Big Tech's AI Investment: How Long Will It Last?

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Will the massive allure of AI eventually deflate? That scenario may not seem too close right now, especially with recent investment track records, but some hints suggest a limit is on the horizon. We discuss that in this edition.

And speaking of endings, this newsletter, usually sent out on Tuesdays and Thursdays, will switch days for the upcoming deliveries to Wednesdays and Fridays, but only because it's the end of the year. 📅

Six bullets of updates

  1. 76% of teens dream of entrepreneurship, inspired by social media influencers, despite mental health concerns. Uh-oh? 🙄 

  2. Mastering the art of evaluating corporate events can turn them into catalysts for brand growth. What an event!  🎩

  3. Despite improving economic signals, 2024 may not herald a bounce-back period for startups. Right? 🔩

  4. Solix launches a revamped multi-cloud data platform, promises 2x performance boost for data integration workloads. ☁️

  5. Bumpy ride for Superpedestrian as it shuts down US operations; just 18 months after raising $125M. 🚲

  6. 51% of early-stage European founders must wrap up their next funding rounds in the next months, with 65% already courting investors. 🇪🇺

Venture Firms Uncork Funds Amid Uncertainty

Venture firms Artis Ventures, BoxGroup, Playground Global, Singular and Partech have recently closed on new funds despite ongoing economic volatility. This points to institutional investors' continued interest in venture capital, seeing 2024 as a viable time to invest in startups.

The dip in valuations might be the silver lining that grabs the interest of institutional backers. In recent years, portfolio managers might've splurged on deals in the heated market, and now, they have a chance to snag some top-notch teams at more favorable terms—at least for the time being.

Amid what could be called a "tough fundraising environment," the rise in funding activity can be attributed to investors' trust in firms with solid track records. Falling valuations and promising better talent deals might also fuel this trend. The flurry of fund announcements doesn't guarantee a prosperous 2024 but signals a hopeful bounce-back in the venture industry.

Startup Events and Deadlines

  1. Financial Modeling 101 - Free Webinar | January 18, 2024 | Online

  2. Saastock - USA  | May 13, 2024 | Austin TX

  3. Saastock - Dublin | October 14, 2024 | Dublin, Ireland

Takeaways from this week’s podcasts

With seven Mergers and Acquisitions deals since 2015, Gerard stressed the importance of a structured approach to M&A for building competitive advantages. Reflecting on GSG's journey, he emphasized key breakpoints, including scaling the business, diversifying through M&A, and driving value to the bottom line. For those aspiring to venture into entrepreneurship, Gerard advised a deep understanding of their business model, ownership of consumer relationships, and the cultivation of loyal customer cohorts.

Alejandro Cremades and Gerard Trotman (Global Savings Group) on Dealmakers’

Defining what constitutes the cost of goods sold (COGS) and having detailed business plans become essential for startups moving past the product-market fit.
Candid communication about challenges fosters a culture of accountability, allowing founders to leverage the collective experience of the board for strategic impacts on the startup's journey.

Jason Calacanis and Scott from Cruz Consulting on ‘This Week in Startups’
The BottleneckOnly 11% of COOs are under 40. Your journey to join them starts now. Level up your career with tactical guides, links, and stories on scaling your operations from a YC-backed COO

Which company was the first major success of Silicon Valley?

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These companies just raised money

  1. 🔒 Making AI safer and more reliable is the mission of startup Distributional, which just secured an $11m seed round

  2. 🛎️ Stayntouch, a New York-based company specializing in cloud hotel property management software, has raised $48 million in funding.

  3. ⚛️ Parse Biosciences, a biotech firm focusing on scalable single-cell sequencing solutions, secured $50 million in Series .

  4. 🧪 Deep Apple Therapeutics, a biotech firm, raised $52 million in a Series A round from life sciences venture capital Apple Tree Partners.

  5. 🏥 Totus Medicines, based in California, secured $66 million in Series B funding, with DCVC Bio leading the financing round.

Big Tech's Ongoing Investment in AI Startups—How Long Will It Last?

Big Tech's enthusiasm for AI startups remains undeterred, despite talk of a slowdown in AI investment. This week's spotlight falls on Mistral AI, securing a substantial $487 million investment at a valuation of $2 billion. 

Nvidia, a chip giant, has been prolific in AI-related deals this year, participating in 18 transactions, with 16 exceeding $100 million. Salesforce Ventures has engaged in thirteen deals. Microsoft has also been active in the AI investment landscape, participating in eight startups' funding rounds and sealing the year's largest deal, a $10 billion investment in OpenAI. 

While the involvement of major corporations in nurturing AI technology is not unusual, recent reports suggest regulatory scrutiny, such as the Federal Trade Commission's examination of Microsoft's investment in OpenAI, may become more commonplace. Despite potential regulatory challenges, Big Tech's consistent investment in AI startups signals a sustained interest in driving innovation in the rapidly evolving AI landscape.

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