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A Note From the Redbud VC Team

We made zero investments this month after making four between May and June, including our latest announcement: Fair. That said, we might not have been the only ones, as most VCs were sailing on the Amalfi Coast. We added six new speakers to the VC/Startup Track at the Main Street Summit, bringing the total to ~40. That said, it’s not just speakers we have a poker night, wine tasting, pottery class, and more. We are excited to launch our VC List, data we’ve cobbled together over the years, including 18k+ VCs and angel investors.

Introducing: The VC List by Redbud VC 📜

We know how hard it can be to find the right investors for your startup. 👀 

That's why we created The VC List - a public database featuring over 18k+ investors.

Whether you're just starting to raise that first round of capital or looking for a lead check writer, The VC List allows you to find the perfect investors.

Check it out below ⤵️

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  | 🏆 Redbud Portfolio

🦸🏽 Become a Mentor | 🏉 Meet the Team 

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Sequoia offered to purchase some of their LPs’ shares to provide liquidity because Stripe has been going 15 years without a large-scale liquidity opportunity. Will they ever go public?

🔥 Burning question of the month 🔥

📈 Macro Trend Report

• S&P 500 | The US stock market has been on a steady climb this year, with the S&P 500 Index nearing a 20% rise for 2024. Despite a few minor dips, the index has remained relatively stable throughout the year, experiencing only one instance of more than a 2% shift back in February.

  

• LAYOFFS | The pace of layoffs has dropped from 2023, but still significantly more than in 2022. While the rate of layoffs in tech is nowhere near where they were last year, consumer companies are still making significant job cuts. Over 10k+ employees have been laid off this month. The Match Group recently announced a 6% reduction in their workforce and the removal of live streaming features from their apps. Additionally, Bungie, the gaming company behind popular titles like Halo and Destiny, announced a 17% decrease in their workforce this week via tweets and ominous calendar invites. The company sited efforts to refocus on its core gaming studios and adapt to the shifting industry landscape. Online tutoring company Chegg announced a 23% reduction to their global employee count as they “return focusing on subscriber and revenue growth.”

• AI | Lots of big announcements from the AI giants this month. OpenAI, announced the launch of "GPT-4o mini," a cutting-edge model designed to offer multimodal capabilities within the ChatGPT platform. Open AI also announced its move into AI search. Their much-anticipated entry into the search market, SearchGPT, is an AI-powered search engine with real-time access to information across the internet. SearchGPT is just a “prototype” for now and will only be accessible to 10,000 test users at launch. Wondering how Google is feeling 🧐. Not to be outdone, Meta has introduced Llama 3.1 405B, an advanced language model set to rival the offerings of Anthropic, Google, and OpenAI. The new model supports eight languages and boasts larger context windows, enabling more comprehensive and accurate processing of user prompts. Outside of product launches, the big AI players have been ramping up lobbying efforts in anticipation of the upcoming election. OpenAI has dramatically increased its lobbying expenditures, spending $800,000 in the first six months of 2024 versus $260,000 in all of 2023, and Anthropic is on track to spend half a million dollars on lobbying over the next few months.

• VENTURE CAPITAL | The Q2 deal-making scene in the US has shown some signs of picking up steam, with around $55.6 billion invested across over 4,200 deals. It's still a bit early to say for sure, but this could mean that the market has finally hit its low point and is bouncing back. One likely reason is that companies that previously raised and stretched funds out through cost-cutting are now back in the financing game. On the flip side, we're seeing some real competition heating up in the pro rata arena. With fewer late-stage deals on the table and high demand for those big-ticket investments, getting in on the action is becoming quite the challenge. This trend ties in with the $9.3 billion raised by VCs in Q1 across 100 U.S. funds, which is a notable drop from 2023's $81.8 billion. Investors said this leaves an abnormally high number of VCs unable to fund their pro-rata rights.

  • EARLY STAGE | Last quarter had the highest percentage of Pre-Seed and Seed rounds in the $5M+ range; could this be due to multi-stage funds taking down more market share and more financings in the deep tech space? That said, valuations were stagnant in Pre-Seed/Seed, with a median of $6M pre-money, up from $5.9M in 2023 and early stage rising ~8% to $12.4M from $11.5M.

    

  • BIG MONEY | Big rounds and valuations have been making waves. Clio raised a whopping $900 million in Series F funding, skyrocketing its valuation to a cool $3 billion. Their ARR has doubled in just a year, hitting $200 million in June 2023, all while maintaining profitability. Looking at the broader picture, the first quarter saw a total of 105 mega-rounds raised globally. However, some companies are taking their time to go public, like Stripe, whose major investor Sequoia Capital has had to get creative with returns for its LPs. Despite a delayed IPO, Stripe is seeing some serious growth, crossing the $1 trillion total payment volume mark in 2023 after a 25% bump. Cybersecurity startup Wiz made headlines by turning down a whopping $23B acquisition offer from Alphabet. With its last private valuation at $12B, Wiz's management team and investors decided to stay independent, and the CEO sent this letter to the 1,200 employees…LFG

    

