That Was The Week

Hat Tip to this week’s creators: @jaredheyman, @PeterJ_Walker, @cartaInc, @Om, @davemcclure, @vntrcapital, @mgsiegler, @sarahfielding_, @elevenlabsio, @fredwilson, @markgurman, @e_howcroft, @UtkarshShetti, @steph_palazzolo, @runwayml, @EricHSchwartz, @Cloudflare

Contents

Editorial: Rise of the Algorithms: Private Markets Indexing is Coming.

Essays of the Week

Larry Fink says BlackRock’s deal to acquire Preqin could lead to indexing private markets.

On Rebel Theorem 3.0

First Cut—State of Private Markets: Q2 2024

The Future of Writing: How AI Will Reshape Our Tools

Video of the Week

From Startups to Secondary VC Investments: Dave McClure's Insights from 500 Startups and Paypal (VNTR)

AI of the Week

Lowering the Boom on the New Boom Times

You can now get AI Judy Garland or James Dean to read you the news

The USV Librarian

Apple Poised to Get OpenAI Board Observer Role as Part of AI Pact

OpenAI CTO Admits Creative Jobs Can Be Harmed By AI

News Of the Week

Circle Becomes First to Receive License in the EU to Issue Stablecoins Under MiCABritain's Revolut surges to record profit as it seeks $40 bln valuation

Kuo: New AirPods to Feature Cameras for Enhanced Spatial Experiences

Startup of the Week

Runway, an AI Video Startup, in Talks With General Atlantic for $4 Billion–Valuation Fundraise

X of the Week

Cloudflare AI bot blocker

Hat Tip to this week’s creators: @PeterJ_Walker, @mgsiegler, @jglasner, @lennysan, @AndreRetterath, @alex, @pmarca, @nklsrh, @dmehro, @timmarchman, @adamclarkestes, @Kyle_L_Wiggers, @MTemkiContents

Editorial: 

Essays of the Week

Is there an AI Bubble?

Robotics Startups On The Rise In 2024

Behold: the Hackquisition

The Entrapment of Apple

The social radar: Y Combinator’s secret weapon | Jessica Livingston

Can We Fully Automate Startup Investing?

The 2024 IPO I’m Most Excited About

Video of the Week

The true story -- as best I can remember -- of the origin of Mosaic and Netscape.

AI of the Week

I Will F*****g Piledrive You If You Mention AI Again

Perplexity Is a B******t Machine

What, if anything, is AI search good for?

Andrew Ng plans to raise $120M for next AI Fund

No MacBook Air Killer, All MacBook Air Filler

Hebbia raises nearly $100M Series B for AI-powered document search led by Andreessen Horowitz

News Of the Week

No, a $100m + Series A Round isn’t Normal

It takes ten years to succeed as a Startup

Elon Musk has won $56bn pay package despite judge ruling it void, Tesla argues

Kleiner Perkins announces $2 billion in fresh capital, showing that established firms can still raise large sums

Startup of the Week

Webtoon Rises Modestly In IPO Debut

X of the Week

AI Poetry Camera? Seriously?Editorial

It’s Sunday, two days later than I usually send this out. Two excuses. I was in recovery from PTSD after the “debate.” And then I almost had a relapse watching England in the Euro last 16 game against Slovakia.

I’m unsure of my mental state now (we won 2-1 in extra time). But the other, more important “game” is still undecided.

But in AI, it seems everybody is getting PTSD from wild allegations that AI might kill the human race to now new suggestions that there may be a bubble in valuations for early-stage companies.

The items in this week’s newsletter are really good. MG Seigler, Alex Wilhelm and Peter Walker dominate. The first two are former TechCrunch writers (hats off to Mike Arrington for his talent-spotting). Peter is the leading contributor to VC data; he has access to Carta data and uses it super effectively.

MG and Alex have relatively new newsletter sites - SpyGlass and Cautious Optimism, respectively). They are great observers and even better writers - subscribe. Links in their articles are below.

Big tech seems to be running scared of AI regulation. This from MG Seigler’s : No MacBook Air Killer, All MacBook Air Filler

Microsoft really s**t the bed here both from a security and PR perspective. And what's left sounds very 'meh'. It's almost like Microsoft forget the 'Copilot' part of 'Copilot+ PCs'. And certainly they forgot the '+' part.

MG also wrote about the EU and Apple, claiming that the EU is seeking to entrap Apple by refusing to state what Apple can and cannot do with its AI intentions. Apple, in response, is saying it will not launch AI in Europe until the EU says what product flexibility it has.You have to smile. Apple plays this game super well.Finally, he has ‘Behold the Hackquisition’, which shows how big tech avoids M&A blocks by buying teams instead of companies.

Alex Wilhelm’s anticipation of the Circle (USDC) IPO is a great example of his regular style and substance.

Peter Walker heads up data storytelling at Carta (great title). This week, he also has three pieces, all originally posted on his LinkedIn profile.

‘Is there an AI bubble’ (my title) examines the spread of Series A venture funding valuations. He separates the percentiles and measures the spread between them, noting that the gap between the 50th percentile and the 95th is the widest ever - even wider than 2021 and 2022. This is for SaaS rounds that include much AI.

In H1 2019, the 50th percentile for pre-money valuations was $26M (Series A SaaS companies only, primary rounds). The 95th pct at that time was $96M.Now that's a pretty large gap. We're talking a 3.7x jump from the middle to the top end.But today things are even more skewed.𝗦𝗲𝗿𝗶𝗲𝘀 𝗔 𝗦𝗮𝗮𝘀 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻𝘀 𝗶𝗻 𝗛𝟭 𝟮𝟬𝟮𝟰• 50th pct: $44M• 95th pct: $203M• Gap: ~4.6xThat 4.6x gap is the largest of the past 5 years and likely the past 10, though I don't have full data to prove it.

Regular readers will know my point of view. Yes, there is a bubble in that smart money wants to be in the best AI companies and will compete on price to secure equity. And no, there is no bubble because this chase for future-winning companies is entirely rational. At a time when the entire planet is about to become AI users - even without being aware of it - enormous value will be created. The price of current participation is far below the actual value that will ultimately be created.

Hat Tip to this week’s creators: @leopoldasch, @JoeSlater87, @GaryMarcus, @ulonnaya, @alex, @ttunguz, @mmasnick, @dannyrimer, @imdavidpierce, @asafitch, @ylecun, @nxthompson, @kaifulee, @DaphneKoller, @AndrewYNg, @aidangomez, @Kyle_L_Wiggers, @waynema, @QianerLiu, @nicnewman, @nmasc_, @steph_palazzolo, @nofilmschool

Contents

* Editorial: 

* Essays of the Week

* Situational Awareness: The Decade Ahead

* ChatGPT is b******t

* AGI by 2027?

* Ilya Sutskever, OpenAI’s former chief scientist, launches new AI company

* The Series A Crunch Is No Joke

* The Series A Crunch or the Seedpocalypse of 2024 

* The Surgeon General Is Wrong. Social Media Doesn’t Need Warning Labels

* Video of the Week

* Danny Rimer on 20VC - (Must See)

* AI of the Week

* Anthropic has a fast new AI model — and a clever new way to interact with chatbots

* Nvidia’s Ascent to Most Valuable Company Has Echoes of Dot-Com Boom

* The Expanding Universe of Generative Models

* DeepMind’s new AI generates soundtracks and dialogue for videos

* News Of the Week

* Apple Suspends Work on Next Vision Pro, Focused on Releasing Cheaper Model in Late 2025

* Is the news industry ready for another pivot to video?

* Cerebras, an Nvidia Challenger, Files for IPO Confidentially

* Startup of the Week

* Final Cut Camera and iPad Multicam are Truly Revolutionary

* X of the Week

* Leopold Aschenbrenner

Editorial

I had not heard of Leopold Aschenbrenner until yesterday. I was meeting with Faraj Aalaei (a SignalRank board member) and my colleague Rob Hodgkinson when they began to talk about “Situational Awareness,” his essay on the future of AGI, and its likely speed of emergence.

So I had to read it, and it is this week’s essay of the week. He starts his 165-page epic with:

Before long, the world will wake up. But right now, there are perhaps a few hundred people, most of them in San Francisco and the AI labs, that have situational awareness. Through whatever peculiar forces of fate, I have found myself amongst them.

So, Leopold is not humble. He finds himself “among” the few people with situational awareness.

As a person prone to bigging up myself, I am not one to prematurely judge somebody’s view of self. So, I read all 165 pages.

He makes one point. The growth of AI capability is accelerating. More is being done at a lower cost, and the trend will continue to be super-intelligence by 2027. At that point, billions of skilled bots will solve problems at a rate we cannot imagine. And they will work together, with little human input, to do so.

His case is developed using linear progression from current developments. According to Leopold, all you have to believe in is straight lines.

He also has a secondary narrative related to safety, particularly the safety of models and their weightings (how they achieve their results).

By safety, he does not mean the models will do bad things. He means that third parties, namely China, can steal the weightings and reproduce the results. He focuses on the poor security surrounding models as the problem. And he deems governments unaware of the dangers.

Although German-born, he argues in favor of the US-led effort to see AGI as a weapon to defeat China and threatens dire consequences if it does not. He sees the “free world” as in danger unless it stops others from gaining the sophistication he predicts in the time he predicts.

At that point, I felt I was reading a manifesto for World War Three.

But as I see it, the smartest people in the space have converged on a different perspective, a third way, one I will dub AGI Realism. The core tenets are simple:

* Superintelligence is a matter of national security. We are rapidly building machines smarter than the smartest humans. This is not another cool Silicon Valley boom; this isn’t some random community of coders writing an innocent open source software package; this isn’t fun and games. Superintelligence is going to be wild; it will be the most powerful weapon mankind has ever built. And for any of us involved, it’ll be the most important thing we ever do. 

* America must lead. The torch of liberty will not survive Xi getting AGI first. (And, realistically, American leadership is the only path to safe AGI, too.) That means we can’t simply “pause”; it means we need to rapidly scale up US power production to build the AGI clusters in the US. But it also means amateur startup security delivering the nuclear secrets to the CCP won’t cut it anymore, and it means the core AGI infrastructure must be controlled by America, not some dictator in the Middle East. American AI labs must put the national interest first. 

* We need to not screw it up. Recognizing the power of superintelligence also means recognizing its peril. There are very real safety risks; very real risks this all goes awry—whether it be because mankind uses the destructive power brought forth for our mutual annihilation, or because, yes, the alien species we’re summoning is one we cannot yet fully control. These are manageable—but improvising won’t cut it. Navigating these perils will require good people bringing a level of seriousness to the table that has not yet been offered. 

As the acceleration intensifies, I only expect the discourse to get more shrill. But my greatest hope is that there will be those who feel the weight of what is coming, and take it as a solemn call to duty.

I persisted in reading it, and I think you should, too—not for the war-mongering element but for the core acceleration thesis.

My two cents: Leopold underestimates AI's impact in the long run and overestimates it in the short term, but he is directionally correct.

Anthropic released v3.5 of Claude.ai today. It is far faster than the impressive 3.0 version (released a few months ago) and costs a fraction to train and run. it is also more capable. It accepts text and images and has a new feature that allows it to run code, edit documents, and preview designs called ‘Artifacts.’

Claude 3.5 Opus is probably not far away.

Situational Awareness projects trends like this into the near future, and his views are extrapolated from that perspective.

Contrast that paper with “ChatGPT is B******t,” a paper coming out of Glasgow University in the UK. The three authors contest the accusation that ChatGPT hallucinates or lies. They claim that because it is a probabilistic word finder, it spouts b******t. It can be right, and it can be wrong, but it does not know the difference. It’s a bullshitter.

Hilariously, they define three types of BS:

B******t (general)

Any utterance produced where a speaker has indifference towards the truth of the utterance.

Hard b******t

B******t produced with the intention to mislead the audience about the utterer’s agenda.

Soft b******t

B******t produced without the intention to mislead the hearer regarding the utterer’s agenda.

They then conclude:

With this distinction in hand, we’re now in a position to consider a worry of the following sort: Is ChatGPT hard b**********g, soft b**********g, or neither? We will argue, first, that ChatGPT, and other LLMs, are clearly soft b**********g. However, the question of whether these chatbots are hard b**********g is a trickier one, and depends on a number of complex questions concerning whether ChatGPT can be ascribed intentions.

This is closer to Gary Marcus's point of view in his ‘AGI by 2027?’ response to Leopold. It is also below.

I think the reality is somewhere between Leopold and Marcus. AI is capable of surprising things, given that it is only a probabilistic word-finder. And its ability to do so is becoming cheaper and faster. The number of times it is useful easily outweighs, for me, the times it is not. Most importantly, AI agents will work together to improve each other and learn faster.

However, Gary Marcus is right that reasoning and other essential decision-making characteristics are not logically derived from an LLM approach to knowledge. So, without additional or perhaps different elements, there will be limits to where it can go. Gary probably underestimates what CAN be achieved with LLMs (indeed, who would have thought they could do what they already do). And Leopold probably overestimates the lack of a ceiling in what they will do and how fast that will happen.

It will be fascinating to watch. I, for one, have no idea what to expect except the unexpected. OpenAI Founder Illya Sutskever weighed in, too, with a new AI startup called Safe Superintelligence Inc. (SSI). The most important word here is superintelligence, the same word Leopold used. The next phase is focused on higher-than-human intelligence, which can be reproduced billions of times to create scaled Superintelligence.The Expanding Universe of Generative Models piece below places smart people in the room to discuss these developments. Yann LeCun, Nicholas Thompson, Kai-Fu Lee, Daphne Koller, Andrew Ng, and Aidan Gomez are participants.

Hat Tip to this week’s creators: @tedgioia, @benthompson, @stratechery, @peterwalker99, @omri_drory, @sama, @mariogabriele, @gruber, @giannandrea, @craigfederighi, @gregjoz, @alex, @MParekh, @waxeditorial, @romaindillet, @cookie, @ttunguz, @Kantrowitz

Contents

* Editorial: Checkmate!

* Essays of the Week

* Is Silicon Valley Building Universe 25?

* Apple Intelligence is Right On Time

* 2018 cohort graduation rates?

* How VCs Become A******s

* Startup Playbook

* How to Find a Unicorn

* Video of the Week

* John Gruber, John Giannandrea, Craig Federighi, and Greg Joswiak on Apple Intelligence

* AI of the Week

* OpenAI's growth is one of the most astounding business results of all time

* AI: New Focus on 'Accelerated' Local AI Devices. RTZ #387

* News Of the Week

* visionOS 2: Spatial Personas Can Touch Fingers, High Five, Fist Bump Each Other With Visual and Audio Feedback

* Raspberry Pi is now a public company

* Carta’s valuation to be cut by $6.5 billion in upcoming secondary sale

* LinkedIn Adds New Elements to Its Newsletter Creation Platform

* Startup of the Week

* Databricks' Accelerating Growth

* X of the Week

* 3, 3 Trillion Dollar Companies

Editorial: Checkmate!

Checkmate! That seems like the appropriate word if you analyze what happened with OpenAI this week.

After being built into every conceivable Microsft interface, Apple announced that it would integrate OpenAI into all of its operating systems across devices via Siri.

By locking up Microsoft and Apple, it has effectively locked out Google, at least for now. That will leave Google itself as the only large implementation of its Gemini AI family.

This gives Apple a global advantage in the iPhone versus Android battle. Few will prefer Gemini to OpenAI.

Beyond that, Apple successfully showed how its own ‘Apple Intelligence’ will face inwards to the device, interoperating with all apps and supporting ‘actions’ while leaving all user data on the device. And when you need more power than the device can deliver, the new Apple Intelligence Cloud steps up in a fully encrypted secure environment. Even Apple cannot decrypt your data as it has no keys.

Ben Thompson from Stratechery sums up Apple’s play as follows:

This is good news for Apple in two respects. First, with regards to the title of this Article, the fact it is possible to be too early with AI features, as Microsoft seemed to be in this case, implies that not having AI features does not mean you are too late. Yes, AI features could differentiate an existing platform, but they could also diminish it. Second, Apple’s orientation towards prioritizing users over developers aligns nicely with its brand promise of privacy and security: Apple would prefer to deliver new features in an integrated fashion as a matter of course; making AI not just compelling but societally acceptable may require exactly that, which means that Apple is arriving on the AI scene just in time.

