💫 The AI Trust Fall?

🚀 We don’t think this way about coworkers’ spreadsheets. But we will probably think this way about AI & this will very likely change the way product managers on-board users.

But today, with every AI software now tucking a disclaimer at the bottom of the page, we will be wondering. “Gemini may display inaccurate info, including about people, so double-check its responses” & “ChatGPT/Claude can make mistakes. Check important info” are two examples.

🔎 In the early days of this epoch, mistakes will be common. Over time, less so, as accuracies improve.

🚀 The more important the work, the greater peoples’ need to be confident the AI is correct. We will demand much better than human error rates. Self-driving cars provide an extreme example of this trust fall. Waymo & Cruise have published data arguing self-driving cars are 65-94% safer. Yet, 2/3 of Americans surveyed by the AAA fear them.

🚀 As with any new colleague, the first impressions & a series of small wins will determine the person’s trust. Severe errors in the future will erode confidence, that must be rebuilt - likely with the help of human support teams who will explain, develop tests for the future, & assure users.

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📈 Billionaire Groupon founder Eric Lefkofsky is back with another IPO: AI health tech Tempus

🔒 Eric Lefkofsky knows the public listing rodeo well and is about to enter it for a fourth time. The serial entrepreneur, whose net worth is estimated at nearly $4 billion, has already taken three businesses he’s founded public.

🔒 Today he’s the founder of Tempus, a genomic testing and data analysis company preparing to IPO. But he’s best known as the co-founder of daily deals pioneer Groupon, which went public at a valuation of nearly $13 billion in 2011, in one of that year’s most high-profile debuts.

Groupon’s IPO and post-IPO years were infamously troubled, though the public listings of his other two companies — InnerWorkings in 2006 and Echo Global Logistics in 2009 — didn’t raise significant flags for investors and did well for Lefkofsky. InnerWorkings, a supply chain startup he founded in 2001, sold to private equity in 2021 for a fraction of its IPO market cap.

🔒 Meanwhile, the stock of Echo Global Logistics appreciated steadily during its 11-year public life history before also being sold to private equity at a 50% premium over its last trading price in 2021.

🔒 Some of the controversies with Groupon involved a report that Lefkofsky pocketed over $300 million from Groupon’s pre-IPO round, leaving little working capital for the company, and cutting its reported revenue in about half in revised S-1 filings after regulators scrutinized the financials in its initial S-1. That unorthodox decision has also brought to light another deal from his past.

All of this has given Lefkofsky the reputation of having somewhat of a golden touch, at least for himself, but maybe not for long-term investors of his companies. ©

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

⏺ VCs are clamoring to invest in hot AI companies, 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 makers of Grok.

They are using Special Purpose Vehicles 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).

⏺What these investors are finding is 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 allows 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.

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🆔 Deal Dive: How (Re)vive grew 10x last year by helping retailers recycle and sell returned items

🤝 The fashion industry has a huge problem: Despite many returned items being unworn or undamaged, a lot, if not the majority, end up in the trash. An estimated 9.5 billion pounds of returns ended up in landfills in 2022 alone, according to data from return logistics software company Optoro.

(Re)vive takes in products that retailers have deemed too damaged to sell and fixes them up — whether that means washing them, reattaching a button, or lint-rolling off some dog hair. The items are then sold through various channels, and (Re)vive’s data platform helps retailers monitor and manage their waste.

🤝 The underlying tech is quite interesting. The startup’s founder and CEO, Allison Lee, said the company’s software lets its employees sort, label and determine the outcome of a box of returned items in about three minutes. The software will also show retailers how much of a certain SKU — a product’s identifying number — was returned and how much money they can potentially make from saving and selling the returned items.

🤝 Refreshed items that are still in season head back to stores, while (Re)vive sells out-of-season goods on third-party channels like eBay and Poshmark on behalf of retailers and takes a cut from each sale.

🤝 Lee said the company is seeing strong demand now and expects it to grow as pressure continues to mount on retailers to clean up and minimize their impact on the environment. She added that companies are now under more scrutiny about damages from investors and shareholders — they can’t write those losses off as part of doing business as they used to.

