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A Note From the Redbud VC Team

Another month ✅ Another deal ✅ Another event ✅ 

The first half of 2024 has been quite a ride, and we’re gearing up for an even busier second half of the year. We’ve been busy traveling across the US, and lots more travel is booked for May. Drop us a line if we’re coming to the city where you’re building (DC, NYC, Minneapolis, SF) 🛩️ . We’re preparing for the RMG Summit in June and another event in Columbia in October, so stay tuned. Congrats to EquipmentShare for closing $600M in debt financing. There are many shakeups in big tech and at big funds this month. Google and Microsoft reveal user counts for their AI-enabled dev tools, and TikTok is facing a forced sale initiated by the US government. On the venture side, most big funds (except a16z and GC) have struggled to close big funds as sluggish M&A and IPO freeze plague the market. That said, pre-seed and seed-stage deal flow has remained steady, and we’re always looking to deploy more capital, so pitch us here! ⚾️ 

RMG Summit 2024

We're thrilled to partner with MetaProp and Gateway South to kick off the first-ever RMG Summit for 125+ Founders, Investors, and Professionals in the Built Environment. 🏗. We’re creating a pathway linking individuals in the built environment—from construction and real estate to clean tech—from Middle America to the Coasts. Over 40 VCs, dozens of top industry professionals, and founders from the US and Canada are already signed up. Request to join here to raise/invest or sell/buy.

• Date: June 13th from 3-6:30 pm, followed by an exclusive VIP dinner at 7 pm— (30 invites)

• Where: 74 Wythe Ave Brooklyn, NY 11249

• Schedule: One-on-one matchmaking, group networking, four vetted pitches, and an exclusive dinner

Redbud VC invests monetary ($50k-$150k) and social capital in early-stage tech founders. We bring monthly Redbud VC, tech, and economics updates. - We've filtered thousands of sources for our 14k+ readers, so you don't have to. Enjoy🥂

📣 Pitch Us for an investment | 🏆 Redbud Portfolio

🦸🏽 Become a Redbud VC Mentor | 🏉 Meet the Redbud Team 

😎 Join our talent network | 🛩️ Flyover Tech community

Dweeby tech founder pre-VC raise to $40M Seed round building an LLM for OnlyFans 💃 

🔥 Burning question of the month 🔥

Nearly a decade later, theories are being resurfaced regarding the Malaysian Airlines flight MH370. Check out the Reddit thread or X threads if you want to go down a 🐰 🕳️ 

📈 Macro Trend Report

• BANKING | Republic First Bank has been closed by Pennsylvania state regulators in the first US bank failure this year. Despite earlier attempts to secure new funds, the bank's fortunes declined, marked by diminishing deposits and challenges in its mortgage lending operations. Compared to larger bank failures in 2023, such as Silicon Valley Bank, First Republic, and Signature Bank, Republic was much smaller, with only $6B in assets spread across 32 branches across the East Coast. The FDIC disclosed this week that its insurance fund is expected to suffer losses of $667M due to the bank's failure. YIKES. 😬

  • BAAS | Not only are banks failing, but so are banking as a service providers. Arguably the most notable company in the space, Synapse, filed Chapter 11 bankruptcy, with its assets being acquired by Tabapay. In addition, Solid repurchased its latest investor’s shares at a 56% discount after settling a suit. Others are on the brink of failure due to federal enforcement as regulatory hurdles become more stringent due to the lack of compliance oversight from BaaS providers.

• AI | Big tech players made some serious moves in AI this month. Over at Google, Sundar Pichai boasted the company is gearing up to cash in on the potential of generative AI tools. 1M developers are using Google Cloud’s generative AI tools, and 60% of GenerativeAI startups backed by investors are Google Cloud customers. Over at Microsoft, they’re already reaping the rewards. Microsoft announced this month that 1.8M customers are hooked on GitHub Copilot for their code-writing needs. Meta released Llama 3, their latest "open" AI model, giving developers unprecedented access with a relatively open license. Meta's also teasing plans for a souped-up version of Llama packing a massive 400 billion parameters, poised right ahead of OpenAI’s GPT-4. It's an all-out AI arms race 🏃🏼‍♀️

• VENTURE CAPITAL | The venture markets are as investor-friendly as ever. The Q1 shift has been enabled by reduced investor competition and heightened demand for companies. Investors are increasingly incorporating downside protective measures like cumulative dividends and liquidity multiples into term sheets. Despite the investor friendly market, the pace of dealmaking continued to decelerate, with deal value dipping compared to Q4 2023 but comparable to Q3 2023. The late stages have been hit hard as Pitchbook found that for every $2.20 needed by venture-backed startups at the venture-growth stage, only $1.00 is being provided by investors. First-time financing deal value in Q1 settled at $3.1B, similar to pre-pandemic levels, while pre-seed/seed stage deal value saw a significant decline of 39.0% compared to Q1 2023.

