As we’re halfway through 2024, it’s a great time to reflect on the past and think about what success means for the rest of this year and next. Here’s a super important lesson from Tom Loverro at IVP from last week about going on OFFENSE, timely and great advice! I highly encourage you to click the image 👇🏼 and read this and the lively 🧵 and comments.

As readers of What’s 🔥 know, I do believe history rhymes but does not repeat. To that end, Tom’s post mirrors the psychology of founders nd investors in 2004 as we were all licking wounds from the dot com meltdown. Here’s an excerpt from my post in 2004 along with the full one below.

Full post from my original blog, BeyondVC March 2004, is here and also below.

THOUGHTS FROM PC FORUM-GOING INTO ATTACK MODE
Posted on Mar 23, 2004 by Ed Sim

Once again, I am not going to blog the panels at PC Forum, but you can find some good commentary on the conference via other bloggers from my post yesterday. Other good posts can be found from Dan Gillmor, Jason Calacanis, or the PC Forum Eventspace.

However, what I would like to share with you is some conversations I had with some VCs and entrepreneurs over the course of the day yesterday. While the panels are interesting and the speakers can stretch your mind, what is great about PC Forum is the high-level networking that occurs during the day. So what did we talk about? There were a number of attendees who were here during the past few years and their businesses raised a fair amount of capital and somehow they managed to survive the nuclear winter during the 2001-2002 period. What allowed them to do it? What are the challenges they face now? One observation that I discussed with some others is that the very principles that made companies successful during the bubble period are the very ones that would land you in bankruptcy court during any other business period. Some of these principles included growing revenue and headcount at all costs with no focus on profitability and spending tons of money on building a larger than life image-lots of money thrown at PR firms and advertising with no idea of who your target market was or what your customer really wanted. In other words, alot of these companies were based on cool technology and not on making customers happy. On top of this, VCs threw too much money at these companies and there was no need for entrepreneurs to be resourceful and creative in order to get things done.

Let’s fast forward to now. The companies that survived this downturn were excellent at cutting costs, repositioning their products for new markets, and being resourceful and creative to survive. While these are some of the business principles I want my companies to continue to adhere to, I also want to caution that there is a danger in being too cheap. Some of these companies were so shellshocked from what happened during the past couple of years that they have become too cautious. For anyone that has been through the tough years, the only thing I can say is congratulations for surviving but now it is time to take some calculated risks. It is time to get out of the bunker and go into attack mode. Go after your competition, take some calculated risks, and focus on creating some revenue growth. What is different now than before is that most companies that survived the nuclear winter know who their customer is, how much they will pay, and what features and functionalities they may want in future versions. While it may sound like idle VC talk, I encourage you to spend that extra $$$ now as long as you can see the real ROI behind a targeted marketing program, the hiring of a new engineer to finish a product faster, or a new sales person to manage more qualified leads. Once again, take it with a grain of salt, as some entrepreneurs may think this is another VC swinging for the fences, but the point is don’t be too cautious because the opportunity may just pass you by.

As always, 🙏🏼 for reading and please share with your friends and colleagues. Hope you had a Happy 4th as well 🎆!

Scaling Startups

#founders doing it their own way, ToDoist at >$100M ARR - lots of grit!

Todoist has made more than $100 million in total revenue, which isn't very interesting because many others have reached this number. What's interesting is that we did it in our unique way:

— Fully bootstrapped. Customers have supported us since the beginning, and we've used only our revenues to improve things further.
— Complete independence. Since we are customer-supported, no one tells us what we can or can't do.
— Remote-first. But not only remote-first, we've hired super talented people worldwide who never went to Ivy League schools or worked at Google. Many of the early people who joined Doist have seen a 10x increase in compensation as we've scaled Doist.
— Europe mixed with US mentality. We've achieved this by working 40-hour workweeks and taking 40 days of vacation per year. We only work on weekdays. The three-member CXO team has 8 kids, and we got them while we scaled Doist.

The most critical personal lesson I've learned is that you can do much more than you think. I came from a refugee background and started a real school in the 4th grade. Starting and running a tech company was not even plausible while growing up. But here we are! So start learning, growing, and building! You got this 😊🚀

#Great 2 minute clip from Lenny Rachitsky with Dylan Field, Figma - Why you shouldn’t take 3.5 years to launch your product!

"It took way too long. Don't do that."

