Sunday Ghospel

Happy Sunday

it’s been a busy week. We have a busy week ahead. Lots of data to come but the most important is the number of pils vs. helles consumed at the Oktoberfest. I will contribute to this discussion actively. Musings tomorrow and on Tuesday. are accordingly musings entirely kept for my own delight. Regular schedule to continue after. In any case. Enjoy this easy gospel on a Sunday.

Cheers
Philip

The week in review

Taking the temperature

• As expected (at least by traders - while not by 105 economists) - the FED delivered a 50bps cut. The FED funds range now floats between 4.75% to 5.00%. As I elaborated earlier last week - this is just the beginning and the future cuts and way forward will be worth watching. The dot plot (some but very few people actually have time to spell out the technical term: Summary of Economic Projections Plot) shows FOMC members are anticipating another 50bps to be cut in 2024. Make that 100bps in 2025. And like I told my barber after the first time I crawled out of my home during COVID - feel free to cut more: 50bps more in 2026. Terminal rate estimated @ 2.9%

  • Interesting note by Claudia Sahm - anyone who has read any commentary on recent recession outlooks, will be sure to have been exposed to her. She is the name giver to the Sahm rule - in short a recession indicator that argues a recession is starting when the 3 month moving average unemployment rate rises by 50bps or more above the low of the 12 month trailing unemployment rate. Historically accurate, she has been vocal about the rule not being all encompassing especially in complex climates like the post-pandemic has given rise to. But her comments on the significance of the 50bps FED cut this week still provides historical context that might show things are not as ruby rosy as they may seem to some

• The Fed doesn’t want any further softening of the labor market. The unemployment rate typically hits 5.1% in a hard-landing - status quo @ 4.2%. Initial jobless claims are the timeliest labor market indicator - the Fed wants to keep them low and achieve the mythical dream of a soft landing. Apollo’s economics department provides some estimates for the jobless claims for September. The survey clocked in @ 219k. Based on decreasing survey participation (recently participation in the economic survey has dropped significantly making the figures less and less reliable) - the corrected jobless claims are estimated to be closer to 300k. Approx. 37% miss.

• Unsurprisingly the biggest move in markets came in on Thursday - the FED rate cut hangover day. NASDAQ jumped 250bps. 10Y Treasuries closed in @ 3.73% on Friday - slight increase in yields on the long end with sharp drops on the 2Y end - the differential spread enough to disinvert the yield curve. 2Y yields @ 3.58

• Rating the meaning of rates: Borrowing costs for lower credit quality companies have been dropping. HY US corporate bond yields @ 7.30%. The lowest since mid-2022. The spread to US Treasuries is also as tight as ever - with a band of 3.12%

Venture tabs

This week global VC Funding:

• EUR 4bn in capital invested globally

• 454 completed deals

Biggest funding rounds:

1. Twelve | ClimateTech | EUR 221m

2. Sakana AI | R&D GenAI | EUR 193m

3. PhysicsWallah | EdTech | EUR 189m

4. Alan | InsurTech | EUR 173m

5. Hotel Engine | No-contract Hotel Booking Platform | EUR 126m

6. Sceye | SpaceTech | EUR 117m

7. AtoB | Payment FinTech for Transportation (Fleet Operators etc.) | EUR 117m

8. Angel City FC | LA based Woman’s Football Club | EUR 111m

9. Brisk Health | Mobile HealthTech | EUR 90m

10. Whatfix | App Guidance and Selfhelp Tool (if you have problems in an application the tool provides you with guidance on fixing it yourself) | EUR 89m

Most Active VCs (excl. all non-pure-play VC firms; e.g. no universities, incubators, sovereign wealth etc.):

1. Andreesen Horrowitz | 4 Deals

2. Alumni Ventures | 3 Deals

3. Bessemer Ventures | 3 Deals

4. Era Ventures | 3 Deals

5. FJ Labs | 3 Deals

6. GC | 3 Deals

7. Multicoin Capital | 3 Deals

8. Paris Business Angels (Angel Group) | 3 Deals

9. RiverPark | 3 Deals

10. SpeedInvest | 3 Deals

Some highlights of this week in Start-Up-Land:

