31 July 2023

Cervin Q2 2023 Newsletter

Read our Q2 newsletter for our take on the current market conditions and to learn the latest news about our portfolio companies.

State of the Venture Capital Market


Data + AI continues to garner momentum with all major vendors highlighting the importance of it. Every AI app starts with data. Data is clearly the differentiator as it relates to Generative AI. In addition, the decline in venture capital deals and valuations seems to be stabilizing and there are signs of improvement in seed valuations and Series A deal velocity. Founders and investors are beginning to align on price discovery for financing rounds. 


Public market comps have recovered. With a 6-9 month delay in how private company valuations follow public markets, we expect some improvement. However, the focus on metrics such as the Rule of 40 (growth rate + burn rate >= 40%) will be top of mind for investors.

The global venture funding industry declined 13% quarter over quarter, getting down to levels not seen since Q2 2020.

(Source: CBInsights)


As the chart below shows, US based startups raised a total of $31.3B, which was the lowest since Q4 2019.  


(Source: CBInsights)


The angel and seed investment market also continued its declines - both in terms of deal value and deal count. Deal count slipped 25% from a year ago. For seed deals, specifically, the quarterly deal value of $2.8B in Q2 marked a 27.5% decline from the previous quarter. 


As discussed previously, we expect the industry to begin plateauing from this point onwards. The only metric that saw an increase was that the seed round deal size increased to $2.9M - this is also likely because the industry has become much more selective and the best deals are now the only ones being funded.


In terms of early stage deals (Series A), deal value seems to be steady compared to both the previous quarters while the number of deals seems to be quite robust.




 However, the median early-stage deal size dropped to $6.0M, a 25% decline compared to 2022.


All in all the industry, which has faced numerous challenges over the last year is now beginning to resemble the pre-pandemic behavior. 



Portfolio News

Recently, we welcomed Type to our portfolio. Type, an AI-first document editor, raised a $2.8M Seed round, with participation from Cervin, Y Combinator, Goodwater, Rogue Capital, Ascend,Omega Venture Partners, and a number of other Silicon Valley funds and angels.

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Other Portfolio News:

- AiFi launched several autonomous stores, including the ones in the Intuit Dome in Los Angeles, Astra Tech's first autonomous B Store at Abu Dhabi's iconic Sky Tower, and a store located in Berlin's Ostbahnhof Deutsche Bahn Railway station.

- Airgap Networks was #1 on VentureBeat's list of the top 20 zero-trust startups to watch in 2023. They also won 3 Global InfoSec Awards including Most Comprehensive Micro-Segmentation, Next Gen OT Security and Most Comprehensive Remote Work Security. In Q2, Airgap acquired NetSpyGlass. Integrating the NetSpyGlass into the Airgap architecture will enable Airgap ZTFW™ customers to better detect, locate, and contain device anomalies in real time.

- Anvilogic received a number of top cybersecurity honors, including the 2023 Global InfoSec Award winner from Cyber Defense Magazine for the most comprehensive threat detection, incident response, hunting, and triage platform, the FinTech Global CyberTech100 2023 award, and winner of the Disruptor Product/Service | Cyber Security Software award at the 2023 Globee Awards.

- Akridata’s Data Explorer was added to the Azure Marketplace.

- ArmorCode joined Snyk’s new partner solutions directory and announced a new integration partnership with GrammaTech 𝗖𝗼𝗱𝗲𝗦𝗼𝗻𝗮r.

- Bedrock Analytics launched a new platform upgrade - Automated Insights powered by ChatGPT.

- Celona continues to expand its private wireless business throughout Europe, naming several industry veterans to head up the business.

- CloudApp rebranded as Zight.

- FireCompass was featured as a leader in the GigaOm Radar for Attack Surface Management for their platform’s ability of adversary emulation and automated testing.

- Folloze launched a new AI solution powered by ChatGPT, that allows B2B marketers to create impact at every digital touch point. The company also won TrustRadius's Top Rated award for 2023.

-  LaunchDarkly was chosen as one of SD Times best development tools of 2023.

- Privacera announced the availability of 2 new AWS Lake Formation integrations, empowering organizations with unified data security governance on Amazon Web Services (AWS). They also announced the private preview of Privacera AI Governance (PAIG), the industry’s most complete AI data security governance solution.

- In a Forbes Council post, Ashish Srimal, CEO of Ratio, shared his perspective on how SaaS and tech companies can continue to grow through challenging economic times with fintech.

- ThirdAI released their Pocket LLM, a powerful new tool that empowers you to memorize entire PDFs and search them using deep learning technology - all on your existing laptop. They also announced a strategic partnership with Lumenci, a technology consulting and analytics firm specializing in the legal and Intellectual Property (IP) space.