Is Now The Right Time To Be Raising VC Funding?

Summer may be over but you're very welcome back for another edition of the Moonfire monthly newsletter. It's our pleasure to be able to bring you all the latest news and exciting developments from within the Moonfire community, and this month we're jumping into something really juicy.

As many founders continue to struggle amidst uncertainty in the markets, we've decided to be a shining light of reassurance and remind visionaries that there is still plenty of support out there and room to thrive.

We hope you enjoy it.

Europe's economy is in a tight spot.

A surge in demand following the pandemic has led to ballooning prices, pushed up further by the consequences of the war in Ukraine. The European Central Bank has leapt into action, raising interest rates by an unprecedented amount and signalling more hikes to come. Some economists are saying the Eurozone has already entered a recession.

What’s going on in European VC?

Public markets have taken a shock this year, and the contagion has spilled into late-stage startups, sending valuations spiralling. Just look at Swedish fintech Klarna, which saw its valuation plummet by 85% after its latest fundraising. Put simply, the market conditions - and risk appetite - just aren’t there to support taking companies public. As a result, the number of IPOs is at an all-time low.

But at the other end of the spectrum, things are looking rosier. Pre-seed and seed stage startups have the advantage of being years away from maturity, so are more insulated from the volatility facing public markets. They’ve continued to attract funding, and their valuations were about 34% higher in the first half of the year compared to 2021, according to Pitchbook. While we expect early-stage valuations to decrease in the next few months, probably until the middle of next year, the drop won’t be as dramatic as the one we see for later-stage rounds.

Stiff competition in Europe

So startups are still chasing growth, and the cash to fund it. But appetite for risk is decreasing. VCs need to fundraise for themselves as well, so they may try to extend their runway by limiting their number of tickets. This means they will have to be more careful about the companies they invest in. We can see this by looking at deal volumes, which have already taken a hit.

But that isn’t to say funding isn’t available. The best investors know that VC is a long-term game, and this downturn is an opportunity to back businesses they believe in. Businesses that can withstand the ups and downs, but ultimately create incredible innovation.

A time to build

At first glance, the broader economic picture may not seem like the most hospitable environment to be raising venture money. But as market uncertainty increases, it’s a sensible time to think about extending your runway, reducing your burn rate, and generally becoming more efficient.

The key to success is choosing a VC that will be more than just a benefactor, and can offer patient capital that aligns well with their thesis or mission. At Moonfire, we want to build companies that will transform society. That means being a trusted partner to the businesses we invest in and supporting them whether times are good or bad. By being there at the very beginning, we seek to build the best platform to take founders through their first phase and help them go on to raise later-stage capital. This includes support with hiring top talent, market insights, and matching startups with other potential investors.

While funding is less available than before, the money is still there for the right companies that show the potential to create large amounts of value. A startup’s biggest enemy is time, and waiting for the “perfect” market conditions to seek investment will only slow your progress and risk competitors eating your lunch. In fact, history suggests a worsening macro environment can speed up innovation rather than suppress it. Hiring can also be easier, with less competition and talent becoming available as other companies lay off staff.

The areas we focus on are developing particularly rapidly. These are web3 and blockchain, artificial intelligence and machine learning, and augmented reality and virtual reality. So if you’re using any of these technologies to disrupt the future of work, gaming, healthcare SaaS, or fintech sectors, get in touch to learn how we can support you to transform your company.

Two exciting portfolio updates in September:

Claimer

Governments around the world offer billions in incentives for startups, from tax credits to grants. But accessing them often involves navigating a complex application that requires specialist knowledge. Claimer is fixing that. Its platform lets companies start a claim in as little as ten minutes, and we were super excited to take part in Claimer’s $4.2 million seed round, alongside Project A Ventures, helloworld.vc, and a group of top angel investors. Claimer is hiring! Check out their vacancies.

Immortal Game

What happens when chess meets web3? Immortal Game is bringing the centuries-old game into the twenty-first century, with NFTs, play-to-earn rewards, quests, a marketplace, and more. Following a seed round that we participated in just last year, the company has raised a $15.5 million Series A, led by TCG Crypto, with Cassius, Greenfield One, Sparkle Ventures, Kevin Durant and Rich Kleiman’s 35V, Blockwall, Kraken Ventures and Spice Capital also participating. Immortal Game is also hiring!

All-In Podcast: Adobe acquires Figma for $20B

Last week's All In Pod saw the Besties talk through Adobe's $20bn acquisition of Figma. A good discussion to observe different views on the deal. Time will tell if this was a steal – equivalent to Facebook's purchase of Instagram – or whether this was a hefty price to pay for a burgeoning competitor.

We'll also need to wait and see if this births a Microsoft ecosystem equivalent in design – or whether the needs of the creative industries that Adobe serves are just too disparate to create a true suite of products.

Whatever your take, well worth listening to.

'Trillion Dollar Coach: The Leadership Handbook of Silicon Valley's Bill Campbell' - by Eric Schmidt, Jonathan Rosenberg, and Alan Eagle

Bill Campbell played an instrumental role in the growth of several prominent companies, such as Google, Apple, and Intuit, fostering deep relationships with Silicon Valley visionaries, including Steve Jobs, Larry Page, and Eric Schmidt.

Based on interviews with over eighty people who knew and loved Bill Campbell, Trillion Dollar Coach explains the Coach's principles and illustrates them with stories from the many great people and companies with which he worked. The result is a blueprint for forward-thinking business leaders and managers that will help them create higher performing and faster moving cultures, teams, and companies.

Whether you're looking to start a business, or confronted with a difficult decision at any stage of your growth journey, Bill Campbell is a wonderful source of inspiration.

Thank you for tuning in. Not yet subscribed? You can sign up on our brand new blog page. If you know someone who’d love to read this newsletter, please feel free to share it. We hope you had a wonderful September, and have a great October!

All the best,

Mattias and the Moonfire team

🌓🔥