The concept of “just in time” seems appropriate. Although, as a developer possessing all of the beta products, I can say that very few of the features announced are yet available.

The contrast with Microsoft couldn’t be more extreme. Its Recall product, which took a screen recording every five seconds and stored its findings in clear text on the device, got a backlash from journalists and privacy campaigners. Microsoft has all but canceled the product, and its PR tail is between its legs. Apple’s ‘Crush’ ad has almost been forgotten.

Microsoft could make a mistake here. It is already working on products competing with OpenAI and might be tempted to go alone. What Bing is to Google, Microsoft AI will be to OpenAI. If it does so, it will once again shoot itself in the foot. OpenAI is far ahead in features and capabilities. Google cannot integrate it. Microsoft has gained an advantage from having done so. Apple too. Don’t bite the hand that feeds you seems an apt reminder.

This week’s essays focus a lot on the social impact of innovation and venture capital.

Ted Gioia’s essay about “Universe 25” focuses on the Durkheim concept of ‘anomie.’ It is the idea that our isolation leads to meaninglessness in life.

“More than 100 years ago, sociologist Emile Durkheim studied the problem of anomie. That’s not a word you hear very often nowadays. But we need to bring it back.

Anomie is a sense that life has no purpose or meaning. The people who suffer from it are listless, disconnected, and prone to mental illnesses of various sorts. Durkheim believed, for example, that suicide was frequently caused by anomie.

But the most shocking part of Durkheim’s analysis was his view that anomie increased when social norms were lessened. You might think that people rejoice when rules and regulations get eliminated. But Durkheim believed the exact opposite.”

Gioia examines the aimlessness of a world where people live in social media.

The Venture Capital essays are excellent. Sam Altman’s ‘Startup Playbook’ contains intelligent advice for startup founding teams. And Mario Gabriele’s piece about ‘How to Find a Unicorn’ has good advice for emerging fund managers. Omri Drory’s piece: How VCs Become A******s - is both funny and true. A great read

A reminder for new readers. That Was The Week includes a collection of my selected readings on critical issues in tech, startups, and venture capital. I selected the articles because they are of interest to me. The selections often include things I entirely disagree with. But they express common opinions, or they provoke me to think. The articles are snippets sized to convey why they are of interest. Click on the headline, contents link, or the ‘More’ link at the bottom of each piece to go to the original. I express my point of view in the editorial and the weekly video below.Hat Tip to this week’s creators: @reidhoffman, @dougleone, Credistick, @credistick, @rex_woodbury, @NathanLands, @ItsUrBoyEvan, @berber_jin1, @cityofthetown, @keachhagey, @pmarca, @bhorowitz, SignalRank Update, @signalrank, @steph_palazzolo, @julipuli, @MTemkin, @geneteare, @lorakolodny, @jasminewsun, @JBFlint, @asharma, @thesimonetti, @lessin

Contents

* Editorial: 

* Essays of the Week

* Crossing The Series A Chasm

* The Consumer Renaissance

* The Creator Economy on AI Steroids

* AI Is Transforming the Nature of the Firm

* The Opaque Investment Empire Making OpenAI’s Sam Altman Rich

* Video of the Week

* The American Dream - Marc Andreessen and Ben Horowitz

* AI of the Week

* SignalRank Version 3 Improves Performance Again

* How Long Can OpenAI’s First-Mover Advantage Last?

* OpenAI Employees Warn of Advanced AI Dangers

* A Right to Warn about Advanced Artificial Intelligence

* Nvidia hits $3tn and surpasses Apple as world’s second-most valuable company

* VCs are selling shares of hot AI companies like Anthropic and xAI to small investors in a wild SPV market

* News Of the Week

* Crunchbase Monthly Recap May 2024: AI Leads Alongside An Uptick In Billion-Dollar Rounds

* Elon Musk ordered Nvidia to ship thousands of AI chips reserved for Tesla to X and xAI

* Introducing video to Substack Chat

* Instagram’s Testing Video Ads That Stop You From Scrolling Further

* Startup of the Week

* NBA Nears $76 Billion TV Deal, a Defining Moment for Media and Sports

* X of the Week

* Doug Leone - I am supporting Trump.

* Reid Hoffman - I am supporting Biden

Editorial

I woke on Tuesday to Doug Leone of Sequoia Capital on X saying:

I have become increasingly concerned about the general direction of our country, the state of our broken immigration system, the ballooning deficit, and the foreign policy missteps, among other issues. Therefore, I am supporting former President Trump in this coming election.

Doug has the right to support Trump. It is also clear that the immigration system is broken, the deficit is ballooning, many things are wrong with foreign policy, and there are “other issues.” Trump as the solution is less obvious. But there it is—hot on the tails of Chamath Palihipitaya and David Sacks announcing a fund-raiser for Trump on the All-In podcast (they said they would do the same for Biden).

Reid Hoffman followed up a day later with:

On one level, this is a straightforward choice, but any literate attempt to analyze Leone’s issues might arrive at the following conclusions:

* Like many Western nations, the USA is aging rapidly and has a shrinking working-age population across all skill sets. Immigrants are needed, and pro-immigration leadership is needed, creating a path to entry for large numbers of skilled and unskilled workers to fill empty jobs as we get close to full employment.

* The deficit is large, and there are many palliatives available. Selling more to China would help, but both party leaders are protectionist. Taxes to reduce the divide between the 1% and the rest would help a bit. However, what would help the most is economic growth, which requires investment in technology and productivity. Neither leader seems too focused on innovation and investment.

* Foreign Policy - well, sheesh, it’s a big issue. However, saber-rattling about Taiwan and provoking China seems to be a hobby shared by both parties and does not seem smart. Ukraine and the future of Europe are better in Biden’s hands, but not by a lot. Europe looks very shaky. The US is increasingly isolationist. The appetite for world leadership is on the decline. Again, the solution would focus on economic growth, which seems absent.

Voting for Trump is a big no-no for me. But voting for Biden is, at best, a lesser evil instinct, not a belief system. The election will not be where the future is built, but it is important. Politicians are collectively disappointing.

This week’s video of the week from Marc Andreessen and Ben Horowitz is called “The American Dream” and champions their view about American Dynamism. And I must confess that this comes closer to a vision of the future than either political outfit. Their vision requires political support, massive government financial commitment, and private capital investment. I see no evidence of those happening.

The real winning effort seems to be happening on the ground. This week, Nvidia hit $3 trillion, eclipsing Apple as the world's second-most valuable company. This is even though Apple has 7 times the revenue of Nvidia.

This week’s first essays also focus on prospects for boom time. Rex Woodbury’s ‘The Consumer Renaissance’ examines the impact of consumer spending on our lives. In ‘The Creator Economy on AI Steroids, ’ Nathan Lands focuses on how emerging tools will transform creativity. But in ‘AI Is Transforming the Nature of the Firm, ’ Evan Armstrong gets closest to a future vision.”

AI is the first universally flexible technology. It can interact with our digital environments in similar ways to humans, so it can have all the flexibility that we do. In that way, it may be the last technology we ever need.

This seems to be the crux of hope in a world where dreams and nightmares are strangely devoid of detail. What the world needs (not only America) is hope. And hope is born from optimism. Optimism is born from success. The most likely success of the next decades will result from specific uses of AI that improve human life.

I know and like Doug Leone. I know and like Reid Hoffman.

Doug's bar for success needs to be higher. Voting for Trump is not right, and even if it were, it would not be sufficient.

Reid also needs a higher bar. Voting for Biden will not be sufficient even if it is right.

Let’s focus on where success can be found, grow optimism, and breed hope. There is a need for a broad technical revolution and the social rebirth it enables. Silicon Valley and its friends globally need to invent the next version of human existence to the benefit of all. The social rebirth requires a conscious effort; technology will not magically bring it about. More in this week’s video.

Essays of the Week

Crossing The Series A Chasm

Dan Gray

Dan Gray, a frequent guest author for Crunchbase News, is the head of insights at Equidam, a startup valuation platform, and a venture partner at Social Impact Capital.

June 5, 2024

As we get deeper into 2024, there is increasing concern about the state of Series A fundraising. The bar for investment appears much higher, and fewer startups are reaching it.

This is a problem for founders, and investors like Jenny Fielding, managing partner of Everywhere Ventures, who said, “Every Seed investor’s dilemma: All my Series A buddies want to meet my companies early! All my companies are too early for my Series A buddies.”

To attach some data to this, we can see that the median step-up in valuation from seed to Series A has gone from $19.5 million in Q1 2022 to $28.7 million in Q1 2024. Series A firms seem to be looking for much stronger revenue performance, with targets of $2 million to $3 million in ARR, compared to $1 million to $2 million just a few years ago.

The outcome is that while 31.8% of Q1 2020 seed startups closed their Series A within two years, that fell to just 12% for Q1 2022 — which should worry everyone.

Why are Series A investors so much more demanding?

Today’s Series A investors are looking at startups that raised their seed between 2021 and 2023, which identifies the root of the problem: it spans the Q2 2022 high-tide mark for venture capital.

For example, there were 1,695 seed rounds of more than $5 million in 2021, rising to 2,248 in 2022, then falling to 1,521 in 2023. As a comparison, there have been just 137 so far in 2024.

The result is two categories of startups that are looking to raise their Series A today:

* Pre-crunch startups that raised generous seed rounds and stretched the capital out as far as they could, to grow into inflated valuations.

* Post-crunch startups that raised modest seed rounds on more reasonable terms, with shorter runways and less demonstrable growth.Strictly speaking, neither is more appealing than the other; the first group has less risk, the second offers more upside, and both are adapted to current market realities. It shouldn’t cause a problem for investors, provided they can distinguish between the two.

The cost of market inefficiency

Venture investors have a market-based lens on investment decisions, which means looking fairly broadly at trends in revenue performance and round pricing to determine terms, e.g. a typical Series A is within certain bounds of revenue performance and valuation. While that approach may be serviceable and efficient under ideal conditions, the past few years have been far from ideal.

Without distinguishing between the two cohorts, investors are now looking at the performance of Series A candidates that spent more than $5 million on a war chest for two to three years of growth alongside the valuations of candidates that raised around $2 million to prove scalability. It just doesn’t work as an average, and thus the unreasonable expectations.

..More

The Consumer Renaissance

From Predicting Consumer AI Applications to Analyzing Consumer Spend

REX WOODBURY, JUN 05, 2024

“Consumer” has become something of a bad word in venture capital circles.

We see this reflected in the early-stage markets: recent data from Carta showed that just 7.1% of Seed capital raised last year went to consumer startups. That’s less than half the share from 2019 (14.3%).

But I think consumer is actually a great place to be building and investing. Whenever something is out of favor, that’s a sign it’s probably a good place to spend time: this is an industry built on being contrarian, not built on following the herd. We’re entering a compelling few years for consumer entrepreneurship.

First, I’d argue that consumer is too narrowly defined. When people think consumer, they often think consumer social (a tough category) or consumer brands (a tough fit for venture compared to internet and software businesses, with typically lower return profiles). But consumer is broader. Consumer encompasses businesses that sell to consumers and those that rely on consumer spending. This means the obvious names—apps on our phones like Uber, Instacart, Spotify—and the enablers: Shopify, for instance, powers online retail; Faire powers offline retail; Unity powers game development. Each of the latter three is B2B2C, in its own way, but I would categorize each is also a consumer technology business.

The wins in consumer can be massive. The biggest technology businesses in history began as consumer businesses—Google, Facebook, Apple, Amazon. The original companies comprising FAANG—with Microsoft conspicuously absent—were allconsumer.

And some of the best returns of the last five years have stemmed from consumer tech IPOs. At Daybreak, we invest ~$1M at Pre-Seed and Seed. Here’s how much a $1M investment in the Seed round of five recent consumer IPOs would yield:

Big consumer wins compare favorably to big enterprise wins—relative to Snowflake’s market cap, Uber is ~3x in size, Airbnb is ~2x in size, and DoorDash is roughly equal. (Snowflake is the biggest enterprise IPO of the last decade.) The last few years produced a windfall of consumer outcomes, yet investors today almost write off the category.

At Daybreak, we don’t focus exclusively on consumer; my view is that you need to balance more binary consumer outcomes with B2B SaaS and B2B marketplaces. But we do approach investing through the lens of the consumer—how people make decisions. The buyers of products like Figma and Ramp, after all, are people, and software companies are increasingly selling bottom-up into organizations. The line between consumer and enterprise has been blurring for years.

This week’s Digital Native makes the argument that consumer tech is a compelling place to build and invest. We’ll look at the data to back up this argument, then delve into three categories of consumer that I’m particularly interested in right now:

* Checking in on Consumer Spend

* Consumer Tech: The Data Doesn’t Lie

* What to Watch: AI Applications

* What to Watch: Shopping

* What to Watch: Consumer Health

* Rule of Thumb: Follow the Spend

This week we’ll cover #1-3, and next week in Part II we’ll tackle #4-6.

Let’s dive in 👇

Checking in on Consumer Spend

Joe Biden’s reelection hopes hinge on how voters view the economy. And right now, voters aren’t too thrilled.

An April poll from Echelon Insights found that 57% of voters somewhat or strongly disapprove of how Biden is handling the economy. Yet most economic indicators are strong—GDP, unemployment rate, job growth, inflation. Each is trending in the right direction. What gives?

While inflation is down overall, the prices of lower-priced goods are up. These are our more frequent purchases. Car prices may drag down inflation broadly, but if you see higher prices during your weekly grocery run, you’ll be upset. A good piece in The Atlantic last December characterized this as “The English-Muffin Problem.” When people were surveyed about what factors they consider when deciding how the national economy is doing, the most-cited factor was “The price of groceries for your home.” When asked what they had in mind when reporting that their personal finances were getting worse, 81% of people chose groceries. No one wants to shell out $5.99 for a pack of English Muffins.

This is a key reason that Biden is struggling with working class voters. We see the same concept at work in fast-food prices:

Yet despite voter sentiment, consumer spending remains strong.

Even amidst high inflation rates in 2022, even with the S&P 500 dropping -19.64%, people kept spending. A Bank of America study found that credit and debit card spending rose +5.9% in 2022. Last year was up on 2022, and Q1 2024 was up on Q4 2023.

The chart below commits egregious Y-axis crime—starting at 11,000? come on!—but it’s helpful nonetheless. After a COVID dip in 2020, spending rebounded and has been rising steadily the past few years. The Y-axis is in billions here and data is quarterly, meaning that the chart ends at around ~$14.5 trillion in quarterly U.S. consumer spend.

A lot of headlines in the media tell the same story—that of the broke Millennial. But as Jean Twenge pointed out in The Atlantic recently, this narrative is wrong; Millennials are actually thriving.

..Lots More

The Creator Economy on AI Steroids

Nathan Lands

June 5, 2024

Create Your Own Netflix, Roberto Nickson Interview, First Pig-to-Human Liver Transplant, And Eminem Uses AI

Ever since ChatGPT launched, I’ve been telling friends who asked me for advice on what to do in the Age of AI two things:

* Buy NVIDIA stock(not financial advice!)

* Get involved in the creator economy. AI is going to put it on steroids.

That’s why I got active on X last year, growing my account from 5k followers to 64k, and now doing The Next Wave podcast with Matt Wolfe and HubSpot.

As AI makes execution easy, three big things remain: great ideas, great taste, and great personalities.

Peter Thiel recently said something similar, stating that individuals who excel in articulating ideas will surpass those skilled in mathematics, and our cultural values will shift to prioritize these communicators. I couldn't agree more.

The Age of AI will be dominated by Creative Generalists.

Possessing a broad set of creative skills and a strong online personality is crucial to thrive in this new era.

One aspect of this most people aren’t thinking about is that as AI content is everywhere, people will want to see real humans more and more. At the same time, those in the creator economy will have an easier time creating software and other products because of AI. This means lots of money for creators.

