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If you’ve struggled to envision your virtual self in the metaverse, you’re not alone.
Meta Platforms, formerly Facebook, may be restructuring its company and hiring thousands for newfound augmented and virtual reality roles, but there’s not even a universal definition for what a metaverse is yet—let alone a synchronous set of ground rules.
Virtual reality goggles have allowed some of us to temporarily step into a video game or take a meeting with a supervisor in a conference room. But more-practical use cases still feel rather far off: Doctors appointments or x-rays handled virtually, skipping the line at the DMV to get a new license from home, air traffic controls, or interactive virtual therapy.
But we’d be remiss—and extraordinarily negligent—not to go ahead and start thinking about the laundry list of items that could go horribly wrong: cybertheft, misinformation, or—much worse—sexual harassment or abuse against children.
This is the discussion I had on Friday with Bradley Tusk, co-founder of Tusk Venture Partners, which invests capital in companies within highly-regulated industries. Tusk published a memo on the metaverse—urging regulators to get a head start wrapping their arms around a concept that is largely intangible at this point, but moving ahead at a rather brisk pace.
There was $10 billion of venture funding ingested into metaverse concepts in 2021. Companies like Microsoft, Apple, and Meta are digging their heels into the sector. Even a metaverse ETF (which, notably, shorts Meta Platforms) is surfacing, giving retail investors a way to invest in the fledgling iteration of the virtual world.
The possibilities of a virtual reality are enough to excite investors, but things could go very, very wrong. The Federal Trade Commission reported this month that more than 95,000 people lost $770 million to fraud via social media in 2021—think about the risk to virtual property. Misinformation has run rampant on platforms like Spotfy, Twitter, or Facebook; take that 3D. The most urgent and frightening considerations are safety: The Center for Countering Digital Hate, a non-profit organization that seeks to combat online hate and misinformation, found that users of Facebook’s VRChat, including minors, are exposed to things including graphic sexual content, racial slurs, or threats of violence every seven minutes.
“If you just do one thing first—even before consumer protection or setting up the rights for speech, or gambling regulation, or whatever else, you have to assume that this is going to be a dangerous place for kids, and you’ve got to proactively think through that and set out rules,” Tusk says.
Historically, regulators have taken a follow-on approach to innovation. Entrepreneurs ideate something—then the guardrails come after. But, with technology as all-immersive as VR, can’t we get ahead on issues we already know will be problematic? At this point, there’s a host of unanswered questions around tax implications for virtual property, cybersecurity risks, consumer protections, rights to speech, national security—you name it. Without rules, it’s a free-for-all. Companies will have full control of the virtual realities they create.
“If you don’t want a company to be able to, for example, monetize everyone’s data in every way they can, you’re going to have to proactively put rules out. You can’t expect them to not do it because that’s how they make money. They’re gonna do it for as long as they’re allowed,” Tusk says.
With the influx of money pouring in, the time to think through some of these protections—and particularly safety—is now. “Somebody’s got to start asking these questions,” Tusk says.
Non-chicken chicken taco: Plant-based meat startup Daring Foods raised $65 million in funding at the end of last year, including by Carolina Panthers quarterback Cam Newton. They were offering free plant-based chicken samples in a food truck outside my local Walmart this weekend. Those nuggets aren’t bad, but it’s quite a strange consistency for a taco, if you ask me.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
VENTURE DEALS
– FTX Trading, a Bahamas-based crypto exchange, raised $400 million in Series C funding from Temasek, Paradigm, Ontario Teachers’ Pension Plan Board, NEA, IVP, SoftBank Vision Fund, Lightspeed Venture Partners, Steadview Capital, Tiger Global, and Insight Partners.
– Descartes Underwriting, a Paris-based corporate insurance technology company that addresses climate and emerging risks, raised $120 million in Series B funding. Highland Europe led the round and was joined by investors including Eurazeo, Serena, Cathay Innovation, Blackfin Capital Partners, Seaya Ventures, and Mundi Ventures.
– Gupy, a São Paulo, Brazil-based HR tech company, raised $90 million in funding. SoftBank Latin America and Riverwood led the round and were joined by investors including Endeavor Catalyst, Oria Capital, and MAYA Capital.
– Purely Elizabeth, a Boulder, Colo.-based granola, oatmeal, and breakfast foods company, raised $50 million in Series B funding. SEMCAP Food & Nutrition co-led the round and were joined by Swander Pace Capital and Fresh Del Monte.
– causaLens, a London-based autonomous predictive technology-based application company, raised $45 million in Series A funding Dorilton Ventures and Molten Ventures led the round and were joined by investors including Generation Ventures, IQ Capital, and GP Bullhound.
