Startup turns VC

Happy Friday. Here’s what we’ve got today…

• A look at AI startup Runway’s plan to raise its own venture fund

• The deal sheet, plus a $92 million Excel error

This week’s fundraising news includes plans for a new $10 million fund from an unlikely source: Runway, a generative AI startup building image and video tools for content creators.

Per an SEC filing, the company has decided to launch Runway Fund 1, LP, raising outside capital for its own early-stage investments.

Runway: Rethinking Content Creation

Runway says its AI platform is now used by millions of individual creators, and has various enterprise contracts with Fortune 500 clients.

Speaking with TechCrunch last year, CEO Cris Valenzuela outlined a vision to “reimagine content creation and [build] a new type of creative suite, the generative suite.” He added, “Content creation today is very expensive and time-consuming. We want to help bring those cost and time factors as close to zero as possible.”

Runway was most recently valued at $1.5 billion in a July Series C extension, reaching a total of $237 million raised from backers including Google, NVIDIA, Salesforce, Madrona, Lux, Coatue, Felicis, and Amplify Partners.

Runway’s Corporate Venturing

The majority of corporate venture capital (CVC) teams invest “off the balance sheet,” taking capital from their parent company’s balance sheet instead of raising from outside limited partners (as a typical institutional venture capital firm would). Such off-balance-sheet mechanics can take the form of multi-year or annual budget commitments—avoiding the work of soliciting capital, though at the expense of a less certain pool of funding whose size can fluctuate as budgets change.

CVCs are also generally found within established, mature businesses. Early-stage startups often don’t have the cash or capacity to make the investment in such an effort. Exceptions include instances in which there’s a clear upside from supporting a nascent and growing industry—most recently seen in crypto from former heavy-weights like FTX and Binance.

Runway seems to feel there’s merit in such a strategy and is taking the unusual approach of funding its corporate venture capital activities via a standalone fund with external commitments. For the venture-backed startup, this option avoids the questionable alternative of funneling a portion of the company’s own cash straight back into new investments; likely not what Runway’s early investors had in mind when they wrote their checks.

At the same time, taking outside capital may present its own set of challenges. Even with its very small fund size, Runway is taking on the non-zero added burden of the various compliance, reporting, and operational components involved in launching its own fund. Someone also needs to dedicate the time required to actually execute the investments, including both underwriting and sourcing.

Depending on the fund’s terms, Runway may also lose out on the classically cited advantages of corporate venture capital: much longer investment time horizons and the optionality to prioritize strategic returns to the parent company over purely financial returns to limited partners.

For Runway’s own venture backers, there may be some level of apprehension with the strategy, even without their capital directly involved. Do the potential (and likely low probability) upsides of the initiative provide the same return as an equal amount of effort focused on Runway’s core business activities?

In Runway’s defense, this won’t be the first time the company has expanded beyond the core tech platform. Last year, it founded Runway Studios, an entertainment division that provides production services to enterprise clients. And, in a bit of creative marketing, launched AI Film Festival, one of the first-ever events dedicated to works produced with the help of generative AI tech.

• Owens Corning (NYSE: OC) has agreed to acquire Masonite International (NYSE: DOOR), a manufacturer of interior and exterior doors, for $3.9 billion.

• The United Arab Emirates is in advanced talks to acquire a beach strip on Egypt's Mediterranean coast for around $22 billion, per Bloomberg.

• Mondi is considering a potential acquisition of DS Smith, a British packaging company, in a deal that would create a combined business worth around $12.6 billion.

• Cohesity, backed by SoftBank, has agreed to acquire Veritas' data protection business in a deal that would value the combined entity at around $7 billion.

• Flynn Group, a franchise operator with over 2,600 restaurants, is considering the sale of a majority stake that could value the business at more than $5 billion.

• The Walt Disney Co. (NYSE: DIS) has agreed to acquire a minority stake in Epic Games, a video game developer, for $1.5 billion.

• CVC Capital Partners and Haveli Investments acquired Jagex, an online gaming company known for its RuneScape title, from Carlyle for $1.1 billion.

