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| Here's a look at today's Startups briefing. - 🚨 Graphcore mulls sale citing tough competition in the AI chip market
- 🌉 Several tech startup founders and investors are returning to San Francisco
- 🇪🇺 European startups fear regulatory pushback will drive away buyers
Thank you. Karan
p/karan-chafekar | |
| 1 | | British AI chip startup Graphcore is evaluating sale options after being unable to keep up with the competition. The firm is also in talks with large tech companies to raise fresh funding at a valuation of over $500M. Graphcore was last valued at $2.77B when it raised a $222M funding round in December 2020. More: - The firm has struggled to bring new products to the market at the same pace as its competitors, especially Nvidia, which can regularly release new and more advanced chips.
- Per a Telegraph report, the firm expected to close a new funding round in Q3 2023 but failed to do so after talks with investors fell through.
- SiliconAngle believes U.K. semiconductor firm Arm, Japanese investment firm SoftBank, and AI startup OpenAI are prime candidates to acquire the firm.
Zoom out: - Investor Chrysalis Investments doubled the valuation of Graphcore to $528M at the start of this year after marking it down heavily last year.
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| 2 | | Several tech startups, entrepreneurs, and investors who left San Francisco and relocated elsewhere are returning to the region, per the WSJ. What happened: During the pandemic, San Francisco-based startups started moving their offices to other regions, blaming the city's governance, rising homelessness, crime, and high cost of living. Added factors causing the shift include the ability to raise funding outside San Francisco and being able to tap into the best of talent due to the widespread adoption of remote work. However, the pivot has not worked out, as funding continues to remain concentrated around the San Francisco region, which is proving to be central to the AI boom. Additionally, investors are getting involved in local politics and pushing the government to make the city safer. 
What the numbers say: The key factor bringing back startups to San Francisco is the region's ability to defy the VC funding dip. Bay Area-based startups witnessed a gentler decline in VC funding of 12%, significantly lower than the 27% dip in Austin, 42% in Los Angeles, and 70% in Miami. Funding also remains concentrated in San Francisco, with startups bagging $63.4B last year compared to Miami's $2B. Relevance: Late last year, investors pressured fintech startup Brex's co-founders Henrique Dubugras and Pedro Fraceschi to return to San Francisco. Scale AI and Figma investor Erik Torenberg also relocated from Miami to San Francisco. | | | |
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| 3 | | SoftBank founder Masayoshi Son is mobilizing $100B in capital to create a new AI semiconductor chip-making startup, code-named Izanagi. SoftBank will reportedly invest $30B in the venture, with the remaining coming from investors from the Middle East. The new venture would complement SoftBank's portfolio chip startup Arm, in which it still owns a 90% stake. More: - Son has had a long-standing interest in artificial general intelligence for years but had to curb investments from SoftBank due to its recent spate of losses.
- However, with SoftBank's financial performance showing signs of recovery, Son sees this as the perfect moment to capitalize on the AI industry opportunity.
- With such a substantial investment, the new venture could be able to take away one-fifth of the global semiconductor market.
- Son expects the new company to rival the "Magnificent Seven stocks," per sources close to the matter.
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| 4 | | European startups fear the rising regulatory pushback from local authorities could drive away potential buyers. The concern stems from Amazon's aborted $1.7B acquisition of automated vacuum robot maker iRobot due to its inability to obtain regulatory approval in the European Union. The deal's failure forced iRobot into restructuring mode, causing it to lay off 31% of its staff, including CEO Colin Angle. More: - The EU's competition unit pushed back on the acquisition, fearing that Amazon would promote Roomba sales on its platforms over rival products.
- Currently, where venture capital is difficult to come by and the IPO window is shut, startups rely on acquisitions to keep it from going extinct.
- European startups particularly rely on acquisitions led by big tech companies to maximize their growth.
- Stefan Moritz, the secretary general of the lobbying group European Entrepreneurs, said, "In the long run, nobody will want to be an entrepreneur. Many companies will shut down or be bought if they have any remaining valuable assets."
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| 5 | | Dutch robotics startup Monumental emerged from stealth with a $25M funding round led by Plural and Hummingbird. Monumental, which is developing a bricklaying robot for the construction industry, will use the proceeds to scale manufacturing, diversify its product lineup, and expand its workforce. More: - Its product differs from a similar solution introduced by Hadrian X, which works with concrete masonry blocks compared to the former's red clay bricks.
- The Amsterdam-based startup has already inked partnerships with 25 contractors, including low-income housing developers.
- Other participants in the round include Northzone, Foundamental, Material Ventures, and NP-Hard Ventures.
- Monumental was co-founded by CEO Salar al Khafaji in 2021, who previously founded and led the data visualization firm Silk, which was acquired by Palantir.
Zoom out: - The U.S. construction automation sector is estimated to be worth around $2T annually, per Pitchbook.
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| 6 | | Indian edtech startup Byju's has reportedly secured $300M in commitments for a rights issue funding round. Per earlier reports, the firm slashed its valuation by 99% from the peak of $22B to between $220M and $250M when it floated the rights issue last month. It has offered disgruntled existing investors an option to invest in the new round; "otherwise, their shareholding will reduce by almost 50%," sources told PTI. More: - In addition to the investment opportunity, Byju's plans to calm down miffed investors by appointing two independent directors to its board to enhance transparency.
- The news comes weeks after a consortium of investors called for an extraordinary general meeting to change Byju's leadership amidst rising governance, financial mismanagement, and compliance issues.
- Byju's founder and CEO, Byju Raveendran, pushed back on the move, calling it an "opportunity to conspire," and emphasized that investors don't have the voting rights to remove the founder or call for a management change.
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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