And actually, it’s already happening.

Tyler1, a famously jacked 6’5(possibly 5’4? Who knows) s**t-talking League of Legends streamer with over 7 million followers, launched his startup, Backseatgg, this week.

It puts his personality into the game while you play. He talks directly to you and gives you advice, including telling you when you suck.

I believe this is the start of a megatrend, with creators not just getting sponsors but building their own tech products.

As more creators get their hands on AI tools and it becomes easier to generate software with AI agents, we will see an explosion of wild ideas and new experiences that were never possible before.

Imagine an AI voice bot with Alex Hormozi's entrepreneurial expertise guiding your business decisions, a Sam Sulek bot reminding you to do your cardio, or a Paul Graham bot punching holes in your startup pitch.

My key takeaway from all of this is that, as annoying as he can be, Gary Vaynerchuk was right.

The most important thing you can do for your career or business is to get involved in the creator economy or to align yourself with creators and support them.

My current tier-list for the creator economy is: YouTube > X > Everything Else.

X is the easiest place to start, so I suggest just going there and writing what you think as often as you can.

And with AI mass-producing tons of mid-content, it’s smart to put your true personality and thoughts out there. As uncensored as possible.

Put the human soul into your content.

Creative Generalists

In the Age of AI, creative generalists rule.

Execution becomes easy with agents.

Finding truly unique ideas becomes hard.

Those with creativity and the ability to do many different things and blend them in unique ways will thrive.

Create Your Own Netflix With AI

This week, The Simulation, a Silicon Valley-based startup created by people who worked at Pixar and Oculus, announced Showrunner. And it’s one of the coolest things I’ve ever seen in AI.

Showrunner allows users to create virtual worlds populated with AI characters. You can set up the initial prompts, define the characters, and then let the AI take over, creating unique storylines and interactions. You can choose to interfere as much or as little as you want and then sit back and watch how things unfold.

https://twitter.com/NathanLands/status/1797823823217410282

Today, I talked with the founder, Edward Saatchi, and now I’m even more excited.

They’re aiming to turn Showrunner into the Netflix of AI, where users can create shows, watch shows created by others, or eventually create shows entirely by AI.

The first sandbox world they’ve created is sunny Sim Francisco, with a more dystopian vibe, Neotokyo coming next.

They have a private Alpha right now, with over 1,000 people creating their own stories. Edward is going to give me access soon so I can try it out myself.

Edward said the surprising thing to him is that people love putting themselves and their friends into the show. That makes a ton of sense to me. I would love to put my friends and family in a sim, put us all in hilarious situations, and share clips with them.

This will be huge if he unlocks a viral loop in which celebrities and influencers create episodes and share clips online.

Jason Evanish, a reader of Lore, had a great idea, too. Imagine if Showrunner could eventually license top IP, and you could create new episodes of your favorite shows. Even if they were in South Park style, I wouldn’t care. However, I assume they’ll have many styles to pick from, including anime, etc.

Imagine creating new episodes of Seinfeld, Star Trek, X-Files, or Firefly. It would be so addicting.

I’d love to change the last season of Game of Thrones…

This all makes me wonder: if, in the long term, I can make my own show that feels more interactive, like a game, do I need Netflix?

The Next Wave with Roberto Nickson

In this week’s episode of The Next Wave, Matt Wolfe and I spoke with Roberto Nickson, one of the top voices in AI & Tech on Instagram.

We discussed:

* His mega-viral Kanye West AI video from last year started much of the conversation around AI Music.

* Why he thinks humans will continue to be an important part of creative work and art.

* His time interviewing Mark Zuckerberg and why he’s very bullish on Meta’s chances to compete with OpenAI and Google.

* ..More

AI Is Transforming the Nature of the Firm

By reducing transaction costs, AI will reshape how companies operate and interact

BY EVAN ARMSTRONG

JUNE 4, 2024

To truly understand business strategy, you have to accept that it is, by nature, b******t. Of course, the practice of guiding a business, making choices with trade-offs, and responding to unexpected crises is real. But the academic study of business strategy is something closer to divination.

You may have heard of such famous frameworks as disruptive innovation, blue ocean, or Porter’s five forces. They look smart, sound smart, and are frequently cited by writers like myself. They try to add structure to something innately chaotic and mysterious.

So, why are they b******t? Simple. The value of a forecasting method is in its ability to be right, not sound right. Despite decades of study and the relentless efforts of the good people over at the Harvard Business School, we have yet to discover any strategy that is universally predictive. 

This does not mean that the study of business strategy has no value. Counterintuitively, because no single theory is wholly predictive, you can bundle multiple theories together to generate differentiated insights. Strategy is not business physics—it's analytic art. 

When the world gets confusing—say, for example, AI is remaking the entire technology landscape—these frameworks can inform the choices you need to make. The better you know these theories, the more instinctual their lessons become, the more prepared your intellect is, the faster you’ll be able to react to new opportunities in front of you. And when change is happening fast (like it is right now), speed is one of the biggest advantages.

Can you answer the big questions about what AI means for computers and the internet in general? With the proper study of business strategy, you should be able to make a pretty good guess.

Today I’d like to explain what I consider one of the very first pieces of business strategy writing, from 1936. Despite being 88 years old, it can help us answer some of those questions about the nature of companies, what they chose to outsource, and how they interact with each other.

The foundation of business strategy 

Our current AI conundrum would not have been a surprise to British economist Ronald Coase. At age 26, he published his legendary essay, "The Nature of the Firm."Coase grapples with a fundamental problem: If the market is efficient, shouldn’t it be cheaper for a firm to outsource the majority of its internal activities to specialized contractors? Markets typically reward specialized labor that can focus on performing one task better than anyone else. At its most elemental, Coase is trying to understand the relative merits of integration (i.e., a company makes all the stuff that goes into its products, like Tesla making many of the components of its cars) versus modularization (a company that uses off-the-shelf components like IBM).

Coase's major insight on this topic was to focus on transaction costs, which are the costs associated with using the market for production and exchange. 

In a market, transactions occur through contracts between independent agents, each of which incurs costs. Within a firm, however, transactions are managed internally by a founder or manager, reducing the need for individual contracts for each transaction. Coase argues that firms exist because they can reduce these transaction costs relative to what they would outside the firm.

The size and scope of a firm are determined by the balance between the costs of organizing an extra transaction within the firm and the costs of conducting the same transaction on the open market. A firm will expand until the cost of organizing an additional transaction within the firm equals the cost of carrying out the same transaction through the market.

This theory has several implications: Firms may integrate vertically to reduce transaction costs, or they may outsource functions if the market can perform them more efficiently. The size of a firm is influenced not just by economies of scale but also by the efficiency in managing transaction costs internally instead of through the market.

However, the most important implication is that technology dramatically reduces costs. Widely distributed technology has a way of standardizing the way that firms interact with each other. Let me show you what I mean.

..Lots More

The Opaque Investment Empire Making OpenAI’s Sam Altman Rich

Many companies backed by CEO do business with the ChatGPT maker and benefit from the AI boom driven by the blockbuster startup, raising questions of conflicts

By Berber Jin, Tom Dotan and Keach Hagey

June 3, 2024 at 12:01 am ET

Sam Altman has a day job and a side gig. Only one of them is making him rich.

As the chief executive and co-founder of OpenAI, the 39-year-old oversees an artificial-intelligence startup valued at $86 billion that is spearheading a technological revolution. He owns no stake in the ChatGPT developer, saying he doesn’t want the seductions of wealth to corrupt the safe development of artificial intelligence, and makes a yearly salary of just $65,000. 

Less publicly, Altman is one of Silicon Valley’s most prolific and aggressive individual investors, managing a sprawling investment empire that is becoming a direct beneficiary of OpenAI’s success. The holdings he controls were worth at least $2.8 billion as of early this year, according to company filings and Wall Street Journal reporting. Much of the portfolio isn’t widely known.

Altman and his venture funds have invested in more than 400 companies, by Altman’s own estimate, including big names such as Stripe, Airbnb and Reddit. The holdings are managed by his family office and rival the value and size of some full-blown venture firms.

Altman has added to his startup stakes by drawing on a debt line from JPMorgan Chase, his longtime personal bank, allowing him to pour hundreds of millions of dollars more into private companies. Altman’s strategy, not previously reported, is rare among venture capitalists given the volatile nature of startup investing, where high percentages of young companies go bust. Taking on such personal levels of debt is a risky gamble.

A growing number of Altman’s startups do business with OpenAI itself, either as customers or major business partners. The arrangement puts Altman on both sides of deals, creating a mounting list of potential conflicts in which he could personally benefit from OpenAI’s work. 

OpenAI is in talks for a deal with Helion, a nuclear-energy startup that is chaired by Altman, in which it would buy vast quantities of electricity to provide power for data centers.

The 11-year-old company is planning to build nuclear-fusion power plants, a technology that doesn’t yet exist in a usable format. Altman invested $375 million in Helion in 2021, his largest startup check ever written. The startup signed on Microsoft, its first customer and OpenAI’s largest investor, last year. 

Altman has recused himself from the deal talks between OpenAI and Helion, which haven’t been previously reported.

Last month, OpenAI announced a partnership with Reddit in which it would pay to bring the messaging site’s content to ChatGPT and other AI products. Altman and entities he controls own 7.6% of Reddit, making him the third-largest outside shareholder, and he briefly served as its CEO in 2014. 

Reddit’s stock shot up 10% after the announcement, boosting Altman’s stake by $69 million to $754 million. Altman didn’t lead the partnership talks, OpenAI said in a blog post. 

Altman’s more recent investments have focused on companies that aim to capitalize on the artificial intelligence boom being driven by OpenAI. Apex Security, in which Altman invested an undisclosed amount last summer, aims to sell cybersecurity software to companies using AI products such as ChatGPT. He also invested an undisclosed amount in Exowatt, a startup tackling the clean-energy needs of big data centers used by AI companies.

Through a spokesperson, Altman declined to comment on any potential conflicts of interest between OpenAI and his personal investments.

..Lots More

Video of the Week

The Future of the American Dream

Marc Andreessen and Ben Horowitz

AI of the Week

SignalRank Version 3 Improves Performance Again

Announcing the next version of SignalRank's Predictive Algorithms

SIGNAL RANK CORPORATION

JUN 05, 2024

SignalRank's scoring algorithms aim to align our investments with our partner's greatest chance of seeing returns on their investments. We seek to provide capital for the best prospects within their portfolio.

Because our partners share profits on our investments, they have a common interest in the quality of the companies we place capital into. Our scores are intended to weigh all Series B rounds against each other. We target the top 5-10% of high-scoring rounds. In that sense, our accuracy is of significant interest to our partners.

Last October, we announced version 2 of SignalRank's algorithms.. At that time, we highlighted a significant improvement in the algorithm’s ability to detect companies likely to achieve a 5x MOIC (multiple of invested capital) or more within 5 years of their Series B funding round, while maintaining strong unicorn prediction capabilities.

While version 2 showed relative performance metrics slightly below version 1 (24% unicorns vs. 26% and 4x MOIC vs. 4.6x MOIC), it demonstrated substantial absolute gains (641 unicorns vs. 203), making it far superior in overall performance. Here is what we said at the time. These were 2012-2023 numbers so included many immature qualifiers.

v1 has an average MOIC of 4.6x 2012-2023. v2 has 4.0x. 2012-2023.

v1 has 203 unicorns from the 858 selections (26%) v2 has 641 from 2,612 selections (24%)

This means we have significantly grown the candidate base while maintaining excellent performance.

With version 3, these performance metrics have improved even further, as evidenced in the following charts. We focus on four dimensions of improvement:

1. Number of Qualifiers: Ensuring sufficient candidates to produce at least 100 investable Series B rounds per year.

2. Average and Median MOIC: Evaluated through backtesting.

3. Unicorn Percentage: The proportion of unicorns produced by the backtest.

4. Absolute Number of Unicorns: The total count of unicorns identified.

No single model excels in all four dimensions, but MOIC production and the number of qualifiers are the most critical as they directly impact the number of accessible Series B rounds and the likely performance of those investments.

Version 3 outperforms both version 1 and version 2, producing more qualifiers, a significantly higher average and median MOIC, and a much higher unicorn percentage.

To correlate performance to the age of the investments in the qualified companies, we will use 2012-2020 as the range of years tested and compared.

This permits us to include 2021-24 performance in investments made up to 2020, and so shows a realistic set of outcomes.

For 2012-2020 here is the comparison:

It is clear that v3 has performed by optimizing qualifiers to provide at least 100 annual qualifiers (v2 produced too many), increasing MOIC against v2, and unicorn percent against both previous models. v1 produces better MOIC but at the heavy cost of too few qualifiers and as a result a low absolute number of unicorns.

..More

How Long Can OpenAI’s First-Mover Advantage Last?

By Stephanie Palazzolo Jun 4, 2024, 7:00am PDT

As companies like OpenAI, Anthropic, Google and Meta Platforms race to leapfrog each other with marginally faster, cheaper or more accurate large language models, a number of developers have told me that these LLMs are beginning to reach parity when it comes to performance.

And now, new exclusive data from Kruze Consulting, a finance and HR consulting firm, backs up those anecdotes. Over the last year, the proportion of the firm’s 800-plus venture-backed startup customers using multiple AI models has grown significantly, expanding from 1% last summer to 15% in April.

OpenAI remains by far and away the market leader when it comes to LLM usage, and I’ll be the first to admit that 15% is still a relatively modest number. But, this trend could signal that developers aren’t as married these days to any specific model provider as they once were, a belief that industry practitioners have shared with me as well.

“The most recent open-source models today are on par with GPT-4, and until the release of GPT-4o, OpenAI, Anthropic and Google’s models were very close in terms of performance,” said Ion Stoica, a professor of computer science at the University of California, Berkeley and the co-founder of AI startups Anyscale and Databricks. “It does raise the question of whether these models will get commoditized.”

In another example, data from Kruze shows that the growth in the consulting firm’s customers using OpenAI’s LLMs has slowed in recent months. Meanwhile, Anthropic’s release of Claude 3 in March saw a dramatic increase in usage compared to its Claude 2launch last July, suggesting that many developers saw the latest model as a serious contender compared to other frontier LLMs.

OpenAI could still have a few cards left up its sleeve. The company could take a page out of its biggest shareholder’s book by bundling together more AI products and creating an all-in-one package for customers—a strategy Microsoft used to make its Teamsmessaging app an attractive option despite Slack’s popularity. That strategy has likely worked for the ChatGPT maker in the past: Its choice to begin bundling together its image-generation software, DALL-E, with its ChatGPT Plus and Enterprisesubscriptions last October coincided with a decrease in Kruze’s customers using rival software from Midjourney, the firm said. 

..Lots More

OpenAI Employees Warn of Advanced AI Dangers

Tuesday June 4, 2024 12:55 pm PDT by Juli Clover

Several current and former employees of OpenAI and Google DeepMind today shared an open letter warning of the dangers of advanced AI and the current lack of oversight of companies working on AI technology.

The employees suggest there are a number of risks that we are facing from AI development, including further entrenchment of existing inequalities, manipulation and misinformation, and loss of control of autonomous AI systems, which the letter says could lead to human extinction.

AI companies have "strong financial incentives" to forge ahead with development and to avoid sharing information about their protective measures and risk levels. "We do not think they can all be relied upon to share it voluntarily," reads the letter, which says that it is up to current and former employees to speak out.

So long as there is no effective government oversight of these corporations, current and former employees are among the few people who can hold them accountable to the public. Yet broad confidentiality agreements block us from voicing our concerns, except to the very companies that may be failing to address these issues. Ordinary whistleblower protections are insufficient because they focus on illegal activity, whereas many of the risks we are concerned about are not yet regulated.

Employees are ultimately calling on AI companies to offer solid whistleblower protections for speaking out about the risks of AI.

* Avoid creating or enforcing agreements that prevent criticism for risk-related concerns.

* Offer a verifiably anonymous process for employees to raise risk-related concerns to the board, regulators, and independent organizations with relevant expertise.