• Barclays has agreed to acquire Tesco Bank, the banking arm of UK supermarket chain Tesco, for £600 million.

• Apollo Global Management is in talks to acquire a minority stake in AlShaya Group, a Middle Eastern franchise operator for Starbucks, which was last valued at $4 billion to $5 billion in 2022 prior to exit of its Russia operations, per Reuters.

• Devon Energy is in talks to acquire Enerplus, a Canadian energy company.

• 95 Percent Group, a portfolio company of Leeds Equity Partners, has acquired Morpheme Magic, an education services provider.

• Warburg Pincus made a growth investment in Bloomerang, a provider of donor management and fundraising software.

• General Atlantic acquired a minority stake in Partners Capital, an outsourced investment office.

• Mainsail Partners invested in Teamfront, a provider of business software solutions.

• Marco Rubber, a portfolio company of Align Capital Partners, has acquired Allied Metrics, a supplier of rubber-based products and solutions.

• Post Oak acquired a stake in Midway Energy Partners, a Texas-based energy provider.

• McNally Capital-backed Xcelerate Solutions has merged with VMD Corp., a healthcare technology and data analytics firm.

• Georgia Metals, backed by CID Capital, acquired Watson Metals, a processor and distributor of specialty metal building products.

• Greater Sum Ventures acquired a majority stake in SOMA Global, a provider of public safety and justice technology solutions.

• Spectrum Science, backed by Knox Lane, has acquired Continuum Clinical, a clinical trials services provider.

• Verlinvest acquired a stake in Cible Skin, a skin care products company.

• Vontobel has agreed to acquire a minority stake in Ancala Partners, a UK-based infrastructure investment firm.

• Linden Capital Partners and Ontario Teachers' Pension Plan have formed a new clinical research investment platform.

• RBio Energy, a company planning to develop biorefinery assets and biomass/biogas power generation capacity, agreed to go public via SPAC Perception Capital III at a $350 million valuation.

Tech, Vertical SaaS, & Misc. Enterprise

• Zededa, an edge computing startup, raised $72m in Series C funding led by Smith Point Capital.

• Polycam, a developer of apps and software for 3D scanning and editing, raised $18 million in Series A funding led by Left Lane Capital and Adjacent, with participation from Adobe Ventures.

• Closinglock, a AI-powered office rent platform, raised $12 million in Series A funding. Headline led, with participation from LiveOak Ventures, RWT Horizons, and GTMfund.

• LimaCharlie, a security operations cloud platform, raised $10.2 million in Series A funding. Sands Capital led, with participation from Long Journey Ventures, Lytical Ventures, Myriad Venture Partners, StoneMill Ventures, CoFound Partners, and Strategic Cyber Ventures.

• Upstash, a cloud database focused on on data liquidity, raised $10 million in Series A funding led by Andreessen Horowitz.

• Attentive.ai, an AI-powered SaaS automating construction and landscaping workflows, raised $7 million in Series A funding led by Vertex Ventures SEAI, with participation from Peak XV Partners and InfoEdge Ventures.

Fintech

• Xensam, an enterprise software asset management provider, raised $40 million in new funding from Expedition Growth Capital.

• Pennylane, an accounting software company for small businesses, raised €40 million in Series C funding at a €1 billion valuation from DST Global and Sequoia Capital.

• OTO, an Indian electric scooter financing platform, raised $10 million in new funding led by GMO Venture Partners, with participation from Turbostart, KL Rahul, and existing backers Prime Venture Partners, Matrix Partners, and 9Unicorns.

• Artificial Labs, a provider of insurtech solutions focused on algorithmic underwriting, raised £8 million in new funding. Augmentum Fintech led the round, with participation from MS&AD Ventures and FOMCAP IV.

• Code, a micropayments platform, raised $6.5 million in seed funding. M13 and Union Square Ventures co-led, with participation from Balaji Srinivasan.

