Jonathan Awad

A new flood of fresh funds is reshaping the venture capital landscape! 🚀 Recent highlights include TVM Capital Healthcare’s $250M Afiyah Fund LP, SVC's $30M investment into General Atlantic’s private equity fund, Golden Gate Ventures' $100M MENA-focused fund launch, and Investcorp's $570M fund closure. These announcements signal a broader trend of escalating financial commitments within the industry. MEA funds are heating up! 🌡️ Our data reveals a 74% YoY increase in the number of MEA-based funds being financed as of May 20th, 2024. Since Q4’23, there has been a notable surge in regional funds securing capital, with international investors also establishing localized funds. Stay informed with the latest trends in VC activity: https://lnkd.in/dP6ZkmCd By MAGNiTT Repost by : Salem Bagami Chief Executive Officer Digital Transformation Company & Managing Director 2080 Ventures Email: [email protected] Website: www.2080.ventures #VC #Funds #Investing

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Good news for the recovery for Enterprise FinTech M&A. Private Equity are paying up for growth, margin, and stability for high quality FinTech assets. Q1’s increase in deal count was driven by Fintech/Payments’ who dominate with strong operating performance. Q1 emphasized that industry specific payments tools, combined with workflow software, can generate the kind of revenue growth and margin that create attractive buyout returns. Many of these combined payments and software businesses have a moat that is hard to penetrate as well as an existing customer base that is sticky. According to PitchBook The PE buyout comeback continued from Q423 into Q1,which saw 32 PE and corporate B2B FinTech acquisitions and will likely reach 42 to 46 deals. Q1 deal count is higher than Q4’s 27 logged deals (31 to 33 estimated) and Q1 2023’s 30 deals. Q1 deals exit deals included MuniciPAY (enterprise payments), Jobox (payments platform & POS), Arryved (mobile POS), Zafin (banking platform), Ireland Pay (enterprise payments), Payment Cloud (enterprise payments) and Feather Pay (enterprise payments). #payments #PE #M&A #FinTech #RetailTech #VC #PayTech #acquisitions #software #enterprisetech

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When I first read Jevgenijs Kazanins's very excellent fintech take on why Cash App Pay could be the next major driver of Block’s growth, I was floored by his initially compelling case that if Cash App can incentivize more payments payments volume to go through Cash App Pay, they can drive massive gross profit uplift, because Cash App Pay’s take rate is substantially higher than Cash Card’s take rate on purchase volume (2-3x). But if it were true, why hasn’t Cash App taken advantage? Whereas Jevgenijs is more optimistic about the ~$2.5bn in GPV that Cash App Pay has generated in its first ~2.5 years of existence, I find it downright embarrassing. That’s less than 1% of Square’s GPV after two years in the wild? And that’s despite it being essentially pre-installed on every terminal with no change in hardware required. I started to have a sinking feeling that maybe something was missing in the calculus. And as I dove deeper, it became clear that the “magic” take rate uptick we thought we’d found was more of a magic trick, relying on some deception. The seeming increase in take rate comes about like this. Normally, when a Cash App user makes a purchase, Cash App acts as the Issuer which means there are several intermediaries between what the merchant is charged and what Block earns on the transaction, meaning its ultimate take rate is relatively low. But in the case of Cash App Pay, there’s potentially a few magic tricks at work. The first is that in this case, Block is facilitating the Square merchant’s acquiring POS AND it’s issuing the Cash App user’s debit card, thereby cutting the intermediaries down in the typical payments flow and seemingly increasing Cash App take rates by 35-50% (instead of just interchange, you’re now getting interchange and markup). But then gets even better with the second trick, because if you’re both the acquirer and the issuer, *you don’t even need the payment network at all*. You can simply move money by book transfer between your merchant’s bank account and your user’s bank account in a perfectly closed loop payment network. Suddenly, Cash App Pay has a magical 2.9% take rate with no money movement costs at all. The problem with these magic tricks, like the ones in life, is that they are actually using some deception to hide what’s truly happening. Let’s play it out. In the status quo, without Cash App Pay, Square would earn ~1.85% in acquirer markup and Cash App would earn 0.90% in interchange for a total of 2.75% in take rate. In the Cash App Pay case, Square and Cash App would split the 2.90% Merchant Discount rate they artfully charged without having any money movement. So instead of the 2-3x markup, the uptick is more like +15bps (+5%). So maybe there isn’t a massive take rate arbitrage, but Block should still be focusing on its closed loop payment network because it represents huge opportunity for other reasons. Read the full post at https://lnkd.in/d93nkn29.