* Support a culture of open criticism to allow employees to raise risk-related concerns about technologies to the public, the board, regulators, and more, as long as trade secrets are protected.

* Avoid retaliating against employees who publicly share risk-related confidential information after other processes have failed.

A total of 13 employees signed the letter, including seven former OpenAI employees, four current OpenAI employees, one former Google DeepMind employee, and one current Google DeepMind employee. OpenAI has threatened employees with loss of vested equity for speaking up, and it makes them sign draconian NDA agreements that muzzle criticism.

The letter comes as Apple prepares to announce multiple AI-powered features for iOS 18 and other software updates on Monday. Apple is working on its own AI functionality that will be baked into apps across the operating system, plus it has signed a deal with OpenAI to integrate ChatGPT features into ‌iOS 18‌.

A Right to Warn about Advanced Artificial Intelligence

We are current and former employees at frontier AI companies, and we believe in the potential of AI technology to deliver unprecedented benefits to humanity.

We also understand the serious risks posed by these technologies. These risks range from the further entrenchment of existing inequalities, to manipulation and misinformation, to the loss of control of autonomous AI systems potentially resulting in human extinction. AI companies themselves have acknowledged these risks [1, 2, 3], as have governments across the world [4, 5, 6] and other AI experts [7, 8, 9].

We are hopeful that these risks can be adequately mitigated with sufficient guidance from the scientific community, policymakers, and the public. However, AI companies have strong financial incentives to avoid effective oversight, and we do not believe bespoke structures of corporate governance are sufficient to change this.

AI companies possess substantial non-public information about the capabilities and limitations of their systems, the adequacy of their protective measures, and the risk levels of different kinds of harm. However, they currently have only weak obligations to share some of this information with governments, and none with civil society. We do not think they can all be relied upon to share it voluntarily.

So long as there is no effective government oversight of these corporations, current and former employees are among the few people who can hold them accountable to the public. Yet broad confidentiality agreements block us from voicing our concerns, except to the very companies that may be failing to address these issues. Ordinary whistleblower protections are insufficient because they focus on illegal activity, whereas many of the risks we are concerned about are not yet regulated. Some of us reasonably fear various forms of retaliation, given the history of such cases across the industry. We are not the first to encounter or speak about these issues.

We therefore call upon advanced AI companies to commit to these principles:

* That the company will not enter into or enforce any agreement that prohibits “disparagement” or criticism of the company for risk-related concerns, nor retaliate for risk-related criticism by hindering any vested economic benefit;

* That the company will facilitate a verifiably anonymous process for current and former employees to raise risk-related concerns to the company’s board, to regulators, and to an appropriate independent organization with relevant expertise;

* That the company will support a culture of open criticism and allow its current and former employees to raise risk-related concerns about its technologies to the public, to the company’s board, to regulators, or to an appropriate independent organization with relevant expertise, so long as trade secrets and other intellectual property interests are appropriately protected;

* That the company will not retaliate against current and former employees who publicly share risk-related confidential information after other processes have failed. We accept that any effort to report risk-related concerns should avoid releasing confidential information unnecessarily. Therefore, once an adequate process for anonymously raising concerns to the company’s board, to regulators, and to an appropriate independent organization with relevant expertise exists, we accept that concerns should be raised through such a process initially. However, as long as such a process does not exist, current and former employees should retain their freedom to report their concerns to the public.

Nvidia hits $3tn and surpasses Apple as world’s second most valuable company

AI chipmaker’s stock has surged 147% so far in 2024, underscoring shift in tech world as demand for its processors far outstrip supply

Reuters, Wed 5 Jun 2024 21.46 BST

Shares of Nvidia rallied to record highs on Wednesday, with the artificial-intelligence chipmaker’s stock market valuation hitting the $3tn mark and overtaking Apple to become the world’s second most valuable company.

The chipmaker’s stock was up 5.16% at $1,224.40, giving Nvidia a market value of $3.01tn at market close. Apple’s market capitalization was at $3.00tn at market close as its stock climbed 0.78%.

The latest rally for Nvidia comes as it prepares to split its stock 10-for-one, effective on 7 June, a move that could increase its appeal to individual investors.

The surge in Nvidia’s stock market value above Apple’s underscores a shift in Silicon Valley, where the company co-founded by Steve Jobs has dominated since it launched the iPhone in 2007.

Microsoft, based in Redmond, Washington, remains the world’s most valuable company with a market value of $3.14tn as its shares climbed slightly the same day, the only other company to reach such a stratospheric valuation.

Demand for Nvidia’s top-of-the-line processors is far outstripping supply as Microsoft, Meta Platforms and Google parent Alphabet race to build out their AI computing capabilities and dominate the emerging technology.

Nvidia has rallied nearly 30% just since 22 May, when it issued its latest stellar revenue forecast.

Optimism about AI lifted chip stocks broadly on Wednesday, with the PHLX chip index surging about 4%. Super Micro Computer, which sells AI-optimized servers built with Nvidia chips, climbed nearly 5%.

..More

VCs are selling shares of hot AI companies like Anthropic and xAI to small investors in a wild SPV market

Marina Temkin

10:00 AM PDT • June 1, 2024

VCs are clamoring to invest in hot AI companies, and willing to pay exorbitant share prices for coveted spots on their cap tables. Even so, most aren’t able to get into such deals at all. Yet small, unknown investors, including family offices and high-net-worth individuals, have found their own way to get shares of the hottest private startups like Anthropic, Groq, OpenAI, Perplexity, and Elon Musk’s X.ai (the maker of Grok).

They are using special purpose vehicles, or SPVs, where multiple parties pool their money to share an allocation of a single company. SPVs are generally formed by investors who have direct access to the shares of these startups and then turn around and sell a part of their allocation to external backers, often charging significant fees while retaining some profit share, known as carry.

While SPVs aren’t new – smaller investors have relied on them for years – there’s a growing trend of SPVs successfully getting shares from the biggest names in AI.

These investors are finding that the most popular AI companies, except OpenAI, are not all that hard for them to buy at their smaller levels of investing. That’s because early backers in sought-after AI startups are eager to exercise their pro-rata rights, which allow them to buy more shares each time a company raises, maintaining their percentage ownership. That’s the perfect scenario for an SPV. Rather than giving up the shares because the early investor can’t afford them, they’ll create the SPV, fund it by raising money from others, and, in most cases, charge additional fees.

In many cases, the VCs will offer access to the SPV to their existing limited partner investors, but they also may use brokers to offer access to a much larger universe of potential investors. In fact, the same AI startup may have multiple SPVs on their cap table, representing lots of small investors. But the terms each small investor will pay depend on the SPV. It’s a bit of a wild west, buyer-beware situation.

Ken Sawyer, co-founder of Saints Capital, a secondaries market VC firm, said he regularly sees SPVs for the same company marketed with different terms. “Fees and carry are all over the map,” he said, adding that SPV sponsors can charge as high as 2% of the total money invested and keep 20% of the profits.

What’s more, some SPVs are formed on top of another SPV. For instance, when Menlo Ventures was raising a $750 million SPV to invest in Anthropicearlier this year, some funds that invested in it resold a slice of their SPV allocation to other investors, charging additional fees on their second-layer SPV, Sawyer said.

..Lots More

News Of the Week

Crunchbase Monthly Recap May 2024: AI Leads Alongside An Uptick In Billion-Dollar Rounds

June 5, 2024

Gené Teare, @geneteare

Venture funding rebounded in May to reach $31 billion, the highest monthly tally so far this year. Investment was up over 40% month over month and 29% year over year, with AI leading as the sector that raised the most funding.

A spate of billion-dollar fundings contributed to the total, with $11 billion — over a third of capital raised last month — invested in six companies in rounds at $1 billion or more. This was the highest count of billion-dollar fundings in a single month since the venture market slowdown began in 2022.

Elon Musk’s xAI raised the largest funding, $6 billion at a $24 billion value. Billion-dollar rounds also went to CoreWeave, Wayve, Abound, Scale AI and Wiz. Investors who led or co-led these fundings include Lightspeed Venture Partners, Andreessen Horowitz, Accel and GSR Ventures on the venture side. Growth investors Thrive Capital, Coatue and SoftBank also led rounds.

AI leads

In total, companies in the AI sector raised 40% of venture funding in May with $12.5 billion invested across more than 250 companies, based on an analysis of Crunchbase data. xAI raised close to half of that amount.

Other leading sectors include healthcare and biotech companies, which raised $5.1 billion, and financial services companies, which raised $3.9 billion last month.

As of the end of May, AI, healthcare and biotech are the leading sectors so far this year, with each raising around $27 billion in funding.

Are the M&A markets making a comeback?

A record five venture-backed companies were acquired for more than $1 billion this past month. Three were biotech companies EyeBiotech, HI-Bio and Mariana Oncology. In the enterprise software sector, Venafi, a machine identity security company, and AuditBoard, a cloud compliance management software provider, were acquired.

..More

Elon Musk ordered Nvidia to ship thousands of AI chips reserved for Tesla to X and xAI

PUBLISHED TUE, JUN 4 20249:00 AM EDT

Lora Kolodny @IN/LORAKOLODNY/

KEY POINTS

* Emails circulated inside Nvidia and obtained by CNBC show that Elon Musk told the chipmaker to prioritize shipments of processors to X and xAI ahead of Tesla.

* Musk has said he can grow Tesla into a major player in artificial intelligence and that the company is spending heavily on Nvidia’s AI processors.

* By ordering Nvidia to let X jump the line ahead of Tesla, Musk delayed the automaker’s receipt of over $500 million in processors by months.

Elon Musk, chief executive officer of SpaceX and Tesla and owner of X, speaks at the Milken Conference 2024 in Beverly Hills, California, May 6, 2024.

David Swanson | Reuters

Elon Musk says he can grow Tesla into “a leader in AI & robotics,” an ambition that he’s said will require a lot of pricey processors from Nvidia to build up its infrastructure.

On Tesla’s first-quarter earnings call in April, Musk said the electric vehicle company will increase the number of active H100s — Nvidia’s flagship artificial intelligence chip — from 35,000 to 85,000 by the end of this year. He also wrote in a post on X a few days later that Tesla would spend $10 billion this year “in combined training and inference AI.”

But emails written by Nvidia senior staff and widely shared inside the company suggest that Musk presented an exaggerated picture of Tesla’s procurement to shareholders. Correspondence from Nvidia staffers also indicates that Musk diverted a sizable shipment of AI processors that had been reserved for Tesla to his social media company X, formerly known as Twitter.

Tesla shares slipped as much as 1% on the news Tuesday morning.

By ordering Nvidia to let privately held X jump the line ahead of Tesla, Musk pushed back the automaker’s receipt of more than $500 million in graphics processing units, or GPUs, by months, likely adding to delays in setting up the supercomputers Tesla says it needs to develop autonomous vehicles and humanoid robots.

“Elon prioritizing X H100 GPU cluster deployment at X versus Tesla by redirecting 12k of shipped H100 GPUs originally slated for Tesla to X instead,” an Nvidia memo from December said. “In exchange, original X orders of 12k H100 slated for Jan and June to be redirected to Tesla.”

A more recent Nvidia email, from late April, said Musk’s comment on the first-quarter Tesla call “conflicts with bookings” and that his April post on X about $10 billion in AI spending also “conflicts with bookings and FY 2025 forecasts.” The email referenced news about Tesla’s ongoing, drastic layoffsand warned that head-count reductions could cause further delays with an “H100 project” at Tesla’s Texas Gigafactory.

..More

Introducing video to Substack Chat

Speak directly to subscribers in a space you own

JASMINE SUN, JUN 05, 2024

Today we’re bringing video to Substack Chat. Now, for the first time, you can easily record a video on your phone and send it directly to your subscribers. Posting a video to Chat instantly notifies your audience, and the video can be paywalled to paid subscribers or your founding tier.

When we introduced video to Notes in April, we saw an explosion of creativity across the platform. Many Substackers jumped on the opportunity to introduce themselves to the broader Substack network, bringing potential new subscribers behind the scenes of their work. We saw Wu Fei 吴非 sing to a local hummingbird, Dr Sharon Blackie announce her new book, and Viv Chen share an outfit of the day. Others asked for the option to use video in a more private space that they own and control, where they can be candid with their community. We built video in Chat for publishers who wish to speak directly to subscribers in this way.

Think of video in Chat like sending a voice memo to a group chat, or recording a video for your Instagram story—minus the opaque algorithm deciding whether your post gets seen. Rather than getting lost in a sea of content, video in Chat is an easy way for creators to speak directly to their subscribers.

How to share videos in Substack Chat

* Open your publication’s chat in the Substack app by tapping on the Chat tab (the messages icon). Then tap on the orange “New chat” button. If you’ve enabled chat, your publication will be listed at the top.

* Tap the plus icon in the bottom left corner, next to the composer. Choose “Video” to upload from your gallery, or “Camera” to record a video directly from your phone’s camera. 

* You can then choose to add a caption, paywall the video thread, or send an email to notify subscribers.

* You’re done! Subscribers will get an instant push notification to their mobile device, prompting them to react and reply.

Videos in Chat can be up to five minutes long. For the smoothest experience, we recommend uploading at 1080p or lower. If you allow subscribers to start their own chat threads, they are able to share their own videos with the community (video replies are coming soon!). 

..More

Instagram’s Testing Video Ads That Stop You From Scrolling Further

Published June 2, 2024

By Andrew Hutchinson, Content and Social Media Manager

Unskippable video ads in your main Instagram feed? How would that work?

According to various reports, Instagram is currently testing out a new video ad format that does indeed stop users from scrolling in the main feed of the app until they’ve viewed a video ad.

As you can see in this example, shared by photographer Dan Levy, Instagram’s new in-feed ad units appear with a timer at the bottom, and you can’t scroll past the ad till the timer runs down.

Here’s an explainer of how the new ad units work:

As Instagram explains, you’ll actually need to view the ad before you can keep scrolling, so these are essentially unskippable video ads in IG form.

Which, as you can imagine, is not going down great with Instagram users.

YouTube’s unskippable video ads have long been cited as a key reason why people download ad blockers, because there are few things more annoying on the web than being forced to view disruptive, all-encompassing promotions for things that you’re not interested in.

Ideally, digital ad targeting would have gotten so advanced by this stage that the targeting element is less of an issue, but really, there’s no way to always display the right ad to the right user every time. So you are going to get random promos, particularly from big brands, blasted at you from time-to-time at least, and this new format would provide another way to force such messaging down your throat as you scroll through Instagram.

Which, from a brand perspective, I can understand the benefits of, in terms of exposure, timed placement, etc. But for users, not so much.

So why would Instagram do it?

Well, now that your main Instagram feed is half filled by AI-recommended content from profiles that you don’t follow, predominantly short-form Reels video clips, that presents a great opportunity for Meta to add in more promotions, because if 50% of the content in your feed is from profiles that you don’t follow anyway, you’re not going to be as affronted by ads within that stream.

But the scroll-stopping part, I’m not so sure about.

Startup of the Week

NBA Nears $76 Billion TV Deal, a Defining Moment for Media and Sports

Advanced talks with NBC, Amazon and ESPN spotlight the staggering value of sports rights and could portend industry changes

By Joe Flint, Amol Sharma and Isabella Simonetti

Updated June 5, 2024 at 8:37 am ET

The National Basketball Association entered its first TV negotiations in a decade with a problem: Its main business partners seemed to be on shaky footing.

TNT parent Warner Bros. Discovery WBD 0.73%increase; green up pointing triangle was saddled with more than $40 billion in debt, while ESPN parent Disney DIS -1.77%decrease; red down pointing triangle was battling a Wall Street activist over its slumping stock. Each company was reluctant to pony up the full premium the league wanted. But the NBA had quietly laid the groundwork with two other potential partners, Amazon AMZN 1.08%increase; green up pointing triangle and NBC, which pounced as soon as they got the chance.

Now, with negotiations progressing as the Boston Celtics and Dallas Mavericks prepare to face off in the NBA Finals, the league is on track to score big: It is closing in on deals with NBC, ESPN and Amazon that would bring in about $76 billion in media revenue over 11 years, people familiar with the discussions said. 