@zoink on why it took @Figma 3.5 years to launch

Clip from our live conversation at #Config2024

🧵 here

# so many truths in this from David Ogilvy, advertising guru (from Farnam Street)

“I doubt if more than one campaign in a hundred contains a big idea. I am supposed to be one of the more fertile inventors of big ideas, but in my long career as a copywriter I have not had more than 20, if that. Big ideas come from the unconscious. This is true in art, in science and in advertising. But your unconscious has to be well informed, or your idea will be irrelevant. Stuff your conscious mind with information, then unhook your rational thought process. You can help this process by going for a long walk, or taking a hot bath, or drinking half a pint of claret. Suddenly, if the telephone line from your unconscious is open, a big idea wells up within you.”

— David Ogilvy

#it’s that time in the cycle, focus on the problem first and always

#more on speed, great 🧵 from Hemant at Lightspeed

also doubles down on my post last week on “Don’t think, Just do”

But Nadia from CodeYam clarifies which I agree with

Enterprise Tech

#the future? Andrej Karpathy founding team OpenAI

100% Fully Software 2.0 computer. Just a single neural net and no classical software at all. Device inputs (audio video, touch etc) directly feed into a neural net, the outputs of it directly display as audio/video on speaker/screen, that’s it.

#trending this week 📈, post from Ashu Garg with Foundation Capital on what’s coming next for AI, short simple and focused summary of many areas we’ve talked about here from multimodal to agentic workflows and the kicker, what comes after transformers?

I’ve been in the AI trenches since 2009, and LLMs are certainly a game-changer. But they also seem to be a warm-up act for the main event—the next cycle of AI innovation, coming in the next 12-18 months.

Here are 3 areas we’re looking at to fuel this cycle, where founders can make real AI magic →

Multimodality 📸
Multiple agents 🤖🤖🤖
Post-transformer architectures 🛠️

Latest blog: https://foundationcapital.com/beyond-llms-building-magic

#More AI market maps from Felicis and IVP + great to see boldstart portfolio cos Superhuman and Clay on the IVP AI 55

#JPM Emerging tech team is one of a kind, embedded in the technology units and finds right balance of working with super early startups and established one also. Here’s a post from leader Larry Feinsmith along with a deck on trends for this year - gives a great look at what JPM is thinking in terms of emerging tech for its $15B IT Budget - Agentic Workflows to ISPM (Identity Security Posture Management) to the security data fabric to AI Security (full deck here)

#Runway in talks to raise $450M at a $4B valuation up from $1.5B one year ago 🤯 (The Information)

Runway, already the best funded among a cluster of startups developing artificial intelligence software to generate videos for Hollywood and more amateur filmmakers, is trying to strengthen that lead with a new round of financing.

The firm is in talks with investors to raise $450 million at about a $4 billion valuation, according to a person involved in the deal and a person who spoke with Runway executives. General Atlantic, a New York private equity and growth-stage investor, is in talks to lead the round, said the person involved in the deal.

Runway sells subscriptions that grant a specified number of credits per month to users of its software, which produces images and movies from text prompts. It was generating around $25 million in annual recurring revenue at the end of last year, said the person involved in the deal. That’s up from the several million dollars a year it was making six months prior, The Information previously reported. It’s still a far cry from the billions in revenue older AI firms like OpenAI are generating, though.

#🤯 AI coding on 🔥 but IMO too many players who are overpriced - going to be some big winners but also a bloodbath - Magic to raise at $1.5B valuation just several months after raising at a $500M valuation with no product to sell and with 20 employees (Reuters)

Magic, a U.S. startup developing artificial-intelligence models to write software, is in talks to raise over $200 million in a funding round valuing it at $1.5 billion, just several months after its last capital raise, three sources told Reuters.

Investors including Jane Street are expected to participate in the round, which could triple Magic's valuation from its last round, despite earning no revenue and having no product for sale, according to sources who requested anonymity to discuss private matters.

The startup, which has about 20 employees, was last valued at $500 million after the previous February fundraising, according to PitchBook data. It has raised $140 million since it was founded in 2022, from backers including Nat Friedman and Daniel Gross’ NFDG Ventures, as well as Alphabet's (GOOGL.O), opens new tab CapitalG.

#agreed, software engineers won’t be replaced and reimagining how software is developed is next (Jaana Dogan - distinguished infra engineer at Github)

People are so keen on replacing software engineers with LLMs. Software engineers won't be replaced. They will more potentially have an entirely new stack.

and this comment from Jose Garcia-Balius, programmer at Github, IMO nails it

This is what I’ve been saying for a while too, we are all just going to be working from a new abstraction level. Similar to how high level languages, assembly etc enabled us to work on an entirely new set of problems it’s all building on top of abstractions.

#also pay attention to Jaana as she started a new gig at Google for developer infra tools!

