- Pre-Money: Jan 22nd, 2024
Pre-Money: Jan 22nd, 2024
IPO alternatives, diversification perks, from petrol to bits
This issue brought to you by Xembly, your AI Chief of Staff.
The week’s most important happenings
The year is fully and unabashedly in gear, the global elite schmoozed in Davos, and here’s what’s up:
With few IPOs in sight, alternatives emerge
Perks of founder diversification
AI is everywhere
From Petrol to Bits
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Dots & Lines
The week’s top takeaways
As the IPO pathway constricts, other approaches emerge: Rumblings of a potential Reddit Initial Public Offering (IPO) as soon as March are exciting. But for most companies with years of pent-up illiquidity, the path to IPO is still very challenging. This is spurring the rise of alternative approaches. Databricks, long considered a leading IPO prospect, is reportedly planning an employee secondary, suggesting broader liquidity remains in the distance even for top performers. Billions have been raised by secondary funds seeking discounted stakes in promising companies. The next tier of companies are showing up on the private equity radar screen, in some cases capitulating to the lower multiples which that industry offers. On the heels of a year in which only 45 unicorns were minted, venture’s next few years look hazy without the re-emergence of an IPO pipeline. Some investors are suggesting a “third way” to do things, or a “one round wonder,” in which companies raise one round instead of coming back to the VC well repeatedly. Any of these trends catching on could herald big changes to the industry.
IPOs have been few and far between
AI is everywhere: Venture funding news aside, lately it’s been hard to find a place where AI isn’t being talked about. The imminent shipping of Apple’s Vision pro headset comes amidst a a wave of AI-powered devices showcased at CES, all of which offer a move forward from the current handheld phone paradigm. Mark Zuckerberg announced Meta’s focus is now on building an Artificial General Intelligence (AGI) - a machine on par with human intellect. International Monetary Fund Head Kristalina Georgieva wrote that AI is likely to impact at least 40% of global jobs, and that countries need a policy response. And the media and tech industries braced for unprecedented disinformation campaigns leveraging AI in a year where 50% of the world’s population will vote. Stay tuned to see where AI shows up next.
Diversification has its perks: In the classic investment model, founder portfolios are concentrated, with much of their future prospects depending on the outcome of a single big business bet. Investors, on the other hand, are diversified, giving them significant leverage. But in the case of Elon Musk, the tables are turned. Elon’s demands for more control at Tesla are buoyed by his considerable portfolio of other promising startup companies. Put aside for a minute that Elon’s control was diminished by his own sale of Tesla stock to buy one of those businesses, Twitter. As Matt Levine points out, Elon’s threat to cast his innovation focus on another business if his demands aren’t met is highly credible. In fact, the tactic can be used repeatedly to justify anything he wants at any of his companies in the future, illuminating a path for founders to increase their leverage. A word to the wise: don’t try this at home unless properly equipped.
From petrol to bits: Among the various trends noted at Davos was Saudi Arabia’s evolution into a true force in technology. The Kingdom had a significant presence at the elite gathering in the Swiss Alps promoting its emergence as a tech hub. It also increased its venture commitment, more than doubling Aramco ventures to $7B as it takes the mantle from the mega-funds currently pulling back from the market. Look for the migration from real to digital to continue for the world’s biggest oil producer as climate concerns continue to grow.
Smart Humans explores alternative investments
In this episode, Slava Rubin talks with Betterment’s Eli Broverman about building a billion-dollar FinTech unicorn and investing in the future.
A few items of interest
General Catalyst announced plans to purchase Ohio’s Summa Health hospital system, with a bold view towards bringing technological innovation directly to customers
Top Tier Capital, a VC and PE firm, raised $1.05B to invest globally in technology companies and venture funds
Electra, a French electric vehicle (EV) charging provider, raised $330M led by Dutch pension provider PGGM, to install 15,000 charging points in Europe by 2030, as climate tech surges
Flexport, a shipping and logistics unicorn in the news last year for founder Ryan Petersen’s return to the CEO role, raised $260M from Shopify
Foundry Ventures, a Boulder VC with $4B under management, will not raise any more funds, after 18 years of consistent industry thought leadership from Brad Feld and others
Artifact, the AI news app built by Instagram’s founders, will shut down next month, citing less demand than anticipated
Kyle Harrison offers a fascinating in-depth look at the evolution of the venture capital model and the future prospects of those who practice in the manner it was intended
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Looking ahead to this week
During the week of January 22nd, look out for:
Earnings from Tesla ($TSLA), Netflix ($NFLX), Intel ($INTC), IBM ($IBM) and Visa ($V)
Election season continuing with Tuesday’s New Hampshire Primaries
Jobless claims on Thursday
Estimates of Q4 GDP on Thursday
Optimus folds a shirt
— Elon Musk (@elonmusk)
Jan 15, 2024
Sick of laundry? Be careful what you wish for…
How'd we do with this week's issue?