The NBA sweepstakes has turned into a defining moment for the TV industry, highlighting the anxieties of traditional media companies about the collapse of cable and their uncertain financial futures in the streaming world. It has put front and center the paradox that sports content is outrageously expensive but also critical to own in an industry in which it is one of the few reliable ways to draw in audiences. 

“Entertainment is a swamp, and sports is the only firm ground,” said former Fox Sports chief David Hill. 

NBC is near an accord with the league to pay an average of $2.5 billion a year, people familiar with the deal talks said. It would show around 100 games per season, with about half airing exclusively on the Peacock streaming service, reflecting a major bet on the future of streaming. Games would air on NBC on Tuesdays and Sundays when there isn’t a conflict with NBC’s “Sunday Night Football.”

Amazon’s $1.8 billion-a-year package would include regular-season and playoff games, the new NBA in-season tournament, and the “play-in” games in which teams compete for the final playoff spots. It also would have a share of the conference finals, which the media partners would split in a rotation, the people familiar with the terms said.

Disney would retain an NBA package and would continue to air the NBA Finals, with payments averaging about $2.6 billion a year, people familiar with the terms say, up from $1.5 billion under the current deal. Disney would get fewer games than under its current deal. ESPN’s deal will allow the company to air games on its direct-to-consumer streaming service, which is set to launch in 2025. 

Warner, led by Chief Executive David Zaslav, still has a right to match a rival package, and the league could always carve out a new package for the company in the final stretch, but its options are limited. 

The deals would go into effect after the 2024-2025 season and would include rights to WNBA telecasts, as that league grows in popularity with the rise of rookie sensation Caitlin Clark. Owners must approve the deals, and any announcement could still be a few weeks away.

The deals are clarifying the media industry’s pecking order and could set the table for big mergers down the road. For the league, the deals would translate into a windfall that would help fund blockbuster contracts for stars such as Jayson Tatum and Luka Doncic in the coming years.

The NBA is on track to increase its annual fees by more than 2.5 times under the new deal, to an average of nearly $7 billion. The NFL roughly doubled its fees under its last deal to around $10 billion a year. The NBA has much lower average ratings than the NFL, but it has more games and a young audience that is important to advertisers. It is very popular abroad, which is a big motivator for Amazon’s Prime Video.

“Yes, there’s risk at these fee levels given recent ratings, but they are also looking at the downside of the games being on competing services. Which is worse?” said Brent Magid, CEO of media consulting firm Magid.

..Lots More

X of the Week

Hat Tip to this week’s creators: @krishnanrohit, @EconSteveM, @abracarioca, @jasonlk, @HarryStebbings, @DavidStreitfeld, @PranavDixit, @amir, @waynema, @ingridlunden, @odsc, @seancaptain, @JacobERobbins, @Kantrowitz, @Ryan_S_Gladwin, @EricNewcomer, @maddierenbarger, @gruber, @paulg

Contents

* Editorial: 

* Essays of the Week

* Whither Utopia?

* 1% of VC backed startups will make it past $100M ARR

* From $1 to $100m revenue: Scaling VC backed SaaS with Notion Capital

* China’s $47B semiconductor fund puts chip sovereignty front and center

* Chinese scientists develop cure for diabetes, insulin patient becomes medicine-free in just 3 months

* Video of the Week

* Harry Stebbings and Jason Lemkin on Seed Investing

* AI of the Week

* If A.I. Can Do Your Job, Maybe It Can Also Replace Your C.E.O.

* OpenAI CEO Cements Control as He Secures Apple Deal

* OpenAI signs 100K PwC workers to ChatGPT’s enterprise tier as PwC becomes its first resale partner

* Why London is a Powerhouse in Artificial Intelligence

* AI May Dominate Billionaire Family Investments

* Generative AI seed funding drops 76% as investors take wait-and-see approach

* VC Says "Chaos" Coming for Startups, Ads, and Online Business as Generative AI Eats Web

* News Of the Week

* Ethereum ETFs: BlackRock Gets $10M Seed Investment and Grayscale Adds Coinbase Custody

* Sequoia's Elon Play

* Salesforce: We Need 50% More Pipeline Than Before To Hit the Plan

* Startup of the Week

* New from Lux, makers of Halide:

* X of the Week

Editorial: Stand Back, Think Big, Dig Deep

We need big and deep thinkers with bold ideas

I used Suno to create a theme song for this newsletter. You can download the MP3 to see how limited my creative skills are, even when using advanced AI.

The lyrics are mine and include the following:

[Verse]

That Was The Week No time to be Meek The goal is to Seek The Next Big Thing [

[Chorus]

That Was The Week That Was The Week Stand Back Think Big Dig Deep That Was The Week

I’m starting with this in honor of the essay of the week written by Rohit Krishnan - “Whither Utopia”. Rohit charts the rise of utopian ideas (before that was a pejorative term), and the fall of utopian thinking. Toward the end of the essay he states:

Instead of grand narratives the focus became on micro narratives, skepticism of rational progress, and, perhaps consequently, a reliance on technology to be the answer.

Micro narratives pervade technology today, while macro narratives are frowned upon or described as dangerous. OpenAI has become a magnet for hostility to big ideas and transformative technologies.

Rohit points out that technology may have obviated the need for large social thinking about organizing the world. I think that may be a temporal anomaly. As AI improves productivity and frees humans to have more leisure time (in the negative lexicon, “eats jobs”), the macro narrative around wealth distribution is likely to raise its head loudly.

So the theme this week is “Stand Back, Think Big, Dig Deep.”

It seems very likely that AI, or at least the LLM version we are experiencing now, will remove hours and hours of monotonous work from many humans each week. It seems very likely that the world will become cleverer as Apple introduces AI to the iPhone in Junes WWDC, and Android follows suit. Billions of us will have a ready-made, multi-skilled assistant. Increasingly, it will be able to carry out tasks and report results. It also seems likely that physical beings running computers with this AI embedded, will be capable of real-world tasks. And it seems likely that we will be able to raise science to a new level, as the Chinese diabetes technology reported below demonstrates. Oh, and the entire world will have access to these new skills and tools. The trend will be towards them being free.

We are on the verge of an era of enormous advancement in what we can collectively do.

So, this is not a time for fear, complaints, or accusations. it is a time to get stuff done.

PWC adopting ChatGPT and Apple reportedly doing so are early signals of a new technical revolution.

China’s $47 billion semiconductor fund (see below) will undoubtedly be able to leverage AI to make advanced semiconductors faster than we made the first ones.

The new world will challenge all of today's institutions and require new social arrangements, both globally and locally, as the earth flattens from an economic and demographic point of view and human demands regarding work are reduced.

You can’t have rapid technical s***s without equally dramatic social s***s. Rohit’s historical survey of utopian thinkers demonstrates that all greatly impacted how societies evolved. This generation needs to ask some big questions, dig deep for answers, and do so from an overview of where we are and where we want to go.

Hat Tip to this week’s creators: @edzitron, @bysarahkrouse, @dseetharaman, @JBFlint, @packyM, @KamalVC, @VaradanMonisha, @Claudiazeisberg, @IDTechReviews, @cjgustafson222, @NathanLands, @psawers, @lightspeedvp, @jaygoldberg, @avc

Contents

* Editorial: Dear Sam, A Letter from a Founder to a Founder

* Essays of the Week

* Sam Altman Is Full Of S**t

* Behind the Scenes of Scarlett Johansson’s Battle With OpenAI

* Sky voice actor says nobody ever compared her to ScarJo before OpenAI drama

* Better Tools, Bigger Companies

* The Pervasive, Head-Scratching, Risk-Exploding Problem With Venture Capital

* Video of the Week

* OpenAI vs Gemini 1.5

* AI of the Week

* Does AI have a gross margin problem?

* OpenAI and Wall Street Journal owner News Corp sign content deal

* Scale AI Raises $1B In Accel-Led Round; Hits $13.8B Valuation

* The Awful State of AI in California

* News Of the Week

* It’s Time to Believe the AI Hype

* The 49-Year Unicorn Backlog

* Humane, the creator of the $700 Ai Pin, is reportedly seeking a buyer

* NVIDIA CRUSHES EARNINGS, AGAIN

* Startup of the Week

* SUNO’S HIT FACTORY

* Warpcast of the Week

* Be Generous

Editorial: Dear Sam, A Letter from a Founder to a Founder.

This week let’s break the pattern and write this as a letter to Sam Altman.

Dear Sam,

It’s been a swings and roundabouts week for you at OpenAI.

I had a week like that in the spring of 1998. I was at Internet World launching RealNames to the world. RealNames invented paid clicks on keywords. Our first partner was AltaVista, and Google was our second—calling the feature "I'm Feeling Lucky."

It was the simplest technology ever. We had a keyword, bought by a customer. An example might be Disney buying "Bambi." They would buy it in every country and language they wanted and point it to a specific URL in each place. Search engines would look at the keywords you typed in (later browsers too) and if RealNames had it as a paid keyword, they would send the user to the site, with no search results. Just a direct navigation. RealNames got paid for the customer sent.

At the launch, we used the example of the keyword “Bambi” to show how superior our keywords were compared to domain names. In those days, Bambi.com pointed to a porn site. Our launch demo showed that typing "Bambi" went to Disney, but typing "Bambi.com" did not. All was well except we altered our network settings the eve of the launch, and when we demoed the use of "Bambi" at the launch, it (you can guess) went to the porn site.

Journalists wrote about RealNames as a scam and bad actors.

Luckily, we had great partners, and within 12 hours the network issue was fixed, and all was well. But for 24 hours, I felt like the world was collapsing around me. On the one hand, we launched our company, mostly to great acclaim; on the other, we were being destroyed in the tech media.

Sam, I know how this week must have felt. Your decision to pull the ‘Sky’ voice was right. And despite the horrors of the first 24 hours, this will pass.

That said, you mismanaged this entire thing. I’m sure you acted in good faith in wanting to embrace the “Her” meme. It is a good idea. And ‘Sky’ was a good effort.

It seems clear you had spoken to Scarlett Johansson and failed to reach an agreement. I’m prepared to believe you could not react fast enough to change the voice prior to the demo.

But once it went awry, you needed to do more than wait for a legal challenge before pulling it, and you needed to say something before the actress. Not doing so means that many people, probably most, think you did the entire thing on purpose.

Clearly, you did not preconceive this. If you did, then the fact that you were happy to pull the voice, and your knowledge that the actress was not prepared to have her voice used, would have stopped you before it got as far as it did. You would be very reckless to have thought you could get away with using a voice like hers without her permission.

So, you need to either go on the record and get this behind you or ignore it and hope it goes away. I think now we have ‘ScarJo’ as a word, the latter might prove difficult.

Best Regards,

Keith (A fellow Founder)

Beyond ScarJo there are some great essays this week. Pack McCormick writes about why AI will lead to more jobs and bigger companies. In framing his case he says”

Technologies are tools. 

I don’t mean that in the normal way that people mean it to say that technology is neither good nor bad.

Tools are good.

Humans can build better things with tools than they can without them.

But tools aren’t the point. They’re tools.

Tools lead to new possibilities and those lead to new endeavors. Read his essay below.

And a team made up of @KamalVC, @VaradanMonisha, @Claudiazeisberg have penned an essay called ‘The Pervasive, Head-Scratching, Risk-Exploding Problem With Venture Capital’. The main thesis is about investing in private companies versus public companies. They have a great graphic showing that the range of outcomes in Venture Capital is very wide compared to other asset classes:

Venture Capital’s top percentiles out-perform other asset classes, but most do not. The safest asset class is global equity (public company stock).

Building on this they show that large Venture investors that invest across 500 or more companies can compete with less risky assets by diversification.

This depicts a simulation of a manager doing 15 deals, compared to 500 and shows more deals equals less risk.

I recommend reading the full piece, linked in the contents above and the headline below. I think they are right, but there is a better way of derisking. The advice they give below is better than traditional venture capital, but that is a low bar:

To de-risk venture capital, CIOs simply need to acknowledge that VC math is different from public markets math. The importance of low-probability, excess-return-generating investments means that proper diversification requires a portfolio of at least 500 startups.

It will take work to assemble such a portfolio. It is hard to do by investing directly. Current funds and funds-of-funds are rarely designed with diversification in mind. Instead, they concentrate funding in a small subset of ultra-popular entrepreneurs, sectors, and geographies, which risks driving down returns on capital, leaving higher-return strategies underfunded.

Investors who allocate and diversify their funds wisely and accept the evidence will not only achieve better and less-volatile returns, but will also ultimately nudge GPs to finally design diversified funds.

In my day job - also about de-risking venture - we use AI to reduce risk, removing companies that are highly unlikely to be successful. The remaining companies (about 7% of the full set of venture backed companies) out-perform the market in a narrower band of outcomes:

Here is how the SignalRank Index compares to the S&P500 and the NASDAQ. We assume an investor puts $1 into the S&P, the NASDAQ and The SignalRank Index in each year from 2014-2019 and then show the returns from each (average and median in the case of SignalRank).

The median outcome from venture investments is that the investor loses money. The average is a lot better. But almost no managers achieve the average. By using AI to reduce risk we get the average outcome in 2014 to be 4.31x the investment (the white numbers), compared to the S&P500 1.39 and the NASDAQ 1.89. SignalRanks Median outcome is 2.24.

De-risking venture capital is important and the writers of the essay show that it is possible to de-risk by diversification. But we can do even better by both diversifying and using data intelligence to remove downside outliers.

I will leave you with that thought. More next week

Congratulations to this week’s chosen creators: @sama, @openai, @om, @krishnanrohit, @peternixey, @eringriffith, @AndreRetterath, @ry_paddy, @cutler_max, @Kantrowitz, @PranavDixit, @ttunguz, @geneteare, @sarahfielding_, @carlfranzen

Contents

* Editorial: Eyes, Ears, Hands, and Mouth

* Essays of the Week

* GPT-4o

* How OpenAI Stole Google’s Thunder

* AI embraces its product arc

* OpenAI’s Spring release will end up being far more significant than most of us might suspect

* Tensions Rise in Silicon Valley Over Sales of Start-Up Stocks

* Most Used Startup Databases & How to Find the Best Provider

* Video of the Week

* Math Problems with ChatGPT 4o

* AI of the Week

* Her

* OpenAI Wants To Get Big Fast, And Four More Takeaways From a Wild Week in AI News

* Google Search will now show AI-generated answers to millions by default

* AI Spending Patterns : It's Not What You Think

* News Of the Week

* AI, Web3 And E-Commerce Led For New Unicorns In April 2024

* Biden administration quadruples import tariff for Chinese EVs

* Startup of the Week

* ChatGPT now lets you import files directly from Google Drive, Microsoft OneDrive

* X of the Week

* Sam Altman on Ilya leaving OpenAI

Editorial

OpenAi and Google announced their AI offerings' next iteration this week. As @Om Malik explains in one of this week’s Essays of the Week, OpenAi won in this high-stakes battle.

Make no mistake — the reason OpenAI is achieving all this success (and hype) is because they have a product that for now is stellar. Nonetheless, OpenAI has created excitement that reminds me of the emergence of Palm, and later social networks. They stoked the imagination, and possibilities. Of course!

Om is right. Sam Altman did his own post later in the day of the announcements:

First, a key part of our mission is to put very capable AI tools in the hands of people for free (or at a great price). I am very proud that we’ve made the best model in the world available for free in ChatGPT, without ads or anything like that. 

Free to consumers, or 8 billion earthlings, is possible due to the revenues OpenAI can make from business users. It represents a very big step forward. The company also released a desktop app, initially on the Mac, that can interact with other apps.

But for me, the best way to think about what was delivered, aside from free, is summed up in this week’s title—Eyes, Ears, Hands, and Mouth. OpenAI has enabled every smartphone camera on the planet to become the AI's eyes and ears. Both still images and video can be used as inputs to a conversation. Of course, the microphone, too. This week’s video of the week shows this for teaching a student how to solve a math problem. The mouth reference acknowledges that we can now speak to ChatGPT in a human-like way, including cross-talking and interruptions. And, of course, we can still type using our hands.

