digital health that makes it an appealing industry for your fund?

The market is growing rapidly in that space. There are still a limited number of institutional players with a dedicated focus on digital health in Europe. In the U.S., it is a little further along, but still not common. Digital health is going to be an ecosystem on its own, especially as COVID-19 has proven how important health care and digital health is, and how to overcome the situation to certain degrees. This is about putting more capacity in our health care system.

There is also a shift moving toward digital biomarkers, which are being used for speech, imaging and pathology. You can create a biomarker for speech that could detect Alzheimer’s disease, or a scan that would identify certain pixels and structure them together to show cancer.

There are so many layers to digital health. What is your strategy in finding promising startups?

We can put companies into certain buckets: artificial intelligence, machine learning, pathology, radiology, early-stage, but it is always about the team. We are investing in a group of people with protectable technology.

We are getting to know them, their personalities, background, mission and aspirations, as well as checking their technology. We want to look at where their data is coming from, how unique it is, the annotations, and the continuous training program.

This new fund will also seek out U.S. startups. Are there any startups here that you have already identified?

We haven’t yet identified U.S. companies, but we are looking further into them; called first and second screening. We would not be lead investors in the U.S., we would be a participant. In Europe, we would take the lead, but in the U.S. and Israel, we would be co-investors.

From going on the road for your first fund, what lessons did you learn?

One of the things we have learned is to have a more simple investment “waterfall” (the method of splitting profits among partners that allows for profits to follow an uneven distribution) for limited partners.

Another is that with your first fund, you usually have nothing more than a PowerPoint deck. With the second fund, we have a track record with 15 investments and one exit, so we can show that the case is working. It’s something that has made life easier.

A third lesson is to prepare your fund for institutional investors so that it is set up for those types of pension funds. You need a very clear message and focus on something people can identify with.

Illustration: Dom Guzman

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Duffel, a startup focused on building the connective digital tissue between airlines and booking agents, has raised more than once this year.

The company, founded in 2017 according to Crunchbase data, also closed and announced its Series A earlier this year. That round, a $21.5 million infusion announced this June, was led by Benchmark. Blossom led the firm’s August 2018 Seed round of $4.7 million. Overall the company has raised a total of $56.3 million in known venture capital.

Why Should You Care?

It’s Monday morning and there is a deluge of new rounds to catch up on, so why should you care about this one?

A few reasons. First that it’s a UK-based firm that has raised twice in a year from American investors. That doesn’t happen too frequently. And, second, because what the startup is doing makes sense and could prove lucrative.

According to the company, Duffel helps “travel agencies to plug in directly to airlines’ reservation systems via an API so that they can pull real-time flight offers, make bookings” and so forth. This reminds us of Twilio somewhat. Twilio famously connected companies of any size to telephony services via APIs.

Twilio’s post-IPO, public-market ascent is now legendary. Sticking to our loose analogy, as the travel market is enormous, Duffel could find a neat spot inside of a place where being the handoff between supply and demand could prove lucrative.

The tech-powered travel-focused startup space is busy. But well-funded companies in the space like Klook ($521.5 million raised), Evaneos ($109.1 million raised), and TripActions ($481.5 million raised) don’t operate in the same space. Sifted reported this morning that Amadeus is a Duffel competitor of sorts, though larger by what we reckon are several orders of magnitude.

Capping, you probably haven’t heard of Duffel before today. That’s because it hadn’t launched. Now it has, with a big check in tow. How far it can get before it raises is our next question, but I’d bet you lunch that Duffel picks up more capital in 2020 if its debut goes well.

Illustration: Li-Anne Dias.