Pre-Money: May 27th, 2024

KPIs

The week’s top performance indicators

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Dots & Lines

The week’s top takeaways

• Content still king, for now: LLMs need to train on relevant, accurate content, and to cite it to back up assertions. This need for quality data is driving a race by AI companies to strike content deals, like OpenAI and NewsCorp’s $250M pact. Terms haven’t been disclosed, and unless these deals are exclusive it’s hard to see how licensing provides LLMs with long-term defensibility. And it’s easy to imagine how blending partisan media into answers could lead to even more misinformation than Google’s early missteps, like recommending people eat rocks. How leading AI models integrate diverse information and data is an important trend for investors to track, as it will impact AI as well as media business models.

• Founder knows best: Numerous businesses that grew too fast in the heyday of 2021 are going back to basics. Techstars announced that Founder David Cohen is back in the CEO seat, after a year in which the leading accelerator downsized and confronted multiple challenges across its geographic and sector programs. Notable founders came back to lead other high-profile businesses in the past year, including Ryan Petersen at Flexport and Greg Solano at Yuga Labs. Bringing a founder back in after a “professional CEO” wasn’t able to continue a company’s zero to one trajectory is likely to get a business back on track, though also an admission that the scaling strategy calling for outside leadership was flawed or too early.

• Fintech reeling from a misfiring Synapse: The bankruptcy of a16z-backed Synapse is rippling through the fintech world, disabling products and stranding customer funds. Synapse provides banking-as-a-service (BaaS), making it easy for startups to implement deposits, payments and other common banking features into their apps through simple APIs and tools. As the business declined, the company filed for bankruptcy and sought a buyer earlier this year. But the deal fell apart, and the downstream effects are impacting functionality across the fintech world. Companies like Juno and Mainvest have been unable to service customer banking needs, with some consumers wondering where their cash went. The issue is likely to bring a spotlight to the counter-party reliance common in fintech and where regulatory responsibility lies when things go bad.

• Time for Tempus: The next Pre-IPO company to test public markets is likely to be Tempus AI, as the healthcare data company started and run by Groupon Founder Eric Lefkofsky filed its S-1. The Chicago-based business initially filed IPO paperwork in 2021. It boasted $532M in 2023 revenue - growing 65% year-on-year - along with net losses of $214M. Tempus has raised more than $1.5B of venture funding, including a $200M infusion from SoftBank Vision Fund that came out in the prospectus. Roughly two thirds of its revenue comes from providing access to its broad data sets to leading pharma companies, with most of the rest derived from lab testing. Only a tiny fraction of its revenues comes from AI services, but it leans heavily into the story of revolutionizing health through AI to support the IPO, mentioning the term 228 times in the prospectus. Stay tuned to how markets receive this message.

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• Google’s internal Moonshot Factory X is feeling budget pressures and transitioning toward incubating and graduating startups at earlier stages

• A mid-year review of which unicorns will not be going public this year includes Plaid, Figma, Stripe and more

• Female-led funds are on track for a big drop in fundraising this year

• Didn’t like the Humane Pin at $699? Consider buying the business for $1B, as the company seeks a sale following its rough debut

• Peter Thiel’s Valar Ventures closed it’s 9th fund at half the size of its prior fund, demonstrating the headwinds GPs raising today face

• Scale.ai, which helps create and fine-tune LLMs, raised $1B on a $13.8B valuation led by Accel and with participation from Nvidia, Amazon and others

• Web3 social network Farcaster raised $150M on a $1B valuation led by Paradigm

• Paris-based H raised a $220M seed round to build AI agents, with top VCs like Accel, corporates like Amazon and UIPath and billionaires like Eric Schmidt involved in the funding

• An insightful take on the anatomy of seed rounds, how they have evolved, and how they can be reframed to help companies most

• TikTok is laying off hundreds of team members as it navigates the pending US ban or divestment

• A deeper look at AI margins asks whether its massive costs and intense competitiveness prevent healthy gross margins and profitability in the long-term, or if there are ways around those challenges

• The latest drama at OpenAI concerns aggressive separation agreements that could result in departing employees losing vested equity