Next Monday, I’m joining Google as a Principal Engineer to work in the intersection of LLMs and developer/researcher platforms and tools. There are large gaps at every layer, from prototyping to building production services. While we train and explore models, we are not doing enough for infrastructure and tooling.

#the problem with LLMs, only good as data its trained on and yes, there are some copyright issues - here’s Figma’s design tool seems to be directly copying the Apple weather app and to its credit, Figma took down the service to investigate (🧵 here)

#Abnormal Security to raise at $5B valuation (Business Insider)

Abnormal Security, a startup that uses artificial intelligence to guard users from cyber threats across email and apps, is set to be valued at $5 billion in a fresh funding round, according to two sources familiar with the deal.

The company previously raised $210 million in Series C venture funding in a deal led by Insight Partners with participation from Greylock Partners, Menlo Ventures, and The Syndicate Group in 2022, which valued Abnormal Security at $4 billion, according to Pitchbook data. The company has raised a total of $374 million in venture funding.

#open source agent growth at CrewAI, a boldstart port co - 10.6M+ agents powered by Crew in the last 30 days 🤯

#🤔 from Rodney Brooks, Mr. Robotics and AI

Many people are trying to make excuses for why this trivial problem trips up LLMs. Occam's razor should remind you that there is no emergent reasoning in LLMs. Instead it gets lucky (and it is astonishing that it works so well--that says something deep about our language) sometimes by probabilistic word salad-ing. But this shows it has *no* understanding of the world. Get over it. LLMs are not a salvation technology.

Example here:

#will another AI startup with its own models founded by big researchers with big 💰 be acquihired like Adept and Inflection? Truly, the more generic the model means that all roads eventually lead to one of Big 3 Cloud vendors (The Information)

The challenges facing Character reflect the increasing pressures on AI startups. Often started by prominent researchers, these startups have collectively raised billions of dollars from investors eager for early stakes in the next potential tech stars.

For Character investors, part of the draw was CEO Noam Shazeer, an author of the seminal “transformer” research paper, and his co-founder, Daniel De Freitas, who had worked on an early chatbot at Google.

But many of these startups have been grappling with the high costs of training and running AI models, plus competition from tech giants and large startups such as OpenAI. Few AI entrants have shown they can make enough money to offset the costs.

Markets

#That’s a lot of GPUs! Read 🧵 from modestproposal

Barclay's:

"the street is modeling $167B in cumulative AI capex, which is enough to support over 12,000 ChatGPTs. 

We think one of the big players may blink and cut back the capex plans, but not likely until we get well into 2025 or beyond"

Here's the extracted text from the image:

---

In this report, we make a lot of assumptions. The basic math exercise starts by figuring out how much the big hyperscalers are spending in incremental compute-only capex from 2023-2026 (what we label as “cumulative AI Capex”), and then figuring out how much this capex can support in terms of new AI products for consumers and enterprises. The quick conclusion - we are more in the FOMO camp, as the street is modeling $167B in cumulative AI capex from the top players in the industry, which, as noted above, is enough to support over 12,000 ChatGPTs. We estimate that around $70B will be invested in training foundation models, leaving roughly $95B for inference (i.e. “the cost of serving up finished products”). We think one of the big players may blink and cut back the capex plans, but not likely until we get well into 2025 or beyond. We’d also note that recent breakthroughs in the smaller foundation model space are likely to bring a ton of products and queries away from the cloud and towards the edge (i.e. - running natively on a PC or a phone) by 2026, which may further pressure the need for this large level of AI capacity in the cloud.

#Resiliency, Startup Nation 🇮🇱 💪🏼 🙏🏼 - “Amid war toll, Israeli startups nabbed $2.9b from investors, the most in two years” (Israel Times)

Investment into Israeli startups and high-tech firms over the past three months showed the first quarterly year-on-year increase since the start of 2022, despite the country’s ongoing war with the Hamas terror group, according to a report compiled by research center IVC and LeumiTech, a Bank Leumi arm that specializes in tech companies.

Israeli tech startups attracted $2.9 billion in capital from investors in the April to June quarter, up 48 percent compared with the $1.96 billion raised during the same period in 2023, and the $1.63 billion that were nabbed during the first three months of the year, preliminary data of the report displayed. There were 110 deals in the second quarter as in the corresponding period last year.

Larger deals mainly by cybersecurity firms led capital-raising rounds over the past three months with six transactions above $100 million, accounting for about 62% of the total. American-Israeli cloud cybersecurity unicorn Wiz in May raised $965 million at a staggering valuation of $12 billion.