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💼 VC firm Antler’s CEO says Asia presents ‘biggest opportunity’ in the world for growth

🎁 Asia’s startup ecosystem hasn’t been doing well in the past couple years, as everything from geopolitics to higher interest rates affected investors’ willingness to write checks. Many venture firms have exited China, which used to be the continent’s biggest venture market.

Though there hasn’t been a huge decline in the number of fundraising rounds, the rounds have shrunk — investors are no longer spending as much as they used to. Still, some investors are bullish on the continent’s potential, setting up global strategies as they seek fund-returning investments.

🎁 Venture firm Antler appears to be one such investor. It launched a $285 million emerging growth fund, called Antler Elevate Fund, in June 2023, and has been investing between $1 million and $10 million in Series A rounds and later worldwide. Established in 2018 in Singapore,

🎁 Antler has since grown its investments and networks globally, extending its reach to the U.S., Europe and Africa, and throughout Asia, including Vietnam, Japan and Malaysia.

🎁 TechCrunch caught up with Antler’s founder and CEO, Magnus Grimeland, at an event in Seoul to talk about startup trends in Asia, the opportunities the firm sees in the region and how it approaches investments as AI grows ever more prominent.

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💡 State of Private Markets: Q1 2024.

Carta report on the VC market in the USA in 1Q 2024.

💫 For the sake of form, the total VC market is $16.3B, dynamics +1% to QoQ and -64% YoY (by the number of transactions -29% QoQ and -46%(~) YoY);

⬜️ Share of downrounds in Q1 2024: 23% (highest);

⬜️ Midstage has grown: Series B from $4.0B to $4.2B, and Series C from $2.0B to $4.6B QoQ;

⬜️ Early and Late continue to fall and stay at the bottom;

⬜️ Scores dropped everywhere except for Seed;

⬜️ 42% of all priced rounds were bridges (the highest proportion on Series A is 43%);

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📈 Unicorn-rich VC Wesley Chan owes his success to a Craigslist job washing lab beakers
#VentureNews

⭐️ Over the course of his career in venture capital, he’s invested in over 20 unicorns, including AngelList, Dialpad, Ring, Rocket Lawyer and Sourcegraph. Five of those went on to become decacorns: Canva, Flexport, Guild Education, Plaid and Robinhood. Chan’s was the first check into most of those.

⭐️ After working at Google in its early days as an engineer, he became an investor. His venture capital pedigree started at Google Ventures and continued to Felicis Ventures. Now as the co-founder and managing partner of FPV Ventures, he leads the two-year-old firm’s $450 million venture capital fund with co-founder Pegah Ebrahimi.

His story started before he was born, when his family migrated to the U.S. from Hong Kong in the 1970s.

“They came here with no money, and in fact, growing up they didn’t have any money,” Chan said. “It’s just really fascinating to watch that journey. That they would leave a place where they didn’t speak a word of English and — they still don’t speak English very well — and build a new life because they felt that that was what was necessary.”

⭐️ Chan admits that he wasn’t as appreciative of his parents’ fortitude when he was young. However, growing up in a hard-working, immigrant family that didn’t have much money ended up teaching him how to recognize nuances and be someone who can adapt.

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⭐️ WndrCo officially gets into venture capital with fresh $460M across two funds
#VentureNews

⭐️ WndrCo, the holding company and technology investment firm started by founding partners Sujay Jaswa and Jeffrey Katzenberg, raised its first venture capital fund, closing on over $460 million in capital commitments.

⭐️Katzenberg is well-known for being the former chairman of Walt Disney Studios and co-founder of DreamWorks SKG. Jaswa was a principal at New Enterprise Associates before joining Dropbox as one of the company’s early employees.

We profiled the 8-year-old company in 2022 after we noticed how many times WndrCo’s name was associated with venture capital deals in a short period of time. “The common thread across everything is that we’re really looking for founders that we think have a chance of cracking an important problem,” Jaswa told TechCrunch at the time.

That vision hasn’t changed. Katzenberg and Jaswa, along with general partners ChenLi Wang, Anthony Saleh and Jeffrey Nykun, manage $1.3 billion in assets today through their Build, Venture and Seed strategies.