• Alan - the French InsurTech - raises EUR 173m in Series F. Big ticket for a big valuation @ +EUR 4.0bn (almost a 50% step up to last round). Existing investors like OTTP, Lakestar and Temasek participated. New lead investor is the Belgian Financial Institution Belfius. The lead investment is attached to a partnership. Belfius’ corporate clients will be offered insurance products while Alan gains significant market reach. Some context on the French InsurTech:

  • Alan offers health insurance products such as virtual doctor consultations and mental health support all via the mobile platform

  • The idea itself does not seem novel but Alan executed well and outperformed legacy providers. Currently the company focusses on the French home turf, where companies are required to provide their employees with health insurance. Here Alan seems to shine by providing a streamlined and automated claims and reimbursement process - this is the core product. Value added services like the ones mentioned above came later.

  • Since launching in 2016 the company has gathered 500k users - more impressive is the growth this year. Since February the company added 150k customers.

  • ARR expected to clock in @ EUR 450m this year. Profitability is in sight for 2026

  • German DeepTech DeepDrive bags EUR 30m Series B. Felix and his team are building a modular EV drive technology that is proven to enable cost efficiencies for OEMs by close to 20% - unlocking billions in cost savings and a quicker rollout of EVs globally. 8 of the top 10 OEMs are in the pipeline as potential customers. New investor Leitmotif led round. Core cap table investors participated as well - UVC, BMW i Ventures, Bayern Kapital and Conti

• Capmont raises EUR 100m venture fund to fuel Series B tickets ranging between EUR 2 - 5m. That should make for a portfolio of 20odd companies.

• VCs explore the moon hoping to achieve moon returns. Intuitive Machines has scored a USD 4.8bn contract with NASA to deliver a satellite constellation between the moon and Earth. This is supposed to enable continuous communication with space missions/tech / astronauts / E.T. perhaps. Intuitive is the first company to ever perform a private moon landing and has generated top-line growth of 130% YoY as of Q2

• 11x raises USD 24m in Series A. Led by Benchmark. Participants include: Quiet Capital, Abstract Ventures, Lux Capital, Visionaries, Activant, HubSpot Ventures, Project A and 20VC. A lot of investors wanted in on the cap table of the company that is leveraging AI to enhance digital sales strategies. AI-powered Sales in the form of automated workstreams. Their AI sales rep. Alice helps clients automate prospecting, multi-channel engagement, and personalisation - companies can achieve more scale at a lower headcount. 11x also launched Jordan: An AI phone rep. to validate the quality of inbound leads. In other context: The company also made further headlines in the week as it moved it headquarters from their founding base in London across the pond to SF.

The week ahead

Economic Events

• Monday

  • US Manufacturing PMI for September

    • Consensus: 48.6

    • August: 47.9

  • US Service PMI for September

    • Consensus: 55.3

    • August: 55.7

• Tuesday

  • RBA (Aussie) Rate Decision

    • Expected to hold steady @ 4.35%

    • Inflation hovering around 3.8% significantly above target range - underlines assumption that no cut should be expected

• US Consumer Confidence for September

  • Consensus: 103.5

  • August: 103.3

• US New Home Sales Report for August (Annualised figures)

  • Consensus: 700k

  • July: 739k

Thursday

• Swiss National Bank (SNB) Rate Decision

  • Expected to oppose the stereotypical Swiss sentiment and refrain from staying neutral: Rates expected to be lowered to 100bps (25bps cut)

  • Comes after their first 25bps cut in June this year

  • Inflation still significantly below 2.0% - currently around 1.1%; weak consumer confidence; GDP annual growth @ 1.8% - seems there is room to play for more cuts

• US QoQ GDP for Q2

  • Consensus: 3.0%

  • Previous: 1.4%

Friday

• US Core PCE Inflation / Price Index for August

  • Consensus: 0.2% (monthly)

  • July: 0.2%

  • Last annual growth read @ 2.6%

  • As the fan favorite of FED officials the inflation read is highly anticipated to provide backdrop to last week’s jumbo cut. Any strength here may kick off speculation that the dot plot’s estimate for another 50bps cuts this year may be overstimulating

Earnings I will be watching

• Micron

• Cintas

• Jefferies

• Worthington SteelAccenture

• Costco

  • Retail indicators last week showed resilience - in line with consensus estimates

  • Interesting to see if Costco earnings will provide further backdrop to this