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The hidden years of inception stage. Founders & LP’s rarely understand that the journey of building a great company can involve up to three years of work before an early stage VC will get involved. h/t Peter Walker for the years from incorporation data from Carta https://lnkd.in/e5fFkvDt #vc #founders #investing Antler

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Seed VCs are turning to new ‘pro rata’ funds that help them compete with the big firms Alpha Partners, SignalRank and now SaaS Ventures help seed VCs pay for shares when big VCs try to price — or push — them out Lee Edwards, partner at Root VC, has a saying at his firm that “pro rata rights are earned, not given.” That may be a bit of a stretch since pro rata refers to a term that VCs put in their term sheets that gives them the right to buy more shares in a portfolio company during consequent funding rounds to maintain an ownership percentage and avoid dilution. Still, while these rights are not exactly “earned,” they can be expensive. One of the latest trends in VC investing these days are funds dedicated to helping seed VCs exercise their pro rata rights. https://lnkd.in/dRM3RvdA By Christine Hall

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Profitable venture scale businesses. Its a new thing. Its the way businesses should be built. But only the best founders and capital allocators can do it successfully.

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If you're building a fintech startup, you likely know of this investor, but just in case... This week's findfunding.vc spotlight is on Neil Kapur from TTV Capital. He: 🛫 Is based in SF & Atlanta 💲 Has spent time at Google in consumer-facing payments & at two fintech startups  🏔️ Loves alpine mountaineering and has climbed Kilimanjaro, Denali, Rainier, and more!! Amongst founders, Neil and the team at TTV Capital , including Gardiner Garrard, Mark Johnson, Sean Banks, Lizzie Guynn, and Laney Lewis are known for saying “lift, not lean.” They believe that their job as investors is not to create work for founders, but instead ask the right questions and help navigate to the best outcomes. Knowing Neil well personally, he's not only my go-to person for anything related to fintech but I can also highly recommend having him on your cap table - he's the kind of human you want to have in your corner during both good times and bad. Make sure to: ✉️ Pitch him at [email protected] ➡️ Follow TTV Capital on LinkedIn For more, check out our funder spotlight card below along with TTV Capital's profile on findfunding.vc (link in comments).

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Fintech represents a beneficial mutation in the realm of financial services. With consumers accessing unprecedented perks, their expectations are evolving. Open the average wallet, and you'll find fewer credit cards tucked in the slots—why pay by card when Affirm and Klarna offer interest-free installment plans at the point of sale? Robinhood (aptly named) has forced traditional brokerages to forgo their lucrative commission revenue to stay competitive. These trends and others illustrate a broader narrative: fintech isn't just a new challenger but an accelerant for financial service transformation. Fintech innovations are driving significant changes in consumer behavior and expectations. Incumbents have no choice but to fight innovation with innovation.

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Episode 8 of Rally Cap VC's podcast is dropping next week, featuring Wael Nafee, General Partner at RAED Ventures. Raed Ventures is the leading Saudi early-stage VC firm, with ~$450m in AUM. Their portfolio includes Tabby [$1.5b val], Foodics [$170 Series C], Salla E-Commerce Platform [$130m pre-IPO], Unifonic [$125m Series B], Sary [$75m Series C], Lean Technologies [$67m Series B], Noon - The Social Learning Platform [$41m Series B], and so many more. While the kingdom 🇸🇦 is sometimes mistaken as an 'easy-to-fundraise' destination, this misconception cannot be further from the truth. This conversation with Wael [whom many founders refer to as their 'favorite investor'] offers a glimpse into the sophistication of institutional investors in the region.

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Based on the recent data signals from Carta, 2Q24 offers a glimmer of improving stability within the VC ecosystem, underpinned by a drop in down rounds, resilient valuations, and a return to more founder-friendly deal terms - signaling a continuation in gradual recalibration 🎯 👇 Down Rounds 1Q24 saw a staggering 24.2% of rounds being down rounds, a five-year high that painted a grim picture for startups. However, 2Q24 flipped the script with a drop to 17.4%. This shift isn’t just a statistical blip; it reflects a broader recalibration of valuations post-2020-2021’s inflated peaks. With startups now more likely to have raised their last rounds post-bubble, this trend suggests a healthier, more sustainable funding environment moving forward 📉 📊 Valuations Across the board, valuations are showing resilience, particularly at the seed and Series A stages. 2Q24 even saw seed valuations surpassing 1Q22 levels, despite a significant drop in deal volume. The story here is one of quality over quantity—fewer, larger rounds as investors zero in on startups with strong fundamentals 💪 While Series C and D stages haven’t fully bounced back, the trend across all stages points to a gradually rebounding market where valuations are increasingly decoupled from sheer deal volume, hinting at a more strategic and selective investment approach 🌱 🤝 Deal Terms 2Q24 also saw a decline in investor-friendly terms like participating preferred stock and cumulative dividends, which had previously surged during the uncertain times of 2021-2022. This move toward simpler, more founder-friendly deal structures indicates growing investor trust in startup valuations and their long-term prospects 📑 However, liquidation preferences over 1x remain relatively heightened, highlighting a focus on distribution activity amidst a liquidity drought (~33% and 43% of 2017- and 2018-vintage funds having yet to return any money to LPs, respectively) 👀 🌎 Regional Activity Trends The West remains the dominant force in VC activity, but 2Q24 saw its share dip to 59% from 63% in 1Q24. Meanwhile, the Northeast staged a strong comeback, increasing its share from 20% to 25%. This resurgence is led by New York's robust SaaS and FinTech scene, with key players like CoreWeave, Wiz, AlphaSense, Cyera, Ramp, and Semperis driving significant investment. Boston, on the other hand, is seeing a resurgence driven primarily by biotech, with companies like Obsidian Therapeutics, Diagonal Therapeutics, Seaport Therapeutics, and Ajax Therapeutics leading the charge. These shifts underscore a recalibration in regional activity, with the Northeast reclaiming its influence in the VC landscape🗽 #VentureCapital #VC #PrivateMarkets #Technology #Innovation #Investment #Startups