– Gandeeva Therapeutics, a Vancouver-based cryogenic electron microscopy (cryo-EM) and machine learning biotechnology company for developing therapeutics, raised $40 million in Series A funding, led by Lux Capital and Leaps by Bayer and were joined by investors including Obvious Ventures, Amgen Ventures, Amplitude Ventures, and Air Street Capital.
– Simcha Therapeutics, a New Haven, Conn.-based cytokine immunotherapy developer, raised $40 million in Series B funding, led by SR One Capital Management and was joined by investors including BVF Partners, Samsara BioCapital, Rock Springs Capital, ArrowMark Partners, and Logos Capital.
– Vynca, a Palo Alto, Calif.-based holistic care provider for those with serious illnesses, raised $30 million funding. Questa Capital led the round and was joined by investors including Generator Ventures, First Trust, 4100 Group, and OCA Ventures.
– Alva Labs, a Stockholm, Sweden-based recruiting startup, raised $13.1 million in Series A funding led by VNV Global and was joined by investors including H&M global head of HR Tomas Lindén.
– Unblocked, a Los Angeles-based NFT company for music and entertainment brands, raised $10 million in seed funding from investors including Tiger Global, Penske Media, Electric Feel Entertainment, Primary Wave Music, Dapper Labs, Oaktree Capital Management, and Marcy Venture Partners.
– Wonderment, a Boston-based SaaS platform offering order tracking technology for Shopify merchants, raised $6 million in seed funding led by CRV and was joined by investors including Underscore VC and Defy.vc.
– Emergent Games, a blockchain gaming and metaverse studio, launched after raising £4 million ($5.4 million) in funding from Pluto Digital.
– AllSpice, a Boston-based git platform for hardware development, raised $3.8 million in seed funding. Bowery Capital and Root Ventures led the round and were joined by investors including Flybridge Capital and nTopology co-founder Greg Schroy.
PRIVATE EQUITY
– Vista Equity Partners and Evergreen Coast Capital agreed to acquire Citrix Systems, a Fort Lauderdale, Fla.-based virtualization software company, for $16.5 billion in cash. As part of the deal, Citrix will merge with TIBCO, a Vista portfolio company.
– Brentwood Associates acquired a minority stake in Pacifica Beauty, a Carpinteria, Calif.-based vegan beauty brand, per Bloomberg. Financial terms were not disclosed.
– Harbour Point Capital acquired a majority stake in Midwest Medical Transport, a Columbus, Neb.-based ambulance transportation services provider. Financial terms were not disclosed.
– Vertellus, a Pritzker Private Capital portfolio company, acquired Polyscope Polymers, a Geleen, Netherlands-based specialty additives developer for coatings, electronics applications and engineering polymers. Financial terms were not disclosed.
EXITS
– FARFETCH Limited acquired Violet Grey, a Los Angeles-based beauty marketplace, from Fernbrook Capital Management. Financial terms were not disclosed.
OTHER
– Pearson agreed to acquire Credly, a New York-based digital certification company. Financial terms were not disclosed.
– Cengage Group agreed to acquire Infosec, a Madison, Wis.-based cybersecurity education provider, for $190.8 million.
IPOS
– Epta, an Italian commercial refrigeration systems company, is weighing an IPO that could value the company at up to 1.8 billion euros ($2 billion), per Bloomberg.
– Arcellx, a Gaithersburg, Md.-based cell therapy company that develops immunotherapies for patients with cancer and other incurable diseases, plans to raise up to $140.3 million in an offering of 8.3 million shares priced between $15 and $17 per share. The company reported a net loss of $44.3 million in the nine months ending in Sep. 2021 and has yet to post revenue. New Enterprise Associates, Novo Holdings, Quan Capital, and Takeda Ventures back the firm.
– Appgate, a Coral Gables, Fla.-based Zero Trust platform for enterprises and governments, filed for an IPO. The company posted $31.4 million in revenue in the nine months ending in Sep. 2021 and $21.9 million in net income. Magnetar Financial backs the firm.
SPAC
– ETAO International Group, a Chinese digital healthcare company operator, agreed to go public via a merger with Mountain Crest Acquisition Corp. III, a SPAC. A deal values the company at $2.5 billion.
FUNDS + FUNDS OF FUNDS
– Blackstone, a New York-based private equity firm, raised $11 billion for a second private equity fund focused on investments in Asia.
– TCV, a Menlo Park, Calif.-based venture capital firm, raised $460 million for a new fund focused on funding tech companies at later stages.
– 468 Capital, a Berlin-based venture capital firm, raised $400 million for a second fund focused on tech companies in Europe and the U.S.
PEOPLE
– Isos Capital Management, a Westport, Conn.-based venture capital firm, hired Brian Flinn as managing director.
– Steve Koltes, the co-founder of CVC Capital Partners, a Luxembourg-based private equity firm, said he would step back from the firm ahead of its planned IPO. He will remain on the board.
Financial Services