⭐️ With the Build strategy, WndrCo often acquires controlling stakes in underappreciated tech companies to turn them into category leaders, for example, digital security companies Aura and Pango. The Venture strategy targets founders reshaping industries, with a strong preference to be the lead institutional investor. WndrCo’s venture portfolio includes 1Password, Airtable, Databricks, Deel and Figma.

⭐️ Its Seed fund invests early in the next generation of entrepreneurs and has made investments in companies including Yassir, Material Security, Pilot, Quince, Socket and Twelve Labs.

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🌐 The Vector Computer Company
#Venture

💻 Vector computers simplify many kinds of data into vectors - the language of AI systems - and push them into your vector database. As Spark has become the system for transforming large volumes of data in BI & AI training, the vector computer manages the data pipelines to feed models, optimizing them for a purpose or user.

Combining text & structured data in an LLM workflow the right way is difficult. It requires a new software infrastructure layer: a vector computer. Combining text & structured data in an LLM workflow the right way is difficult. It requires a new software infrastructure layer: a vector computer.

💻Today, most vectors are very simple, but increasingly, vectors will have all kinds of data embedded in them, & vector computers will be the engines that unleash those powerful combinations. Superlinked is building a vector computer. Founder Daniel Svonava is a former engineer at YouTube who worked on real-time machine learning systems for a decade.

🔔 Vector computers improve LLM accuracy by helping to surface the right data for Retrieval Augmented Generation (RAG). They allow faster optimization of LLMs by including many kinds of data that can be updated quickly.

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© One Line of Code Can Wipe a Billion Rows : Investing in Tobiko

➡️ A short SQL statement can delete a table, reformat date into the US format, or compute the average quota attainment by account executive by region over a company’s history.

➡️ As data has become a critical component of analytics & production systems, data engineers require more sophisticated tools to manage their data transformations. Tobiko is that solution.

At small scale this may not seem important. But for Harness, this innovation saved 30-40% of their cloud data warehouse spend & reduced model build time by 80%. DreamHaven, a gaming company, found Databricks’s Delta Live Tables 3.5x more expensive than Tobiko to run the same pipelines.

➡️ Existing systems recalculate too much because they don’t understand data lineage & the relationships between tables. So they recalculate too much data to ensure correctness, substantially increasing data warehouse spend.

➡️ More than that, Tobiko enables data engineers to operate with the same discipline as software developers: creating development environments, writing tests to ensure code performs as intended, & simulating changes to ensure one line of code doesn’t wipe a billion rows.

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💡 Accel has a fresh $650M to back European early-stage startups
#VentureNews

🎥 Early-stage rounds continue to account for the majority of investments in the European startup market, and on Tuesday one of the biggest firms in the region announced a new fund to bolster that trend. Accel has raised $650 million to back startups from seed to Series A across the U.K., the Continent and Israel.

Accel has invested in more than 200 startups in the region to date, making it one of the more prolific VCs in this market.

🎥 One of the recurring laments you hear in Europe is that even if the region produces exceptional talent and ideas, companies on the continent are challenged when it comes to scaling.

🎥 In the years since those investments, Accel’s bet has been that the growth of startups in Europe has been strong enough to grow the pot of money that it’s raising to back them. Notably, the $650 million announced Tuesday is the same size as the firm’s early-stage fund in the U.S. (announced December 2023).

“The European tech scene has really come of age,” said Harry Nelis, a longtime partner at Accel in London. Current investments include cybersecurity firms Cyera and Oasis, the care home marketplace Lottie, and the buzzy AI video startup Synthesia, among many others.

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🌐 Kleiner Perkins leads $14.4M seed round into Fizz, a credit-building debit card aimed at Gen Z college students
#Venture

💻 Carlo Kobe and Scott Smith believed so strongly in the need for a debit card product designed specifically for Gen Zers that they dropped out of Harvard and Cornell at ages 19 and 21, respectively, in 2021 to build a startup called Fizz.

💻 The pair wanted to go beyond creating a debit card for the younger generation. They wanted to make using the card a way to establish credit and become more educated about finances generally and ultimately be financially independent.

The best way to do this, they decided, was to make its core an artificial intelligence budgeting product and to offer gamified financial literacy courses presented in “a fun and interactive quiz format.” Its target demographic is college students, aged 18 to 24.