💰 Micro Trends

• SILICON VALLEY V.S. SILICON VALLEY | Silicon Valley's political climate has taken an interesting turn, as tech billionaires with opposing views are publicly trading blows online. 🥊 Following the assassination attempt of President Trump this month, David Sacks and Elon Musk openly criticized former colleague and major Democratic donor Reid Hoffman. Not just the PayPal Mafia are in the mix of the online callouts; Roger McNamee called out Marc Andreessen and Ben Horowitz on their recent endorsement of Trump for their “antidemocratic” values on X, to which Ben responded, “Really Roger? We've known each other for 25 years, you invested in my company, you have my cell #, and your very first idea when we disagree is to attack me in a tweet?” Looks like the days of not disagreeing in public are over…

• ZOOMED OUT | The largest Zoom call ever happened this month. 164,000 women joined a call, raising nearly $2M for Kamala Harris in under two hours. Despite Zoom's new use case as a political fundraising platform, recent growth has slowed following an impressive boom during the pandemic-driven shift to remote work. The company witnessed a remarkable 370% revenue increase in a single quarter of 2021, but its earnings have plateaued at approximately $1.1B since late 2022. Zoom's challenge is attempting to maintain its relevance and market dominance as in-person interactions become increasingly common and more and more companies push to 5 days in the office. Even Zoom pushed their employees to work hybrid to “experience the customer’s pain point first hand.” That said, will virtual interactions start declining?

📰 Middle America Headline of the Month

Rally is less than one month away and the finalists for their IN-Prize pitch were just announced.

IN-Prize finalists will pitch before an audience of venture capitalists, angel investors, entrepreneurs, early adopters, corporate executives, universities, and partners. The total dollars invested is up to $5M, with participants receiving up to $1M each. 🥳

We’ll be there to watch. 👀

💰 Flyover Deals

There’s been a slowdown in flyover funding this month, but don’t worry we’re still deploying capital 🚀

• Check out the 256 flyover deals for over $4.4B in funding we tracked here; deals were down but funding nearly doubled

• Indiana-based Modicus Prime raised $3.5M Series Seed to help prevent drug quality failures 💊

• Cincinnati-based Tembo closed a $14M Series A and ReSquared closed a $5M Seed 

• Some big rounds in Chicago closed this month:

  • Quantum Rise, a Chicago-based AI automation startup, closed a $15M Seed Round

  • Vanqua Biosciences closed a $45M Series B extension

  • GeoWealth closed a $18M Round led by Blackrock

• Indy-based med tech firm GeoH raised a $3M Seed Round

• Chicago-based Pi Squared raised a $12.5M Series A 🖥

• Camperoni, a Minneapolis-based camper management software closed a $750k pre-seed 🏕

• Columbus-based Strive raised a $30M Series B

• Chicago-based Coldcart raised a $6.5M Seed  

🐄 Middle America vs. National Macro Trends

• Unemployment in Missouri rose this month to 3.7%, but well below the National Average of 4.1% that is also steadily increasing ✅

• The Midwest Consumer Price Index stayed steady this month at 3.3%, just below the national rate of 3.5% ✅ 

  

🧠 This Month's Recommendations

📚 What We’re Reading

• AI’s $600B Question and Navigating the Impending AI Bubble

• Why investors have fallen in love with small American firms

• How to use AI to bootstrap

🎧 What We’re Listening To

• Mike Droesch of Bessemer on The Path from Aspiring VC to Partner on the Full Rachet Podcast [56 min]

• Index Venture’s Mike Volpi on AI, open source, and the evolution of VC funding on the Turpentine VC Podcast [60 min]

• “Even if you have spent 14 years building something, it could truly be gone in 14 days.” Listen to Eventbrite CEO Julia Hartz talk about her journey building Eventbrite and navigating COVID [44 min]

📆 What We’re Doing

• We’re prepping for the new VC/Startup track Redbud VC, and Mercato Partners are adding to the Main Street Summit Oct. 8-10th. Oh yeah, and we just added ✨6 new speakers✨ 

• Grab your pass 👉️ 🎟️ https://www.mainstreetsummit.com/venture 

🪝 Outside the Main Hubs: Picks of the Month

🚀 Redbud Portfolio Company Highlights

Introducing our latest investment: Fair, an embedded auto warranty platform designed for enterprise software, marketplaces, and insurance companies, helping them boost revenues by offering consumers transparent, efficient, and tailored auto warranties. 

Read why we believe the future of warranties will be online, embedded, and transparent with Fair ⤵️

🛠️ Resources

• We are excited to announce our collaboration with Mercato Partners to create an exceptional experience for startup founders, investors, and aspiring entrepreneurs at Main Street Summit 2024 with a VC/Startup Track starting October 8th to 10th Grab your pass 👉️ 🎟️ https://www.mainstreetsummit.com/venture 

• The complete guide on How to Interview and Hire ML/AI Engineers (one of our favorite reads on hiring out there)

• Founder who 120 VCs—he closed $2.7M in 5 weeks with demand for $5M+. Here's his step-by-step guide to close a round. 💰

• 📊 All-In-One Startup Metrics Guide - What to track, when and why

• What’s the best way for founders to meet and pitch angel investors? Here’s a basic overview with tips on how to find and pitch to angel investors. 👼🏼

• The ultimate Sales + Marketing playbook

• The Best Fundraising Advice video series from Bill Trenchard

• Founders - Check out the YC Seed Guide for everything you need to know about fundraising early

• 10 Free tools to build the basics of your startup 💪

• 💲Building financial models is not easy → check out these easy-to-use templates and guides

• 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