  

  Source: Pitchbook

  • STARTUP GROWTH | New data from PitchBook’s-NVCA Venture Monitor is showing there are too many startups to be supported. The surge in entrepreneurial activity is outpacing the capacity of venture capital firms, resulting in fierce competition for funding. More than 2,000 VC firms effectively paused new investments in startups during the first nine months of 2023, while approximately 3,200 startups failed within the same period. While the downturn in dealmaking initially impacted late-stage and venture-growth companies, it has now extended to seed-stage startups. Despite this, US pre-seed and seed-stage startups are projected to raise a similar amount of capital as in 2018 but through fewer VC deals.

  • BIG FUNDS, BIG STRUGGLES | Big venture funds are grappling with a brutal fundraising environment, and it’s showing. Tiger Global closed its latest venture capital fund at $2.2B, its smallest in ten years, indicative of a trend towards scaled-back ambitions among major investors. The downsizing coincides with challenges LPs face, whose returns have been inhibited by the recent IPO drought. Tiger invested in just three mega-rounds exceeding $100M in 2023, a stark drop from the 92 in 2022. Similarly, Kim Kardashian's SKKY Partners is falling short of their fundraising targets, securing only $121M in capital commitments by late March, drastically lower than initial expectations of $1-$2B. However, not all funds are facing the same struggles. General Catalyst is nearing the close of a hefty $6B fund, while Andreessen Horowitz recently announced a substantial $7.2B across five fund strategies. GC and a16z have collectively garnered 44% of VC dollars in ‘24. Despite the challenges, the top-performing emerging VC funds continue to demonstrate strong returns, outpacing established funds with excess IRRs of 15.9%, more than 3 percentage points higher than that of established funds. 😉

💰 Micro Trends

• NON-COMPETES | The FTC voted to prohibit almost all noncompete agreements this month. Noncompetes are commonly used in employment contracts to restrict workers from joining rival companies or starting their own ventures. The FTC’s decision followed a period of extensive public interactions, with over 26,000 comments received by the FTC. The FTC predicts that this ruling will spur significant growth in new business formations, “The FTC estimates that the final rule...will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year.” In reality, the implementation of any final rule is expected to face delays and potentially be tied up in legal proceedings for years to come.

• TIKTOK | The fate of TikTok hangs in the balance as the U.S. government is taking some decisive action against its Chinese ownership. Last week, the Senate passed a legislative package delivering foreign aid; included in the bill was a provision that could result in the outright ban of TikTok in the country unless its Chinese parent company, ByteDance, sells its stake within a year. President Joe Biden signed the bill into law on Wednesday, initiating a countdown for TikTok's potential departure from American users. TikTok says it has 170M MAU in the U.S., and it reportedly brought in between $16B and $20B in revenue in 2023. Despite this, TikTok won't immediately disappear from devices as ByteDance gears up to defend its ownership through legal battles, shifting the battleground from Congress and regulatory agencies to the courts. However, with China signaling its resistance to any forced sale of TikTok, the future of the platform in the U.S. remains uncertain. Sorry, GenZ. 🎶

📰 Middle America Headline of the Month

St. Louis has been chosen to participate in the 2024 Startup World Cup 🏆

St. Louis’ inclusion in the Startup World Cup, staged by San Jose, California-based Pegasus Tech Ventures, will give one local firm a chance to pitch their company for the contest’s $1M prize at an event in October in San Francisco. St. Louis’ representative in the finals will be chosen through local pitch contests staged by technology group TechSTL. Learn more below ⤵

💰 Flyover Deals

Lots of bigger Series A & B rounds are continuing to close this month! 🚀

• Check out the 278 flyover deals for over $2.3B in funding we tracked here

• EquipmentShare pulled in $600M in debt financing as they eye a potential IPO early next year