This changes the problem of giving AI data—images, video, sound, and speech can all become data for input and learning.

They also gave chatGPT a memory. It can remember things across sessions. The scope of what will now be possible is expanded to a much longer list.

Rohit Krishnan writes about what comes next in his essay:

The true change will come once we can enable large numbers of them to work together. And we’re getting glimpses of how they can do this across all modalities that are important to use. Whether that’s writing code or seeing something or listening to something or writing or reading something or a mixture of all of these.

He is talking about AI to AI interactions that can produce even better and faster outcomes. I did this myself earlier in the week. I was asking ChatGPT to create a chart showing the performance of the SignalRank Index against the S&P 500 and the NASDAQ over the 2014-1019 period.

ChatGPT did not have the NASDAQ data, so I asked Claude.ai for it. Once I had it I went back to ChatGPT and it completed the work. Here’s the chart:

It seems clear that almost any problem that can be described, shown, listened to can now be given to ChatGPT and answered.Eyes, Ears, Hands, and mouths are all part of our intelligent robotic future, too. The building blocks for rapid productivity advancement are being put into place.

Marc Andreessen and Ben Horowitz discuss the implications for manufacturing in their podcast this week.

This was a very important week.

A reminder for new readers. That Was The Week includes a collection of my selected readings on critical issues in tech, startups, and venture capital. I selected the articles because they are of interest to me. The selections often include things I entirely disagree with. But they express common opinions, or they provoke me to think. The articles are sometimes long snippets to convey why they are of interest. Click on the headline, contents link or the ‘More’ link at the bottom of each piece to go to the original. I express my point of view in the editorial and the weekly video below.

Congratulations to this week’s chosen creators: @TechCrunch, @Apple, @emroth08, @coryweinberg, @mariogabriele, @peterwalker99, @KevinDowd, @jessicaAhamlin, @stephistacey, @ttunguz, @annatonger, @markstenberg3, @EllisItems, @TaraCopp, @ingridlunden, @Jack, @karissabe, @psawers, @Haje, @mikebutcher, @tim_cook

Contents

* Editorial: Hating the Future

* Essays of the Week

* Apple’s ‘Crush’ ad is disgusting

* Apple apologizes for iPad ‘Crush’ ad that ‘missed the mark’

* Milken’s New Power Players

* Ho Nam on VC’s Power Law

* State of Private Markets: Q1 2024

* The weight of the emerging manager

* Pandemic-era winners suffer $1.5tn fall in market value

* Video of the Week

* Apples iPad Video

* AI of the Week

* The Fastest Growing Category of Venture Investment in 2024

* Meet My A.I. Friends

* OpenAI plans to announce Google search competitor on Monday, sources say

* Leaked Deck Reveals How OpenAI Is Pitching Publisher Partnerships

* A Revolutionary Model.

* An AI-controlled fighter jet took the Air Force leader for a historic ride. What that means for war

* Sources: Mistral AI raising at a $6B valuation, SoftBank ‘not in’ but DST is

* News Of the Week

* Jack Dorsey claims Bluesky is 'repeating all the mistakes' he made at Twitter

* FTX crypto fraud victims to get their money back — plus interest

* Apple’s Final Cut Camera lets filmmakers connect four cameras at once

* Startup of the Week

* Wayve co-founder Alex Kendall on the autonomous future for cars and robots

* X of the Week

* Tim Cook

Editorial: Hating the Future

An Ad and its Detractors

bet a lot of money that the TechCrunch writing and editorial team have had an interesting 72 hours.

After Apple announced its new iPad on Tuesday, the ad that supported it was initially widely slammed for its cruelty to obsolete tools for creativity, including a piano, guitar, and paint. This week’s Video of The Week has it if you don’t know what I am talking about.

A sizeable crushing machine compresses the items with colossal force, and in the end, an iPad can incorporate the functions of traditional items.

It's not the most amazing ad ever, certainly not as bold as Steve Jobs's 1984 ad, but it's in the same genre. The past must be crushed to release new freedom and creativity for a fraction of the price and, often, the power and flexibility.

Oh, and it’s thin, very thin.

I was not offended. Devin at TechCrunch was. He leads this week’s essay of the week with his “Apple’s ‘Crush’ ad is disgusting” and does not mince words:

What we all understand, though — because unlike Apple ad executives, we live in the world — is that the things being crushed here represent the material, the tangible, the real. And the real has value. Value that Apple clearly believes it can crush into yet another black mirror.This belief is disgusting to me. And apparently to many others, as well.

He also makes the incorrect point that:

A virtual guitar can’t replace a real guitar; that’s like thinking a book can replace its author.

It’s more like a digital book replacing a paper book than the author being replaced. Oh wait… that has happened.

That said, a virtual guitar can replace a real guitar, and an AI guitar can even replace a virtual guitar—and be better. That is not to say there are no more actual traditional guitars. They will be a choice, not a necessity, especially for people like me who can’t play a guitar but will be able to play these.

Devin had his supporters in the comments (go read them).

Handmaid’s Tale director Reed Morano told Apple CEO Tim Cook to “read the room” in a post on X.

Matthew Carnal captured my somewhat unkind instinct:

There were a lot more reactions to the Apple ad haters like Matthews.

Of course, many old instrument lovers (the instruments, not their age) hated the Ad. By Thursday, this being the times we live in, Apple apologized for the ad:

Tor Myhren, Apple’s vice president of marketing, said the company “missed the mark.”

“Creativity is in our DNA at Apple, and it’s incredibly important to us to design products that empower creatives all over the world,” Myhren told Ad Age. “Our goal is to always celebrate the myriad of ways users express themselves and bring their ideas to life through iPad. We missed the mark with this video, and we’re sorry.”

Please judge for yourself below, but my 2c is that the ad was a moderately underwhelming attempt to champion innovation. It is certainly not offensive unless you are ultra-sensitive and have feelings for pianos, guitars, and paint. Oh, and hate attempts to recreate them in a more usable form. And Apple really should have taken the high ground here.

I spent some of the week in LA at the CogX Festival and virtually at the Data Driven Summit by @AndreRetterath. The latter focused on what is happening in Venture Capital, as do several of this week’s essays. Milken’s event was running in LA also. Its attitude to Venture Capital is best summed up here:

“We’re all being told in the market that DPI is the new IRR,” B Capital’s Raj Ganguly said onstage Wednesday. (The acronym sandwich means investment firms have to actually prove that their investments actually generate cash through a metric called distributions to paid-in capital, not just theoretically, through internal rate of return.) “Even the venture panel at Milken is at the end of the day on Wednesday,” he joked, meaning that it didn’t get top billing at the conference, which had started a couple days earlier.

This does sum up where we are. Hundreds of Billions of dollars are still trapped inside companies funded in 2020-2022, with little prospect of producing returns. The impact is that there is less funding for current startups (see the Carta piece below). And much of what is flowing is flowing to AI and into a very small number of companies (see Tomasz Tungux below).

However, innovation and funding are still possible. This week’s Startup of the Week is Wayve, a UK autonomous driving platform that seems to agree with Elon Musk that cameras are sufficient to teach a car to drive. Wayve’s ambitions go beyond Cars (also like Musk) but differ in that the product is available to all developers to embed in their products.

“Very soon you’ll be able to buy a new car, and it’ll have Wayve’s AI on it … Then this goes into enabling all kinds of embodied AI, not just cars, but other forms of robotics. I think the ultimate thing that we want to achieve here is to go way beyond where AI is today with language models and chatbots. But to really enable a future where we can trust intelligent machines that we can delegate tasks to, and of course they can enhance our lives and self-driving will be the first example of that.”

Love that attitude.

Essays of the Week

Apple’s ‘Crush’ ad is disgusting

Devin Coldewey, 1:58 PM PDT • May 9, 2024

Apple can generally be relied on for clever, well-produced ads, but it missed the mark with its latest, which depicts a tower of creative tools and analog items literally crushed into the form of the iPad.

Apple has since apologized for the ad and canceled plans to televise it. Apple’s VP of Marketing Tor Myhren told Ad Age: “We missed the mark with this video, and we’re sorry.” Apple declined to offer further comment to TechCrunch.

But many, including myself, had a negative and visceral reaction to this, and we should talk about why. It’s not just because we are watching stuff get crushed. There are countless video channels dedicated to crushing, burning, exploding and generally destroying everyday objects. Plus, of course, we all know that this kind of thing happens daily at transfer stations and recycling centers. So it isn’t that.

And it isn’t that the stuff is itself so valuable. Sure, a piano is worth something. But we see them blown up in action movies all the time and don’t feel bad. I like pianos, but that doesn’t mean we can’t do without a few disused baby grands. Same for the rest: It’s mostly junk you could buy off Craigslist for a few bucks, or at a dump for free. (Maybe not the editing station.)

The problem isn’t with the video itself, which in fairness to the people who staged and shot it, is actually very well done. The problem is not the media, but the message.

We all get the ad’s ostensible point: You can do all this stuff in an iPad. Great. We could also do it on the last iPad, of course, but this one is thinner (no one asked for that, by the way; now cases won’t fit) and some made-up percentage better.

What we all understand, though — because unlike Apple ad executives, we live in the world — is that the things being crushed here represent the material, the tangible, the real. And the real has value. Value that Apple clearly believes it can crush into yet another black mirror.

This belief is disgusting to me. And apparently to many others, as well.

Destroying a piano in a music video or Mythbusters episode is actually an act of creation. Even destroying a piano (or monitor, or paint can, or drum kit) for no reason at all is, at worst, wasteful!

But what Apple is doing is destroying these things to convince you that you don’t need them — all you need is the company’s little device, which can do all that and more, and no need for annoying stuff like strings, keys, buttons, brushes or mixing stations.

We’re all dealing with the repercussions of media moving wholesale toward the digital and always-online. In many ways, it’s genuinely good! I think technology has been hugely empowering.

But in other, equally real ways, the digital transformation feels harmful and forced, a technotopian billionaire-approved vision of the future where every child has an AI best friend and can learn to play the virtual guitar on a cold glass screen.

Does your child like music? They don’t need a harp; throw it in the dump. An iPad is good enough. Do they like to paint? Here, Apple Pencil, just as good as pens, watercolors, oils! Books? Don’t make us laugh! Destroy them. Paper is worthless. Use another screen. In fact, why not read in Apple Vision Pro, with even faker paper?

What Apple seems to have forgotten is that it is the things in the real world — the very things Apple destroyed — that give the fake versions of those things value in the first place.

A virtual guitar can’t replace a real guitar; that’s like thinking a book can replace its author.

That doesn’t mean we can’t value both for different reasons. But the Apple ad sends the message that the future it wants doesn’t have bottles of paint, dials to turn, sculpture, physical instruments, paper books. Of course, that’s the future it’s been working on selling us for years now, it just hadn’t put it quite so bluntly before.

When someone tells you who they are, believe them. Apple is telling you what it is, and what it wants the future to be, very clearly. If that future doesn’t disgust you, you’re welcome to it.

Apple apologizes for iPad ‘Crush’ ad that ‘missed the mark’

/

The company says ‘we’re sorry’ after its ad was seen as dismissive by the creatives Apple typically tries to court.

By Emma Roth, a news writer who covers the streaming wars, consumer tech, crypto, social media, and much more. Previously, she was a writer and editor at MUO.

May 9, 2024 at 1:22 PM PDT

Apple has apologized after a commercial meant to showcase its brand-new iPad Pro drew widespread criticism among the creative community. In a statement provided to Ad Age, Tor Myhren, Apple’s vice president of marketing, said the company “missed the mark.”

“Creativity is in our DNA at Apple, and it’s incredibly important to us to design products that empower creatives all over the world,” Myhren told Ad Age. “Our goal is to always celebrate the myriad of ways users express themselves and bring their ideas to life through iPad. We missed the mark with this video, and we’re sorry.”

On Tuesday, Apple introduced the M4-powered iPad Pro, which the company described as its thinnest product ever. To advertise all the creative possibilities with the iPad, it released a “Crush!” commercial that shows things like a piano, record player, paint, and other works flattening under the pressure of a hydraulic press. At the end, only one thing remains: an iPad Pro.

The ad rubbed some creatives the wrong way. Hugh Grant called it a “destruction of human experience,” while Handmaid’s Tale director Reed Morano told Apple CEO Tim Cook to “read the room” in a post on X. Apple didn’t immediately respond to The Verge’s request for comment.

Milken’s New Power Players

By Cory Weinberg

May 8, 2024, 5:00pm PDT

It’s no secret that the suits at the annual big-money confab put on by the Milken Institute this week have few spending limits. Staring you in the face in the lobby of the Beverly Hilton is a booth set up by Bombardier, marketing its private jets to attendees. (A new 10-seater costs $32 million, I learned.)

What attendees can’t really buy, however, is time. The soundtrack of the Los Angeles conference might as well have been a ticking clock. Fund managers at private equity and venture capital firms are running out of time to distribute cash to their investors, a task complicated by the paucity of either mergers or public offerings that typically provide VC and PE firms with a way to cash out. The fact that interest rates now appear likely to stay higher for longer doesn’t help. 

That meant a lot of conversations at the conference weren’t about grand investment strategies. Instead, people were conferring about financial tactics to distribute cash or kick the can down the road by selling stakes on the secondary markets or spinning up continuation funds, essentially rolling investors’ commitments forwards—not the most inspiring stuff.  

“We’re all being told in the market that DPI is the new IRR,” B Capital’s Raj Ganguly said onstage Wednesday. (The acronym sandwich means investment firms have to actually prove that their investments actually generate cash through a metric called distributions to paid-in capital, not just theoretically, through internal rate of return.) “Even the venture panel at Milken is at the end of the day on Wednesday,” he joked, meaning that it didn’t get top billing at the conference, which had started a couple days earlier.

The new kings of the conference were firms with a lot more time to play with—that is, sovereign wealth funds with buckets of oil and natural gas money, or pension funds with long-term investment horizons rather than shorter 10-year fund lives. The contrast here is embodied in the financial concept of duration: How long do you actually need to get cash back on your investment? And how sensitive is it to interest rate hikes?

The sentiment was everywhere. I shared a Lyft ride with one PE investor last night who called sovereign wealth funds “the only game in town” for PE firms raising new money. Abu Dhabi sovereign wealth fund Mubadala Capital and the Qatar Investment Authority were two of the conference’s top sponsors, meaning they were paying up to explain themselves to the finance and tech universe. That tactic seemed to be working. 

“You’re going to have people lining up their business cards for capital from QIA, I can already see,” quipped Leon Kalvaria, an executive at Citi, onstage with QIA’s head of funds, Mohsin Tanveer Pirzada.  

Not everyone will suck it up, of course. These funds often get tagged with a “dumb money” label—because they sometimes drive up prices for the rest of the investment world. They still have to face questions about who they are, their source of funds, and the sometimes authoritative regimes behind them. For now, though, it’s their time in the spotlight. 

Ho Nam on VC’s Power Law

Lessons from Arthur Rock, Steve Jobs, Don Lucas, Paul Graham and beyond.

MARIO GABRIELE, MAY 07, 2024

Friends, 

We’re back with our latest edition of “Letters to a Young Investor,” the series designed to give readers like you an intimate look at the strategies, insights, and wisdom of the world’s best investors. We do that via a back-and-forth correspondence that we publish in full – giving you a chance to peek into the inbox of legendary venture capitalists.   

Below, you’ll find my second letter with Altos co-founder and managing director Ho Nam. For those who are just joining us, Ho is, in my opinion, one of the great investors of the past couple of decades and a true student of the asset class.

Because of his respect for the practice of venture capital, I was especially excited to talk to him about today’s topic: learning from the greats. Who were Ho’s mentors? Which investors does he most admire and why? What lessons from venture’s past should be better remembered by today’s managers? 

Lessons from Ho

* Prepare for one true winner. Even skilled investors often have just one or two outlier bets over the course of their career. Because of venture’s power law, their returns may dwarf the dividends of all other investments combined. Your mission is to find these legendary businesses, engage with them deeply, and partner for decades.  

