Weekly VC Insights by Uniborn #19

Inside: A breakdown of the industries and geographies that investors care about, and once again, a heated debate about AI
Barbara Krassner
🇬🇪 Uniborn Team
3 min read

Well, well, last week was a week of predictable letdowns. The awesome superconductor LK-99 turned out to be not so awesome, and the scandalously famous and, until some time, incredibly successful WeWork entertained the idea of bankruptcy. Also, Hopin, one of the most record-breaking unicorns of the pandemic age, has effectively sold its core virtual events business under the hammer. 

But there is more news, a good one as well. Subscribe to our once-a-week feed to ensure you don't miss out on the next batch.

🔥 For starters, the PE barometer turned positive for the first time since late 2021!

The rebound in private equity is evident thanks to PitchBook’s charts. Compared to Q3 2022, investment returns in the sector are up 125%.

It is not just PE that is recovering — as we mentioned earlier, European startups halted the decline in VC funding during Q2 2023. In fact, compared to Q1, venture capital investment increased by 14%, from approximately $14 billion to $16 billion.

Explore Sifted's conversation with the most active European VCs such as Antler and Notion Capital discussing the recovery.

🔥 65% of investors ranked сontinental Europe as the region with the best PE investment opportunities outside the US. Runner-up is the UK with 41%

In terms of sectors, investors expressed the following intentions for the year ahead, according to a survey by Stifel & Eaton Partners:

Ready to increase allocations to:

  • Healthcare: 80%
  • Industrials: 60%
  • Energy Transition: 35%
  • Technology: 30%
  • Financials: 15%
  • Consumers: 10%

Ready to reduce allocation to:

  • Consumers: 41%
  • Financials: 41%
  • Technology: 35%
  • Energy Transition: 18%
  • Healthcare: 6%
  • Industrials: 6%

As we’ve pointed out in previous digests, the VC market has experienced increased concentration within larger funds: half of the capital raised this Q1 went to just five funds.

In other words, even with the recovery trend, the VC industry will have a tough time. The poll shows that nearly three-quarters of LPs plan to reduce their venture presence. However, it should be noted that the survey only included 44 LPs, which is hardly enough to get a complete picture.

Explore the full Stifel & Eaton Partners' study.

🔥 How much VC money do you think women-founded startups raised last year? In Europe, less than 1% of all invested venture capital!

The number is appalling, but it doesn't tell the whole story. The general downturn in the industry has certainly had an impact. So things can still heal.

And in general, despite the considerable gender bias and the departure of dozens of women from VCs (we discussed this last week), venture capital funding for companies founded by or with women has (or just had, although we don't like to think so) been making headway in Europe in recent years. 

And 2021 was a bright spot — it saw the creation of notable female-led funds, incubators for female founders, and an increase in the number of new female-backed companies. Evidently, 2022 and 2023 are down significantly, but with the venture capital market already showing signs of recovery, the "female curve" may rise again.

Image: PitchBook
Image: PitchBook

Explore PitchBook's report on European trends in women-focused venture investing over the past 14 years. 

🔥 The AI corral: a limitation on technological progress or a necessary defense?

In June, the European Union made history by introducing a sweeping bill to regulate AI comprehensively. The bill may still be amended, but it's already clear that the law will set well-protected boundaries for the use and development of AI, including restrictions on facial recognition and increased transparency of intelligent models like ChatGPT. We recommend listening to a Bloomberg podcast for more details.

Now, the debate has raged over whether over-regulation will stifle an industry that could take so much routine away from humanity (generative AI alone could automate 60%-70% of the work most of us do every day, according to a new McKinsey report). 

In a sense, we are witnessing a grand regulatory experiment. As David Wang, CIO at Wilson Sonsini, said, "It's easy to say 'stop,' but so much harder to say 'go in this direction'."

Image: David Wang's profile on LinkedIn
Image: David Wang's profile on LinkedIn

Explore Nature's article on how three major AI providers — the US, the EU, and China — are forging a legislative relationship with the intelligence they have given rise to.

Cover image: Unsplash

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