• Cincinnati-based Abre closed a $24M Series A Round

• Kode Labs closed a $30M Series B led by Maverick Private Equity

• Detroit-based Rivet completed a $6M Round of funding

• PinkDx, an Indianapolis-based biotech startup, closed a $40M Series A Round

• Pinch, a medspa at-home startup, closed a $3.5M Seed Round 

• Chicago-based Continuum wrapped up a $1.7M Seed Round

• Neurava completed a $2.3M Seed Round

🐄 Middle America vs. National Macro Trends

• Unemployment in Missouri stayed steady this month, keeping at 3.3%, but still well below the steady national average of 3.8% and below the Midwestern average of 3.9% ✅

• The Midwest Consumer Price Index is on the rise this month at 3.6% this month, just below the national rate of 3.9% ✅ 

  

🧠 This Month's Recommendations

📚 What We’re Reading

• AI is coming for your (services) job, written by Samit Kalra of 1984 Ventures

• Overconfidence and its implications - read The Thin Line by Ted Lamade, Managing Director at The Carnegie Institution for Science

• The new age of AI is this generation’s Space Race → Generative AI’s Act II

• Dear Venture Capitalists - You’re Blowing It 😢

🎧 What We’re Listening To

• From Paypal intern to starting 4x Billion-Dollar companies, check out Joe Lonsdale’s interview on My First Million [55 min]

• Think Fast, Talk Smart: How to handle talking to a skeptical audience (Spoiler: VCs are naturally skeptical) 🤨 [17 min]

• The Vinod Kholsa interview on the Turpentine VC Podcast [1 hr]

📆 What We’re Doing

We were all over last month with lots more travel ahead! 🚀 

• Here’s where we’ve been:

  • Hosted the 12th annual Missouri Startup Weekend, crowing SolTax as our winner with a $15k check → photos here

  • We had a great time meeting the builders in our own backyard at InvestMidwest!

  • We reconnected with operators and investors at Capitalizing KC hosted by portfolio company Appreciate 

  • The Global Finals of VCIC were excellent! Shoutout to all of the student teams that competed throughout the weekend

• Here’s where we’re going:

  • Maria is off to Minneapolis to host the first Soapbox Dinner Series for young VC’s 🍽

  • Our tickets are secured for Camp Hustle in Saratoga, CA - looking forward to meeting GPs and LPs from all over

  • Heading to DC for the Beyond Silicon Valley Summit hosted by Revolution’s Rise of the Rest Seed Fund

  • We are hyped for Capital Camp this month, which is the leading event for alternative asset managers across the world put on by our friends at Permanent Equity and in Columbia 🙂 

🪝 Middle America & Beyond Picks of the Month

🚀 Redbud Portfolio Company Highlights

Introducing our latest investment - Braid 💰 Have you seen the latest on BaaS failures and regulatory crackdowns? Enter Braid, where banks have contractual control and autonomy in partnering with fintechs. Banks of any size can launch or connect with fintechs. Read why we believe Braid is bringing the future of banking to community banks ⤵️

🛠️ Resources

• Founders! Apply for the Self-Storage Hawai'i unConference new technology and business breakthrough pitch contest here!

• How to break into VC - notes from Eric Rosenblum

• 📣 Calling all Technical Startup Founders, check out YCombinator Startup School x Startup CTO Handbook

• Master The Terms Of Valuation & Win Funding On Your Terms

• Just raise funding? Here’s how to write the ✨ perfect ✨ investor update (with templates ofc!)

• Run a tight fundraising process with the help of these Notion templates for tracking investors, financials, and deck help!

• 🧍🏼‍♀️Hiring? → MBA Mondays published thier insights on best hiring practices at employee 1 or 100

• How to run user interviews with Sam Altman and Emmet Shear

• Feeling lost even at the early stages? Here’s the founder’s guide to a pre-seed round. 🌱

• SaaS funding guide: Types of funding, when you need it, and what investors look for

• 💭 VCs ask a lot of questions, esp. in the early stages. Here are some favorite questions from Haley at Hustle Fund.

• Take a look at the list of the creme of the crop accelerators ✨

• STOP chasing VC funding without a plan

• a16z’s enterprise AI report just dropped - take a look at the 8 most insightful slides

• LTV: CAC and other SaaS ratios that are strong indicators of growth

• Founders - Here are links to 20 free investor lists & databases, all curated in one spot

• A quick review of what VC’s are evaluating at the pre-seed and seed

• Resource page for founders we made here 📒

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The information provided in this newsletter is intended for general understanding and educational purposes only, not as a guide to investment decisions. The authors, publishers, and distributors of this newsletter are not licensed financial advisors and are not providing financial advice or investment advisory services.s