• Flood, a decentralized order routing and settlement protocol, raised $5.2 million in seed funding. Bain Capital Crypto led, with participation from Archetype and Robot Ventures.

• Truflation, a provider of economic data feeds and indices, raised $6 million in funding led by Laser Digital and Red Beard Ventures, with participation from Modular Capital, Abra, G20, and Four Seasons Ventures, and existing backers Chainlink, Fundamental Labs, C2squared, Cogitent Ventures, and the Israeli Blockchain Association.

Consumer & Media

• Glass Imaging, a developer of smartphone imaging technologies that use computational AI, raised $9.3 million in seed funding led by GV, with participation from Future Ventures, Abstract Ventures, and LDV Capital.

Healthcare & Life Sciences

• Neurona Therapeutics, a clinical-stage biotech focused on regenerative cell therapies, raised $120 million in new funding. Viking Global Investors and Cormorant Asset Management co-led, with participation from The Column Group, Schroders Capital, Stanton Road Capital, and NRx Pharmaceuticals.

• Unlearn, a developer of clinical trial AI software to create digital participants, raised $50 million in Series C funding. Altimeter Capital led, with participation from existing backers Radical Ventures, Wittington Ventures, Mubadala Capital, Epic Ventures, and Necessary Venture Capital.

• Aizon, an AI-powered platform for pharmaceutical manufacturing ops, raised $20 million in Series C funding led by NewVale Capital, with participation from Atlantic Bridge, Crosslink Capital, and Uncork Capital.

• Ezra, a provider of MRI-based cancer detection services, raised $21 million in new funding. Healthier Capital and FirstMark Capital co-led, with participation from Allianz Life Ventures, Credo Ventures, Seedcamp, LDV Partners, Accomplice, and Founders Future.

• Headlight, a provider of evidence-based mental health services, raised $18 million in funding from Matrix and EPIC Ventures.

• Vektor Medical, a developer of AI-enabled arrhythmia analysis technology, raised $16 million in Series A funding co-led by Solas BioVentures and TVM Capital Life Science.

Industrials, Greentech, & Other

• Koloma, a geologic hydrogen startup, raised $245 million in Series B funding, per Axios. Khosla Ventures led, with participation from United Airlines Ventures and Amazon's climate fund.

• Elroy Air, an autonomous cargo drone developer, raised $48.9 million in new funding led by Shield Capital.

• Daedalus, an AI-enabled manufacturer of bespoke precision parts, raised $21 million in Series A funding. NGP Capital led, with participation from Addition and Khosla Ventures.

• Thea Energy, a fusion energy startup, raised $20 million in Series A funding. Prelude Ventures led, with participation from 11.2 Capital, Anglo American, and Hitachi Ventures, among others.

• Formlogic, an autonomous precision manufacturing service provider for space companies, raised $20 million from Trinity Capital.

• Greyparrot, a provider of AI waste analytics, raised $12.8 million from Bollegraaf, a manufacturer of recycling plants.

• Ares Management raised $2.6 billion for its latest private credit fund.

• Warburg Pincus is targeting $2.5 billion for a new financial services-focused buyout fund.

• MSA Capital is targeting a $1 billion raise for new venture investments in Middle East technology startups.

• 3 Boomerang Capital raised $375 million for a new lower middle market healthcare-focused buyout fund.

• The Riverside Company raised $235 million for a new fund focused on small-cap enterprise SaaS.

• Voyager Ventures raised $100 million for its second greentech fund.

1. Inside Norway sovereign wealth fund’s $92 million Excel error.

• Incorrect date input leads to “unforgivable” error (and the FT promises a free T-shirt to anyone with an even larger Excel misstep to share). — Financial Times

2. The latest on New York Community Bank’s struggles.

• Renewed tremors in U.S. banking industry following commercial mortgage defaults. — Semafor

Interested in partnering with Transacted? If you’re a brand looking to connect with an engaged financial audience, we’re here for it. Please reach out. 

Got a tip or an idea for a story? Email [email protected], or Tweet/DM @transactedInc.