💻 Now Fizz is announcing to TechCrunch exclusively that it’s raised $14.4 million in seed funding led by Kleiner Perkins, with participation from SV Angel, Y Combinator, New Era Ventures, and the founders and operators behind several unicorns, including Handshake, Postmates and Public.com. The startup went through Y Combinator’s Summer 2021 cohort.

💻In the last 12 months, the pair said, Fizz grew from zero to having “tens of thousands” of customers. Its offering is available to students at over 300 colleges and universities, including all the Ivy League schools and every top 25 school as ranked in U.S. News & World Report.

🔔Fizz, which is expected this year to cross nine figures in annual card volume, the founders say, partners directly with schools. It also uses campus ambassadors and TikTok to promote its offering.

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⬜️ Cube is building a ‘semantic layer’ for company data
#VentureNews

⭐️ Cube began as an open source project in 2019 offering what Keydunov describes as a “universal semantic layer” for organizational data that can feed into databases, business intelligence (BI) tools, and even AI-powered chatbots.

⭐️ Now, five years later, Keydunov and Tiunov have a veritable business on their hands, having launched a subscription-based service built on Cube — Cube Cloud — that adds automated workflows and enterprise-focused governance and deployment tooling.

“There’s no shortage of data,” Keydunov told TechCrunch. “And the demand for data continues to grow among employees, partners and customers, who are motivated by the idea that data-driven decisions lead to improved operational efficiency, enhanced customer satisfaction and competitive advantage. Technologies like AI, machine learning, the internet of things and blockchain are reshaping the data landscape and revolutionizing how organizations collect, process, and derive value from data. It’s not only humans who need data; now machines need data too.”

⭐️ Data modeling challenges aside, surveys suggest that relatively few orgs are achieving even base-level success deriving value from their data. A 2022 Gartner poll of data analytics leaders found that fewer than half believe their teams are effective in providing value to their employers.

That’s despite the fact that, according to the same poll, companies are spending an average of over $5 million on data management, governance and analytics initiatives.

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⭐️ West took significant share inQ1 2024
#VentureNews

💡 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%.

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🍔Number of priced seed rounds declined sharply in Q1
#VentureNews

👍 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.

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🍔 West region saw over 50% of investment last 12 months
#VentureNews

👍 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%.

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🍔 Total Series C investment rose from Q4 to Q1
#VentureNews

👍 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.

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🏃‍♂️ In 2024, many Y Combinator startups only want tiny seed rounds — but there’s a catch
#VentureNews

⭐️ When Bowery Capital general partner Loren Straub started talking to a startup from the latest Y Combinator accelerator batch a few months ago, she thought it was strange that the company didn’t have a lead investor for the round it was raising. Even stranger, the founders didn’t seem to be looking for one..

⭐️ She thought it was an anomaly until she talked to about nine other startups, Straub told TechCrunch. They were all looking to raise nearly identical rounds: $1.5 million to $2 million with around a $15 million post-money valuation, while giving up only 10% of their companies — aside from YC’s standard deal, where it takes a 7% stake.

Most had raised the majority of that already from multiple angels with only a few hundred thousand dollars’ worth of shares left to sell.

These dynamics mean there are likely numerous startups among the 249-strong YC winter batch that won’t be raising from traditional seed investors at all. That happens with every cohort, of course, but the difference this time is that the traditional seed investors would have liked to fund them. However, many seed investors,

⭐️ like Straub, have a 10% equity ownership minimum. In fact, selling 20% of the startup is considered fairly standard for a seed round. Institutional investors typically require 10% equity to lead a round, too. In its early-stage advice guide, YC even says that most rounds require 20% but also advises, “if you can manage to give up as little as 10% of your company in your seed round, that is wonderful.”

⭐️ A YC spokesperson confirmed that they encourage founders to only raise what they need. They also said that since YC upped its standard deal to include $500,000 of capital in 2022, more companies are raising less and looking to give away less equity.

YC doesn’t spend much time on fundraising in the program, a nod to the success of Demo Day, but companies can always talk about it with their group partner, the spokesperson added.

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