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🚀 With this deck, Hinge Health Raises $300 Million in Series D at a $3 Billion Valuation 🚀 - Hinge Health, a pioneering startup in the digital health space, has just raised an impressive $300 million in its Series D round, securing a valuation of $3 billion! 🩺💰 - This funding round, driven by top investors, is a testament to the growing demand for innovative, tech-driven healthcare solutions. 👉🏻 Key Highlights: 🔷 Funding Amount: $300 Million 🔷 Valuation: $3 Billion 🔷 Lead Investors: A mix of leading venture capital firms and strategic investors. 🔷 Purpose of Funding: Expand product offerings, enhance R&D, and scale operations globally. 👉🏻Why This Matters: 🔷 Digital Health Revolution: Hinge Health is at the forefront of the shift toward digital-first healthcare, offering cutting-edge solutions for musculoskeletal (MSK) conditions. 🔷 Scalability: This capital will enable Hinge Health to broaden its reach, making its services accessible to millions more patients globally. 🔷 Technological Advancements: Continued investment in AI, machine learning, and wearable tech will enhance personalized care and treatment outcomes. 👉🏻 Facts & Figures: 🔷 Total Funding: With this round, Hinge Health has raised over $426M, positioning itself as a dominant player in digital healthcare. 🔷 Growth Trajectory: The company’s valuation surged from $1B in 2020 to $3B in 2024, reflecting rapid market adoption and expansion. 🔷 Customer Base: Hinge Health’s platform serves over 400 employers and health plans, including 25% of the Fortune 500. 🔷 Innovation: The funds will fuel R&D, expand the product offering, and scale operations, particularly in integrating AI and remote care. 👉🏻 Strategic Focus: 🔷 Product Innovation: Introducing new features like real-time virtual physical therapy and AI-driven personalized care plans. 🔷 Global Expansion: Targeting new markets in Europe and Asia to address the global MSK pain crisis. 🔷 Partnerships: Strengthening collaborations with healthcare providers, insurers, and employers to enhance service delivery. 👉🏻 What’s Next? - Hinge Health’s innovative approach to MSK care is revolutionizing how chronic pain and injury recovery are managed. - With this significant financial boost, the company is set to further disrupt the healthcare industry by providing accessible, effective, and scalable digital health solutions. 👉🏻 Takeaway for Founders: - Strategic funding isn’t just about capital—it’s about positioning your startup for sustained growth and innovation. - For those keeping an eye on the health tech space, Hinge Health’s trajectory is a clear indicator of where the future of personalized healthcare is heading. 🔰 P.S.: Let me know in the comment section, which startup's deck you want to see next. #startups #founders #funding #healthtech #startupgrowth #india #venturecapital #digitalhealth #innovation

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⛳ Emerging fund managers pulse check. PitchBook tracks over 10,000 funds that are raising money, with 45% being emerging fund managers (defined as firms with less than 3 funds). Despite a dip in available capital—down to 16% from the pre-pandemic 23%—these managers are finding creative ways to stay competitive, like partnering with larger firms. 💼 Joanna Drake (founder turned investor) shared how "wildly different" it is raising a fund versus for a startup. One key datapoint she shared on the fund side was how little feedback you get along the way (and the years you can wait for it). The “long-winded and challenging process to raise capital” inspired Drake and Ben Black to create RAISE Global, a community for emerging fund managers and the “forward-thinking LPs” who back them. (A decade later, several hundred emerging managers with AUM under $200m are on the platform) They've found the newest emerging managers are more diverse and geographically dispersed than Silicon valley, and more were able to crack the ceiling and raise larger $100m funds (although this is still a small % of the market, requiring partnership with larger funds at the late stage). ▶ And not a hugely surprising datapoint: A lot of action is in the sub $49 million range, where roughly 50% of emerging managers are raising. Theresa Sorrentino Hajer, Head of U.S. venture capital research at Cambridge Associates warns that past success isn't actually a strong indicator on it's own to assess emerging managers. We've had a valuation reset. And newer managers with investments during the 2019-2021 "party days", need to build relevant track record and play to their strengths. A lot of emerging managers are specializing (70% who applied for Raise had a thematic focus), and betting on getting in as early as possible in the startup's lifecycle (Raise: 31% at accelerator/ pre-seed stages, and 47% at seed stage). “Emerging managers have to compete on a different dimension,” Nick Moran from New Stack Ventures. You're no longer just dealing with capital. Emerging VC's need to be as innovative and nimble as the startups they invest in, having a unique thesis and insights. They also play a role at the top of the deal-flow funnel: helping larger firms find promising companies, so finding a thesis, sector or philosophy aligned partner at a larger firm is helpful. Onwards! #EmergingManager #Startups #VC

