Contrary Research Rundown #20
Tactical advice on fundraising, and new memos on Merge, Mutiny, and more
Research Rundown
While the world of startups continues to feel a lot of pain, there are several new venture funds being raised. In 2023 already, we've seen funds like NEA close over $6 billion, early-stage firm Cowboy Ventures announce a larger fund along with an opportunity fund, marketplace-focused FJ Labs closed $260 across two funds, a new, sector-focused firm called Dimension launched, and Defy closed its third fund of $300 million.
It can be disorienting to square the current macro environment, funding downturn, and zeitgeist chatter with hundreds of billions of dry powder VCs are sitting on today. It is important to understand what is going on in the funding market and what to expect for the foreseeable future for founders and operators of mid to late-stage startups so as to take the necessary actions and march forward.
While VCs have capital commitments from their LPs, it doesn’t mean the funding dynamics of the pandemic era for startups will or should persist. There’s a consensus amongst seasoned investors and founders that valuations are coming down, rounds are taking longer to close, overall activity is falling, and performance expectations for raising subsequent rounds are going higher.
Several investors have shared some of the following as the consensus tractical advice for founders:
Try to raise sooner than you expected this year if you need to
Cut burn as much as possible, even after layoffs
Focus on survival, not valuation, so as to have a shot at thriving
Trade better unit economics and lower cash burn for exponential growth
Be decisive about hard calls
Bring in seasoned operators with experience in leading through difficult situations
That being said, the conditions and expectations for seed-stage startups are quite different. Firms across the funding landscape are reorienting around early-stage rounds. While the bar for raising has gone up across all rounds, a lot of the dry powder is dedicated to the seed stage at established firms and brand-new seed capital. On top of that, growth and crossover firms are rushing to make early-stage investments.
If you have a working product, some early growth, and are capital efficient — there’s a lot of capital out there hungry to invest in the next generation of founders.
Helion Energy is building some of the world’s first nuclear fusion generators, having created 7 prototypes in less than 10 years, with a focus on enabling a future with unlimited clean electricity. To learn more, read our full memo here.
Mutiny enables companies to dynamically customize a website’s copy, visuals, and call-to-actions matching the visitor’s profile to increase the product’s appeal. To learn more, read our full memo here.
KoBold Metals offers a digital prospecting engine using computer vision, machine learning, and data analysis to find materials critical for electric vehicles under the earth's surface. To learn more, read our full memo here.
Sorare is a fantasy sports platform built on the Ethereum blockchain that allows players to buy, sell, and collect players for their fantasy teams in the form of NFT trading cards. To learn more, read our full memo here.
Merge offers APIs that authenticate and sync data across software vendors so SaaS companies can offer multiple integrations to their customers. To learn more, read our full memo here.
Thrive Capital is leading a potential investment in Stripe at a valuation of $55 to $60 billion, down sharply from two years ago. Stripe aims to raise $2.5 billion to pay the tax liabilities and allow its employees to sell their company shares and get liquidity amidst the funding downturn.
A group of investors and founders share recaps of the biggest stories of 2022 and their predictions for 2023 and beyond across crypto, commerce, manufacturing, fintech, healthcare, and more.
Instagram co-founders, who departed Facebook in 2018, are back with a new product called Artifact, which can be thought of as TikTok for text.
Amidst the funding downturn, climate change-focused startups are showing resilience. With the falling cost of renewable energy, the SEC’s proposal for emissions reporting and climate mandates in Inflation Reduction Act have created ripe conditions for more funding to flow into the sector.
An educational discussion on the rapid developments and startup opportunities at the intersection of life sciences and technology with the cofounding partners of Dimension, a new life science focused early-stage venture firm.
OpenAI, the creator of ChatGPT, has announced a new classifier to help distinguish text produced by computers versus humans. You can read more about the famous Transformer paper in our twitter thread from this past week.
Forbes did a cover story taking us inside OpenAI’s breakout moment and talked to to OpenAI’s Sam Altman and Greg Brockman — and more than 60 people, from Bill Gates to Fei-Fei Li — about the new wave of AI developments. You can learn more about OpenAI in our deep dive here.