VCs should give up on the winner-takes-all approach to investing

Welcome to TechCrunch+ Tuesday

Several years ago, I was chatting with a friend who’d become an investor about an idea I had for a startup. It wasn’t a pitch: I just wanted to see what they thought of my premise.

“That sounds like a solid lifestyle startup,” they replied, “but most investors I know are only looking for billion-dollar companies.”

The fundamentals of venture capital explain why investors are on a perpetual unicorn hunt, but “even markets with a seemingly dominant player can support multiple winners,” writes Rebecca Szkutak.

To learn more about the winner-take-all strategy that underpins tech investing, she interviewed:

• Marco Zappacosta, co-founder and CEO, Thumbtack
• Lily Shaw, investor, OMERS Ventures
• Logan Allin, founder/managing partner, Fin Capital
• Lia Zhang, investor, Makers Fund

Thanks very much for reading,

Walter Thompson
Editorial Manager, TechCrunch+

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How any SaaS company can monetize generative AI

Generative AI often looks like a magic trick, but complex prompts can consume a great deal of resources.

And that makes usage-based pricing a “natural fit” for SaaS companies adding AI-powered products to their roster, says Puneet Gupta, a former AWS general manager who’s now the CEO and co-founder of Amberflo.io.

“Since the back-end costs of providing service are inherently variable, the customer-facing billing should be usage-based as well.”

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VC Office Hours: Why the sex tech industry could benefit from today’s politics

Tech is set on disrupting nearly every aspect of human existence. Except for one, it seems.

Between 2020 and 2022, sex tech startups raised just a little over $1 billion in venture capital, reports Dominic-Madori Davis. She interviewed Coyote Ventures co-founder Jessica Karr to learn more about the state of the sector.

“Sex tech is an inclusive space — there are also many new products that are innovative for gender inclusivity as well as sexual wellness for men,” said Karr.

“While the new products address the true diversity of all people’s personal preferences, the taboo will remain for a long time.”

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How this VC evaluates generative AI startups

When OpenAI made its Chat Generative Pre-trained Transformer (ChatGPT) commercially available in November 2022, it kicked off a land run in tech. Nine months later, every startup is looking for ways to incorporate generative AI.

“Nearly every pitch deck I’ve seen since December has had AI on the front two pages,” says Adam B. Struck, founding partner of Struck Capital.

“There are a few areas that we think are especially investable and others that are more challenging for a seed-stage company to compete in.”

In this TC+ column, Struck unpacks his thesis as it relates to each layer of generative AI’s tech stack and includes his “new comprehensive deal evaluation framework specific to AI.”

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IP for startups: When (not) to patent your inventions

Acquiring a patent creates a myriad of benefits for a startup: It can open doors with investors, lead to joint partnerships, and even help immigrant founders in the U.S. obtain green cards.

But it’s complicated!

Haje Jan Kamps interviewed Michele Moreland, general partner at venture fund Aventurine, to learn more about the application process, how much to budget, and her tips for hiring effective counsel.

“If you are developing a cutting-edge new technology, the next evolution of X, your counsel should know X very well,” said Moreland.

“They need to know why it is better, why it solves the problems, and what the advantages are.”

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