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Interesting observations for those tracking the growth of the startup ecosystem across MENA

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Thanks to BankBeat for sharing my most recent article on the impact that rate cuts are likely to have on banks and, especially, fintechs 📉

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Super helpful #Startup #Equity Calculator to determine the equity for early hires, thanks to Pear VC head of talent Matt Birnbaum! Thanks for sharing Pejman! 🙏🏼 You can read more here How to structure startup equity for early hires: https://lnkd.in/ggmpT5-Y Google Doc: https://lnkd.in/gjsvths6

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Excited to share some thoughts from my recent conversation on the VC10X podcast. We dove quite a bit into the importance of product-market fit in Hard Tech 🎙️ ·     One key insight I've gained from working with Hard Tech companies at Pangaea Ventures: The difference between good and great product-market fit often shows up in the growth patterns. ·     Many Hard Tech companies show linear growth - put in a dollar on manufacturing and sales, get a predictable return. But when you've truly nailed product-market fit, something magical happens: the growth curve becomes exponential. ·     We look for companies where $1 invested this year yields significantly more return than the same dollar did last year. That's when you know you're onto something special. That's the inflection point where linear becomes exponential. ·     This pattern has been a reliable indicator throughout my time at Pangaea, helping companies navigate their early growth stages, build high-performance teams, and cultivate excellence. Thanks to Prashant and the VC10X podcast for having me on to discuss the evolving Hard Tech ecosystem. What patterns have you observed in successful Hard Tech companies? Would love to hear your thoughts.

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After reading Carta’s VC Fund Performance Report (data as of Q1 2024) earlier today, it’s clear that during the last few years of the ZIRP (Zero Interest Rate Policy) era, the market was flooded with venture funds, with a notable portion founded by those with little investment experience or a solid track record. The results of this trend are now becoming apparent, as shown in the report’s graph depicting unrealized IRR for vintage years since 2017. The sharp decline in returns, especially for the 2021 and 2022 vintages, underscores the challenges that have arisen as the market environment has shifted. Earlier this year, Pitchbook reported that 37% of first-time managers will not be able to raise a second fund. However, after reviewing the more recent data from Carta, which shows a median IRR below zero for the most recent vintages, it seems that even this figure might be overly optimistic. The data suggests that a significant portion of these new funds may struggle to survive, let alone thrive, in today’s more challenging market. This highlights the difficulty of being a disciplined investor who consistently delivers real returns, especially in an environment that no longer provides the rising tide needed to lift all boats.

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Great analysis of recent #vc trends. Thank you Kaela Roeder and Technical.ly for including my thoughts in the piece. My "expanded" two cents below for anyone curious... It is easy to get excited by what is happening in venture capital these days given the advent of AI. However, for early-stage startups, the numbers tell a more nuanced story. Early-stage deal volume in Q4-2023 was down 66% from the peak (Q4-2021) and a quarter of the deals were down rounds. In 2024, volumes stayed fairly flat relative to 2023 levels (signalizing a normalization to pre-pandemic VC activity) and 32% of deals were down rounds in Q1 (a worsening since year end). Early-stage valuations have spiked back up this year – a pleasant boon for some founders. But, this inflation is largely driven by the excitement around AI and strong demand for capital-efficient, high-growth companies. Many startups have tried to become “dot AI” businesses overnight; however, such tactics are not the “silver bullet” to fundraising challenges and growth. With limited time and capital, funds are on the hunt for companies with bulletproof fundamentals or those with exponential growth potential. If you don’t check one of these two boxes, the VC world looks fundamentally different for you. Locally, there are some positive tailwinds. The D.C. area has outpaced other metro areas in adding AI jobs due in large part to the defense industry and an increasing number of tech companies opening-up federal outposts. Over the long-term, this will be very positive for D.C. startup growth and talent.

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