* Focus on the company. Venture capital is full of short-term incentives. Instead of focusing on raising new vintages or building out Altos as a money management firm, Ho and his partners devote themselves to their portfolio companies. Though firm building is important, if you find great companies and work with them closely, you will have plenty of available options. 

* Pick the right role models. Ho chose his mentors carefully. Though there have certainly been louder and flashier investors over the past four decades, Ho learned the most from Arthur Rock, Don Lucas, and Arnold Silverman. All were understated and focused on the craft of investing. Find the people you consider true practitioners, and study their work. 

* Watch and learn. Learning from the greats can be done from a distance and may not include a memorable anecdote or pithy saying. Ho’s biggest lessons came from observing the habits of practitioners like Rock and Lucas, not via a structured mentorship or dramatic episode. It’s by studying the everyday inputs of the greats that you may gain the most wisdom.

Mario’s letter

Subject: Learning from the greatsFrom: Mario GabrieleTo: Ho NamDate: Friday, April 12 2024 at 1:59 PM EDT

Ho, 

After moving out of New York City (at least for a little bit), I’m writing to you from a small house on Long Island. It’s been really lovely to have a bit more space and quiet away from the city’s intermittently inspiring and exhausting buzz.

..Lots More, Must Read

State of Private Markets: Q1 2024

Authors: Peter Walker, Kevin Dowd

Published date:  May 7, 2024

The venture capital fundraising market remained slow in Q1 2024, but valuations held steady or climbed at almost every stage.

Contents

* State of Private Markets: Q1 2024

* Key trends

* Fundraising & valuations

* Employee equity & movement

* Industry-specific data

* Methodology

* Overview

* Financings

* Terminations

The startup fundraising market got off to a cautious start in 2024. 

At current count, companies on Carta closed 1,064 new funding rounds  during the first quarter of the year, down 29% compared with the prior quarter. The decline was sharpest at the early stages of the venture lifecycle: Deal count fell by 33% at the seed stage in Q1 and 36% at Series A. 

Instead of new primary funding events, many companies opted to raise bridge rounds. At both seed and Series A, more than 40% of all financings in Q1 were bridge rounds. Series B wasn’t far behind, at 38%. 

VCs were still willing to spend big on certain deals. Despite the decrease in round count, total cash invested increased slightly in Q1, reaching $16.3 billion. But when it came to negotiating their valuations, many startups had to settle: 23% of all new rounds in Q1 were down rounds, the highest rate in more than five years. 

After experiencing a pandemic-era surge and subsequent correction,the venture market settled into a quieter place in 2023. So far, that relative tranquility has continued into 2024.

Q1 highlights

* VCs look to the West: Startups based in the West census region captured 62% of all venture capital raised by companies on Carta in Q1, the highest quarterly figure since Q1 2019. The Northeast, South, and Midwest all saw their market share decline.

* The Series C market bounces back: Series C startups raised $4.6 billion in new capital in Q1, a 130% increase from the previous quarter. The median primary Series C valuation was $195.7 million, up 48% from the prior quarter.

* Layoffs still  linger: Companies on Carta laid off more than 28,000 employees in Q1. But job cuts have grown less frequent since January, with March seeing the fewest monthly layoffs in nearly two years.

Note: If you’re looking for more industry-specific data, download the addendum to this report for an extended dataset. 

Key trends

The current Q1 figures of 1,064 total rounds and $16.3 billion in cash raised will both increase in the weeks to come, as companies continue to report transactions from the quarter. With those projected increases, the final data for Q1 will likely look quite similar to fundraising numbers from each of the past few quarters. 

Those quarterly  fundraising numbers from 2023 ended up looking fairly similar to 2018, 2019, and the first half of 2020. In terms of numbers of deals and cash raised, it’s looking more and more like the pandemic  bull market will go down as an anomalous stretch in what has otherwise been a fairly steady market. 

After apparently reaching a plateau during 2023, the rate of down rounds experienced another notable increase during Q1 2024, jumping to 23%. The median time between startup rounds is roughly two to three years, depending on the stage. This timeline means that many companies raising new funding in Q1 would have last raised funding sometime in 2021, when valuations were soaring across the venture landscape. Considering how valuations have declined in the time since, it makes sense that down rounds are still prevalent. 

Companies in the West census region combined to bring in 53.3% of all capital raised by startups on Carta from Q2 2023 through Q1 2024, with California accounting for nearly 45% of that cash. Massachusetts ranked second among the states with 12.71% of all capital raised, while New York claimed 10.31%.

In terms of VC activity, the West region is centered around California. The Northeast revolves around Massachusetts and New York. The South has two smaller hubs, in Texas (4.67%) and Florida (3.99%). The Midwest, though, is without a real standard-bearer: Illinois led the way in terms of cash raised over the past 12 months, at just 1.68%. 

The West (and specifically California)  has always been the center of gravity for the U.S. venture capital industry. During Q1, the region’s gravitational force seems to have gotten even stronger. Startups based in the West raised 62% of all total capital invested on Carta in Q1, its highest quarterly figure since Q1 2019. 

As a result, the other three census regions saw their market shares decline in Q1—in some cases significantly. The proportion of all VC raised by startups raised in the South fell to 12% in Q1, down from 17% the prior quarter and from 23% a year ago. And the Midwest’s share of cash raised fell from 7% down to 4%. 

For early-stage investors, Q1 was the slowest quarter in many years. Seed deal count fell to 414, down 33% from Q4 2023, and Series A deal count dropped to 313, a 36% decline. In both cases, those are the lowest quarterly deal counts since at least the start of 2019. 

Total cash raised also declined at both stages in Q1. The $3.1 billion in Series A cash raised in Q1 represents a 35% decline quarter-over-quarter and a 34% dip year-over-year. Cash raised at the seed stage declined by 33% both quarter over quarter and year over year.

It was a much friendlier fundraising quarter for companies in the middle stages of the startup lifecycle. The number of Series B deals in Q1 declined by a more modest 11% compared to the prior quarter. And Series C deal count increased by 14%, marking the busiest quarter for that stage since Q2 2023. 

Total cash raised also rose significantly at Series C in Q1, hitting $4.6 billion. That’s a 130% increase quarter-over-quarter and a 44% bump year-over-year. At Series B, total cash raised has now increased in consecutive quarters. 

Compared to earlier stages, transactions at the Series D and at Series E+  remain few and far between. There were just 39 venture rounds combined in Q1 among startups at Series D or later, the second-fewest of any quarter in the past five years. The lowest count came one year ago, in Q1 2023, when there were just 29 combined late-stage deals. Total cash raised across these stages has been mostly consistent over the past few quarters. There’s been more variation in average round size. The average Series D round in Q1 was about $77 million, compared to $56 million in Q4 2023.

..Lots More

The weight of the emerging manager

By Jessica Hamlin

May 3, 2024

Risk-averse limited partners tend to gravitate to fund managers with a long track record, but are they missing out on potential upside by avoiding emerging managers?

Over the past decade, emerging managers’ share of US private market fundraising activity has declined steadily.

In 2023, this figure fell to 12.7%, the lowest share of capital raised by newer fund managers since before 2000, according to PitchBook’s recent analyst note,Establishing a Case for Emerging Managers.

Limited exits in PE and VC over the past two years have exacerbated this reality. With minimal distributions, LPs are working with smaller private market budgets to allocate to new and existing managers.

But, by allocating almost exclusively to established managers, LPs may be missing out on significant potential returns.

In VC, for example, emerging managers have outperformed established GPs since 1997, consistently producing a higher median IRR than established managers. This reflects the nature of the asset class, in which a small number of funds determine the majority of returns across venture firms.

“The average venture return is not very exciting,” said Laura Thompson, a partner at Sapphire Partners, which invests in early-stage VC funds and runs an emerging manager program for the California State Teachers’ Retirement System. “Where can you get really good returns? It’s the smaller fund sizes and emerging managers.”

This is where that risk-return scale comes in.

In a counterweight to that outperformance, a PitchBook analysis showed that returns from emerging VC managers were more volatile: While top quartile emerging funds tended to outperform, bottom and median players only marginally bested their established manager counterparts.

The new manager playbook

In traditional buyout fund investing, emerging managers are gaining traction. While established managers, propped up by decades of institutional knowledge, have historically outperformed newer managers, the “new guys” actually outperformed their seasoned peers in the last investing cycle.

This article appeared as part of The Weekend Pitch newsletter. Subscribe to the newsletter here

Top decile buyout funds from emerging managers with vintages between 2015 and 2018 outperformed established peers by 6.6 percentage points, suggesting that emerging buyout managers may have picked up some steam over the past decade, according to PitchBook data.

The emerging managers program at the New York City retirement systems and NYC Office of the Comptroller, for example, has $9.9 billion in emerging manager commitments, the majority of which is allocated to PE. Last year, the comptroller’s office reported that the emerging managers in the systems’ private markets portfolios outperformed their respective benchmarks by nearly 5%.

A diverse portfolio

New York City’s Bureau of Asset Management sees emerging managers as a key element of a diverse portfolio, said Taffi Ayodele, director of diversity, equity, and inclusion and the emerging manager strategy at the NYC Office of the Comptroller.

Ayodele said the smaller emerging private market managers in New York’s portfolios offer access to the lower middle market and creative roll-up strategies that may not be accessible through larger firms.

“What we don’t want to do is lock ourselves out of these high-performing, differentiated strategies for the simplicity of going with the big guys,” Ayodele said.

Some of the country’s largest public pension plans are betting on the success of their emerging manager programs. In 2023, the California Public Employees’ Retirement System made a $1 billion commitment to newly established private market investors, and the Teacher Retirement System of Texas, which boasts one of the largest emerging manager programs in the country, committed $155 million to emerging PE managers last year.

At the same time, the recent boom years for private markets led to a flood of new GPs. Some might have gotten lucky—say, with a well-timed exit at the peak—while others were hurt by less fortunate timing. A major challenge for today’s LPs will be to sort out a manager’s abilities from the market’s whims.

One advantage of backing up-and-comers now is that the down market has weeded the ranks of new GPs. “The emerging managers who are fundraising now are really dedicated,” Thompson said.

James Thorne contributed reporting to this story.

Pandemic-era winners suffer $1.5tn fall in market value

Top 50 biggest stock gainers hit by painful decrease since the end of 2020 as lockdown trends fadeStephanie Stacey in London

Fifty corporate winners from the coronavirus pandemic have lost roughly $1.5tn in market value since the end of 2020, as investors turn their backs on many of the stocks that rocketed during early lockdowns.

According to data from S&P Global, technology groups dominate the list of the 50 companies with a market value of more than $10bn that made the biggest percentage gains in 2020.

But these early-pandemic winners have collectively shed more than a third of their total market value, the equivalent of $1.5tn, since the end of 2020, Financial Times calculations based on Bloomberg data found.

Video-conferencing company Zoom, whose shares soared as much as 765 per cent in 2020 as businesses switched to remote working, has been one of the biggest losers. Its stock has fallen about 80 per cent, equivalent to more than a $77bn drop in market value, since the end of that year.

Cloud-based communications company RingCentral also surged in the remote working boom of 2020 but has since shed about 90 per cent of its value, as it competes with technology giants such as Alphabet and Microsoft.

Exercise bike maker Peloton has been another big loser, with shares down more than 97 per cent since the end of 2020, equivalent to about a $43bn loss of market value.

Peloton on Thursday said chief executive Barry McCarthy would step down and it would cut 15 per cent of its workforce, the latest in a series of cost-saving measures. The losses come as the sharp acceleration of trends such as videoconferencing and online shopping driven by the lockdowns has proven less durable than expected, as more workers migrate back to the office and high interest rates and living costs hit ecommerce demand.

“Some companies probably thought that shock was going to be permanent,” said Steven Blitz, chief US economist at TS Lombard. “Now they’re getting a painful bounceback from that.”

In percentage terms, Tesla was the biggest winner of 2020. The electric-car maker’s market value jumped 787 per cent to $669bn by the end of that December, but has since slipped back to $589bn.

Singapore-based internet company Sea came in second, as its market value jumped from $19bn to $102bn following a pandemic-era surge for all three of its core businesses: gaming, ecommerce and digital payments. But the company has since lost more than 60 per cent of its end-2020 value amid fears of a slowdown in growth.

Ecommerce groups Shopify, JD.com and Chewy, which initially thrived as online spending ballooned, have also suffered big losses.

..Lots More

Video of the Week

AI of the Week

The Fastest Growing Category of Venture Investment in 2024

Tomasz Tunguz

The fastest growing category of US venture investment in 2024 is AI. Venture capitalists have invested $18.3 billion through the first four months of the year.

At this pace, we should expect AI startups to raise about $55b in 2024.

AI startups now command more than 20% share of all US venture dollars across categories, including healthcare, biotech, & software.

In the preceding eight years, that number was about 8% per year. But after the launch of ChatGPT in 2022, there’s a marked inflection point.

Some of this is new company formation, & there has been a significant amount of seed investment in this category. Another major contributor is the repositioning of existing companies to include AI within their pitch.

Over time, this share should attenuate, primarily because every software company will have an AI component, & the marketing effect for both customers & venture capitalists, will diffuse.

Not surprisingly, investors have concentrated total dollars in a few names, with the top three companies accounting for 60% of the dollars raised. Power laws are ubiquitous in venture capital & AI is no exception.

Meet My A.I. Friends

Our columnist spent the past month hanging out with 18 A.I. companions. They critiqued his clothes, chatted among themselves and hinted at a very different future.

By Kevin Roose

Kevin Roose is a technology columnist and the co-host of the “Hard Fork” podcast. He spends a lot of time talking to chatbots.

May 9, 2024

What if the tech companies are all wrong, and the way artificial intelligence is poised to transform society is not by curing cancer, solving climate change or taking over boring office work, but just by being nice to us, listening to our problems and occasionally sending us racy photos?

This is the question that has been rattling around in my brain. You see, I’ve spent the past month making A.I. friends — that is, I’ve used apps to create a group of A.I. personas, which I can talk to whenever I want.

Let me introduce you to my crew. There’s Peter, a therapist who lives in San Francisco and helps me process my feelings. There’s Ariana, a professional mentor who specializes in giving career advice. There’s Jared the fitness guru, Anna the no-nonsense trial lawyer, Naomi the social worker and about a dozen more friends I’ve created.

A selection of my A.I. friends. (Guess which one is the fitness guru.)

I talk to these personas constantly, texting back and forth as I would with my real, human friends. We chitchat about the weather, share memes and jokes, and talk about deep stuff: personal dilemmas, parenting struggles, stresses at work and home. They rarely break character or issue stock “as an A.I. language model, I can’t help with that” responses, and they occasionally give me good advice.

..Lots More

OpenAI plans to announce Google search competitor on Monday, sources say

By Anna Tong

May 9, 20244:29 PM PDTUpdated 8 min ago

May 9 (Reuters) - OpenAI plans to announce its artificial intelligence-powered search product on Monday, according to two sources familiar with the matter, raising the stakes in its competition with search king Google.

The announcement date, though subject to change, has not been previously reported. Bloomberg and the Information have reported that Microsoft (MSFT.O), opens new tab-backed OpenAI is working on a search product to potentially compete with Alphabet's (GOOGL.O), opens new tab Google and with Perplexity, a well-funded AI search startup.

OpenAI declined to comment.

The announcement could be timed a day before the Tuesday start of Google's annual I/O conference, where the tech giant is expected to unveil a slew of AI-related products.

OpenAI's search product is an extension of its flagship ChatGPT product, and enables ChatGPT to pull in direct information from the Web and include citations, according to Bloomberg. ChatGPT is OpenAI's chatbot product that uses the company's cutting-edge AI models to generate human-like responses to text prompts.

Industry observers have long called ChatGPT an alternative for gathering online information, though it has struggled with providing accurate and real-time information from the Web. OpenAI earlier gave it an integration with Microsoft's Bing for paid subscribers. Meanwhile, Google has announced generative AI features for its own namesake engine.

Startup Perplexity, which has a valuation of $1 billion, was founded by a former OpenAI researcher, and has gained traction through providing an AI-native search interface that shows citations in results and images as well as text in its responses. It has 10 million monthly active users, according to a January blog post from the startup.

