Pre-Money: Apr 15th, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• The impending AI disillusionment: It was compared to the printing press in Jamie Dimon’s annual letter, said to be ready to eclipse human intelligence this year by Elon Musk, and fear-mongered on The Daily Show. Undoubtedly, Artificial Intelligence is having its cultural moment. But some investors and industry insiders are cautioning that it may not have a massive business impact in the next few years. Customers at a recent Google Cloud conference said the current wave of Generative AI offerings is “still findings its legs,” referring to the high rate of hallucinations - the LLMs’ tendency to invent new facts in response to prompts - and an inability to deliver on many of the most promising use cases. A number of venture investors, like Meritech, have sat out the AI funding craze as they wait for economics to become more clear. Many powerful technologies have gone through a “trough of disillusionment” before seeing peak adoption and market value, so don’t be surprised if AI fades before its promised transformative potential can be demonstrated.

• Demand for venture’s democratization: Few recent launches have captured the public excitement about participation in private markets then that of the Destiny Tech100 ($DXYZ) closed-end fund. With holdings in 23 prominent pre-IPO companies like Stripe, SpaceX and OpenAI, the fund provides a rare entry point for retail investors to get private market exposure, especially in the late stage. A handful of other products do provide such opportunities, like Cathie Wood’s ARK Venture Fund and and Fundrise’s Innovation Fund. But Destiny, available to anyone via the NYSE, is closed-end. This enables its price to move based in part on market sentiment as opposed to exclusively tracking its Net Asset Value (NAV) - the mark-to-market value of the assets it holds. As a result, while the stated value of its private market holdings is $54M, the fund is trading at a market cap of more than $400M, representing a 700% premium, and at times the spread has gone to almost triple that. Some decry it as a “meme,” putting it in the bucket of securities that trade without regard to intrinsic value, but it’s certainly yet another bellwether of the public’s interest in investing in private markets.

• The VC associate two-step: VC Twitter was abuzz with alternate takes on the age-old debate of whether associates - the junior team members at venture firms - are worth talking to, or if founders raising money should only bother with partners. A partner has to champion deals to make them happen, so talking to juniors can lead to repetitive conversations at best, and brain-drain at worst. But associates tend to be out and about and open to new conversations, so without a connection that is where founders are likely to start. Few funding conversations lead to deals anyhow, so even if a conversation involves a partner, success is unlikely. On the investor side, LPs are most likely know a partner and make an intro there. But don’t be afraid of introducing a favored founder to an associate either.

• The iPhone is still king, for now: The highly-touted Humane Pin began shipping last week. The AI-enabled wearable device, worn as a pendant, aims to get us off of our phones and into the real world. But early feedback suggests this iteration of the device falls short of enabling a flowing future for all. Reviewers lamented the that it missed the basics, like simply recording a reminder note, and others were concerned by its alarmingly-high temperature. One prominent Youtuber went so far as to dub it the “worst product I’ve ever reviewed.” It’s still early and we may be entering into a golden age of deeptech fueled by more talent, lower hardware prices and other factors, which will bring more entrants to the space. And the excitement around this launch showcases how much enthusiasm there is for the concept of taking our eyes off our screens and back onto the world.

Deal Points

A few items of interest

• Add ticket marketplace Stubhub to the list of companies lined up to go public later this year, if valuation expectations don’t get in the way

• Rubrik’s IPO will be a good test of investor tolerance for money-losing companies, which was the norm for venture-backed businesses but frowned upon in today’s market environment

• A recent Kaufman Fellow survey of VC fund managers shows a majority thinks the macro environment will improve this year, and expects make more investments than last year

• ByteDance profit increased sixty percent last year, as it simultaneously surges in popularity and draws the ire of US regulators and legislators

• Data security provider Cyera raised a $300M Series C at a $1.4B valuation, led by Coatue

• New York-based short term rental platform Guesty raised a $130M Series F led by KKR

• Monad Labs, the New York-based company behind the Monad L1 blockchain, raised a $225M Series A led by Paradigm, becoming the first crypto unicorn minted in 2024

• As dealmaking stays slow, venture capitalists have re-discovered the lost art of due diligence

• It’s Space Week at Republic: Win a trip for 2 to a rocket launch, and launch your investments into one of the hottest sectors in venture.**

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