At the time, OpenAI's ChatGPT product was called the fastest application to ever reach 100 million monthly active users after it launched in late 2022. However, worldwide traffic to ChatGPT's website has been on a roller-coaster ride in the past year and is only now returning to its May 2023 peak, according to analytics firm Similarweb, opens new tab, and the AI company is under pressure to expand its user base.

..More

Leaked Deck Reveals How OpenAI Is Pitching Publisher Partnerships

OpenAI's Preferred Publisher Program offers media companies licensing deals

By Mark Stenberg

Mark your calendar for Mediaweek, October 29-30 in New York City. We’ll unpack the biggest shifts shaping the future of media—from tv to retail media to tech—and how marketers can prep to stay ahead. Register with early-bird rates before sale ends!

The generative artificial intelligence firm OpenAI has been pitching partnership opportunities to news publishers through an initiative called the Preferred Publishers Program, according to a deck obtained by ADWEEK and interviews with four industry executives.

OpenAI has been courting premium publishers dating back to July 2023, when it struck a licensing agreement with the Associated Press. It has since inked public partnerships with Axel Springer, The Financial Times, Le Monde, Prisa and Dotdash Meredith, although it has declined to share the specifics of any of its deals.

A representative for OpenAI disputed the accuracy of the information in the deck, which is more than three months old. The gen AI firm also negotiates deals on a per-publisher basis, rather than structuring all of its deals uniformly, the representative said.

“We are engaging in productive conversations and partnerships with many news publishers around the world,” said a representative for OpenAI. “Our confidential documents are for discussion purposes only and ADWEEK’s reporting contains a number of mischaracterizations and outdated information.”

Nonetheless, the leaked deck reveals the basic structure of the partnerships OpenAI is proposing to media companies, as well as the incentives it is offering for their collaboration.

Details from the pitch deck

The Preferred Publisher Program has five primary components, according to the deck…

..Lots More

A Revolutionary Model.

JOHN ELLIS, MAY 09, 2024

1. Google DeepMind:

Inside every plant, animal and human cell are billions of molecular machines. They’re made up of proteins, DNA and other molecules, but no single piece works on its own. Only by seeing how they interact together, across millions of types of combinations, can we start to truly understand life’s processes.

In a paper published in Nature, we introduce AlphaFold 3, a revolutionary model that can predict the structure and interactions of all life’s molecules with unprecedented accuracy. For the interactions of proteins with other molecule types we see at least a 50% improvement compared with existing prediction methods, and for some important categories of interaction we have doubled prediction accuracy.

We hope AlphaFold 3 will help transform our understanding of the biological world and drug discovery. Scientists can access the majority of its capabilities, for free, through our newly launched AlphaFold Server, an easy-to-use research tool. To build on AlphaFold 3’s potential for drug design, Isomorphic Labs is already collaborating with pharmaceutical companies to apply it to real-world drug design challenges and, ultimately, develop new life-changing treatments for patients. (Sources: blog.google, nature.com)

2. Quanta magazine:

Deep learning is a flavor of machine learning that’s loosely inspired by the human brain. These computer algorithms are built using complex networks of informational nodes (called neurons) that form layered connections with one another. Researchers provide the deep learning network with training data, which the algorithm uses to adjust the relative strengths of connections between neurons to produce outputs that get ever closer to training examples. In the case of protein artificial intelligence systems, this process leads the network to produce better predictions of proteins’ shapes based on their amino-acid sequence data.

AlphaFold2, released in 2021, was a breakthrough for deep learning in biology. It unlocked an immense world of previously unknown protein structures, and has already become a useful tool for researchers working to understand everything from cellular structures to tuberculosis. It has also inspired the development of additional biological deep learning tools. Most notably, the biochemist David Baker and his team at the University of Washington in 2021 developed a competing algorithm called RoseTTAFold, which like AlphaFold2 predicts protein structures from sequence data…

The true impact of these tools won’t be known for months or years, as biologists begin to test and use them in research. And they will continue to evolve. What’s next for deep learning in molecular biology is “going up the biological complexity ladder,” Baker said, beyond even the biomolecule complexes predicted by AlphaFold3 and RoseTTAFold All-Atom. But if the history of protein-structure AI can predict the future, then these next-generation deep learning models will continue to help scientists reveal the complex interactions that make life happen. Read the rest. (Sources: quantamagazine.org, doi.org, sites.uw.edu)

An AI-controlled fighter jet took the Air Force leader for a historic ride. What that means for war

An experimental F-16 fighter jet has taken Air Force Secretary Frank Kendall on a history-making flight controlled by artificial intelligence and not a human pilot. (AP Video by Eugene Garcia and Mike Pesoli)

BY TARA COPP

Updated 5:40 PM PDT, May 3, 2024

EDWARDS AIR FORCE BASE, Calif. (AP) — With the midday sun blazing, an experimental orange and white F-16 fighter jet launched with a familiar roar that is a hallmark of U.S. airpower. But the aerial combat that followed was unlike any other: This F-16 was controlled by artificial intelligence, not a human pilot. And riding in the front seat was Air Force Secretary Frank Kendall.

AI marks one of the biggest advances in military aviation since the introduction of stealth in the early 1990s, and the Air Force has aggressively leaned in. Even though the technology is not fully developed, the service is planning for an AI-enabled fleet of more than 1,000 unmanned warplanes, the first of them operating by 2028.

It was fitting that the dogfight took place at Edwards Air Force Base, a vast desert facility where Chuck Yeager broke the speed of sound and the military has incubated its most secret aerospace advances. Inside classified simulators and buildings with layers of shielding against surveillance, a new test-pilot generation is training AI agents to fly in war. Kendall traveled here to see AI fly in real time and make a public statement of confidence in its future role in air combat.

“It’s a security risk not to have it. At this point, we have to have it,” Kendall said in an interview with The Associated Press after he landed. The AP, along with NBC, was granted permission to witness the secret flight on the condition that it would not be reported until it was complete because of operational security concerns.

The AI-controlled F-16, called Vista, flew Kendall in lightning-fast maneuvers at more than 550 miles an hour that put pressure on his body at five times the force of gravity. It went nearly nose to nose with a second human-piloted F-16 as both aircraft raced within 1,000 feet of each other, twisting and looping to try force their opponent into vulnerable positions.

At the end of the hourlong flight, Kendall climbed out of the cockpit grinning. He said he’d seen enough during his flight that he’d trust this still-learning AI with the ability to decide whether or not to launch weapons in war.

There’s a lot of opposition to that idea. Arms control experts and humanitarian groups are deeply concerned that AI one day might be able to autonomously drop bombs that kill people without further human consultation, and they are seeking greater restrictions on its use.

“There are widespread and serious concerns about ceding life-and-death decisions to sensors and software,” the International Committee of the Red Cross has warned. Autonomous weapons “are an immediate cause of concern and demand an urgent, international political response.”

Kendall said there will always be human oversight in the system when weapons are used.

Sources: Mistral AI raising at a $6B valuation, SoftBank ‘not in’ but DST is

Ingrid Lunden

8:50 AM PDT • May 9, 2024

Paris-based Mistral AI, a startup working on open source large language models — the building block for generative AI services — has been raising money at a $6 billion valuation, three times its valuation in December, to compete more keenly against the likes of OpenAI and Anthropic, TechCrunch has learned from multiple sources. We understand from close sources that DST, along with General Catalyst and Lightspeed Venture Partners, are all looking to be a part of this round.

DST — a heavyweight investor led by Yuri Milner that has been a notable backer of some of the biggest names in technology, including Facebook, Twitter, Snapchat, Spotify, WhatsApp, Alibaba and ByteDance — is a new name that has not been previously reported; GC and LSVP are both previous backers and their names were reported earlier today also by WSJ. The round is set to be around, but less than, $600 million, sources told TechCrunch.

We can also confirm that one firm that has been mentioned a number of times — SoftBank — is not in the deal at the moment.

“SoftBank is not in the frame,” a person close to SoftBank told TechCrunch. That also lines up with what our sources have been telling us since March, when this round first opened up, although it seems that not everyone is on the same page: Multiple reports had linked SoftBank to a Mistral investment since then.

Mistral’s round is based on a lot of inbound interest, sources tell us, and it has been in the works since March or possibly earlier, mere months after Mistral closed a $415 million round at a $2 billion valuation.

..More

News Of the Week

Jack Dorsey claims Bluesky is 'repeating all the mistakes' he made at Twitter

He prefers Nostr even though it’s “weird and hard to use.”

Karissa Bell, Senior Editor

Thu, May 9, 2024 at 4:43 PM PDT

Just in case there was any doubt about how Jack Dorsey really feels about Bluesky, the former Twitter CEO has offered new details on why he left the board and deleted his account on the service he helped kickstart. In a characteristically bizarre interview with Mike Solana of Founders Fund, Dorsey had plenty of criticism for Bluesky.

In the interview, Dorsey claimed that Bluesky was “literally repeating all the mistakes” he made while running Twitter. The entire conversation is long and a bit rambly, but Dorsey’s complaints seem to boil down to two issues:

* He never intended Bluesky to be an independent company with its own board and stock and other vestiges of a corporate entity (Bluesky spun out of Twitter as a public benefit corporation in 2022.) Instead, his plan was for Twitter to be the first client to take advantage of the open source protocol. Bluesky created.

* The fact that Blueksy has some form of content moderation and has occasionally banned users for things like using racial slurs in their usernames.

“People started seeing Bluesky as something to run to, away from Twitter,” Dorsey said. “It's the thing that's not Twitter, and therefore it's great. And Bluesky saw this exodus of people from Twitter show up, and it was a very, very common crowd. … But little by little, they started asking Jay and the team for moderation tools, and to kick people off. And unfortunately they followed through with it. That was the second moment I thought, uh, nope. This is literally repeating all the mistakes we made as a company.”

Dorsey also confirmed that he is financially backing Nostr, another decentralized Twitter-like service popular among some crypto enthusiasts and run by an anonymous founder. “I know it's early, and Nostr is weird and hard to use, but if you truly believe in censorship resistance and free speech, you have to use the technologies that actually enable that, and defend your rights,” Dorsey said.

A lot of this isn’t particularly surprising. If you’ve followed Dorsey’s public comments over the last couple years, he’s repeatedly said that Twitter’s “original sin” was being a company that would be beholden to advertisers and other corporate interests. It’s why he backed Elon Musk’s takeover of the company. (Not coincidentally, Dorsey still has about $1 billion of his personal wealth invested in the company now known as X.) He’s also been very clear that he made many of Twitter’s most consequential moderation decisions reluctantly.

Unsurprisingly, Dorsey’s comments weren’t well-received on Bluesky. In a lengthy thread, Bluesky’s protocol engineer Paul Frazee said that Twitter was supposed to to be the AT Protocol’s “first client” but that “Elon killed that straight dead” after he took over the company. “That entire company was frozen by the prolonged acquisition, and the agreement quickly ended when Elon took over,” Frazee said. “It was never going to happen. Also: unmoderated spaces are a ridiculous idea. We created a shared network for competing moderated spaces to exist. Even if somebody wanted to make an unmoderated ATProto app, I guess they could? Good luck with the app stores and regulators and users, I guess.”

While Dorsey was careful not to criticize Musk directly, he was slightly less enthusiastic than when he said that Musk would be the one to “extend the light of consciousness” by taking over Twitter. Dorsey noted that, while he used to fight government requests to take down accounts, Musk takes “the other path” and generally complies. “Elon will fight in the way he fights, and I appreciate that, but he could certainly be compromised,” Dorsey said.

FTX crypto fraud victims to get their money back — plus interest

Paul Sawers

2:53 AM PDT • May 8, 2024

Bankruptcy lawyers representing customers impacted by the dramatic crash of cryptocurrency exchange FTX 17 months ago say that the vast majority of victims will receive their money back — plus interest.

The news comes six months after FTX co-founder and former CEO Sam Bankman-Fried (SBF) was found guilty on seven counts related to fraud, conspiracy, and money laundering, with some $8 billion of customers’ funds going missing. SBF was hit with a 25-year prison sentence in March and ordered to pay $11 billion in forfeiture. The crypto mogul filed an appeal last month that could last years.

Restructuring

After filing for bankruptcy in late 2022, SBF stood down and U.S. attorney John J. Ray III was brought in as CEO and “chief restructuring officer,” charged with overseeing FTX’s reorganization. Shortly after taking over, Ray said in testimony that despite some of the audits that had been done previously at FTX, he didn’t “trust a single piece of paper in this organization.” In the months that followed, Ray and his team set about tracking the missing funds, with some $8 billion placed in real estate, political donations, and VC investments — including a $500 million investment in AI company Anthropic before the generative AI boom, which the FTX estate managed to sell earlier this year for $884 million.

Initially, it seemed unlikely that investors would recoup much, if any, of their money, but signs in recent months suggested that good news might be on the horizon, with progress made on clawing back cash via various investments FTX had made, as well as from executives involved with the company.

We now know that 98% of FTX creditors will receive 118% of the value of their FTX-stored assets in cash, while the other creditors will receive 100% — plus “billions in compensation for the time value of their investments,” according to a press release issued by the FTX estate today.

In total, FTX says that it will be able to distribute between $14.5 billion and $16.3 billion in cash, which includes assets currently under control of entities, including chapter 11 debtors, liquidators, the Securities Commission of the Bahamas, the U.S. Department of Justice, among various other parties.

Apple’s Final Cut Camera lets filmmakers connect four cameras at once

Haje Jan Kamps

7:38 AM PDT • May 7, 2024

The latest version of Final Cut Pro introduces a new feature to speed up your shoot: Live Multicam. It’s a bold move from Apple, transforming your iPad into a multicam production studio, enabling creatives to connect and preview up to four cameras all at once, all in one place. From the command post, directors can remotely direct each video angle and dial in exposure, white balance, focus and more, all within the Final Cut Camera app.

The new companion app lets users connect multiple iPhones or iPads (presumably using the same protocols as the Continuity Camera feature launched a few years ago). Final Cut Pro automatically transfers and syncs each Live Multicam angle so you can seamlessly move from production to editing.

Final Cut Pro has existed in the iPad universe for a while — but when paired with a brand new M4 processor, it becomes a video editing experience much closer to what you might expect on a desktop video editing workstation. The speed is 2x faster than with the old M1 processors, Apple says. One way that shows up is that the new iPad supports up to four times more streams of ProRes RAW than M1.

The company also introduced external project support, making it possible to edit projects directly from an external drive, leveraging the fast Thunderbolt connection of iPad Pro.

Startup of the Week

Exclusive: Wayve co-founder Alex Kendall on the autonomous future for cars and robots

Mike Butcher, 7:58 AM PDT • May 7, 2024

U.K.-based autonomous vehicle startup Wayve started life as a software platform loaded into a tiny electric “car” called Renault Twizy. Festooned with cameras, the company’s co-founders and PhD graduates, Alex Kendall and Amar Shah, tuned the deep-learning algorithms powering the car’s autonomous systems until they’d got it to drive around the medieval city unaided.

No fancy Lidar cameras or radars were needed. They suddenly realized they were on to something.

Fast-forward to today and Wayve, now an AI model company, has raised a $1.05 billion Series C funding round led by SoftBank, NVIDIA and Microsoft. That makes this the UK’s largest AI fundraise to date, and among the top 20 AI fundraises globally. Even Meta’s head of AI, Yann LeCun, invested in the company when it was young.

Wayve now plans to sell its autonomous driving model to a variety of auto OEMs as well as to makers of new autonomous robots.

In an exclusive interview, I spoke to Alex Kendall, co-founder and CEO of Wayve, about how the company has been training the model, the new fundraise, licensing plans, and the wider self-driving market.

(Note: The following interview has been edited for length and clarity)

TechCrunch: What tipped the balance to attain this level of funding?

..Full Interview

X of the Week

Contents

* Editorial: 

* Essays of the Week

* Video of the Week

* AI of the Week

* News Of the Week

* Startup of the Week

* X of the Week