Contrary Research Rundown #67
The mass extinction for startups, plus new memos on Temporal, Climeworks, and more
Research Rundown
As we kick off 2024, if there’s one thing there’s not shortage of, it’s predictions. From VCs to Fortune’s Crystal Ball with predictions across tech, politics, climate, and more. One of the most common predictions is what many are calling a “mass extinction event for ZIRP-inflated startups.” After peaking at $345 billion in 2021, global venture funding has fallen to levels we haven’t seen since 2018.
The number of startups that had raised $10M+ but still shut down jumped by 138% in 2023. Back in Q4 2021, the average startup had 16 months of runway. By Q4 2022, that had dropped to just 12 months. Many people see 2024 for many startups as the day the bill finally comes due. Companies that have spent the last two years trying to stave off valuation corrections while chasing product-market fit are now running out of cash.
After the massive rounds of 2021, and the quick successions of rounds and preempted rounds, you saw some companies walk away with 3 or 4 or more years of runway. While those “war chests” can be powerful enablers for a company, they can also be misleading. Jamin Ball, a partner at Altimeter, described the environment this way:
“We're at an interesting point in the venture cycle - many companies were funded (and overfunded) that shouldn’t have been in this last cycle. And it’s just now starting to become clear which companies have a path forward, vs those who don’t (never found product market fit, limited product differentiation). Lots of intellectually honest conversations on this topic between founders, execs and their board are needed in this coming year…The biggest question to ask: ‘Are we walking dead or will we make it out of this.’ And again, big balance sheets can be misleading / make this discussion more confusing.”
As companies consider their prospects moving forward, those that are still unprofitable and dependent on additional venture funding will have to simultaneously be able to address questions about (1) GTM repeatability, (2) efficient growth, (3) profitably unit economics, and (4) large / expanding TAMs. A tall order.
On top of all of that, there are over 1.3K unicorns globally at varying stages of survivability; not to mention the thousands of other startups desperate for cash. And whether they can check all those boxes above or not, they’ll certainly be trying to weave the story that they can. Because if they don’t, they won’t survive.
As a result, good companies and bad companies alike are going to be vying for VC attention on top of each other over the course of 2024. The question will be whose story will VCs buy? And who will get hung out to dry?
Climeworks uses modular fans to blow air over CO2 filters, removing carbon from the atmosphere and working with partners to permanently store it underground. To learn more, read our full memo here and check out some open roles below:
Project Controls, Planner - Austin, TX
Front End Development Manager - Austin, TX
Temporal Technologies is a microservices orchestration platform meant to simplify the process of building and maintaining complex or long-running application workflows. To learn more, read our full memo here and check out some open roles below:
Ironclad seeks to distinguish itself from the field of competing CLM software through offering greater flexibility in implementation, and the ability to utilize insights from data to optimize the CLM process. To learn more, read our full memo here and check out some open roles below:
Staff Product Designer - San Francisco, CA
Solution Engineer, PreSales - Growth Team - San Francisco, CA
Check out some standout roles from this week.
ConductorOne | Remote - Senior Frontend Software Engineer, Software Engineer
fulcrum | Minneapolis, MN - Product Manager
Hebbia | New York - Product Manager, Chief of Staff, Product Designer
Pallet | San Francisco - Founding Engineering Leader
SpaceX has continued to see a massive spike in launches, growing from ~60 to nearly 100 from 2022 to 2023. You can also see a visualization of all those launches.
Perplexity, an AI-first search engine, has raised a $70M round from investors like IVP, Nat Friedman, Elad Gil, and Jeff Bezos.
After ending its possible acquisition by Adobe, Figma has continued to double down on AI features in its products, such as FigJam.
Speaking of Figma, one of the company’s early competitors, InVision, has announced its shutting down its prototyping tool in the next few months after losing the designer market to Figma decidedly.
Reynold Xin, the co-creator of Spark and co-founder of Databricks, shared on a podcast the history of Spark, what made Databricks successful, and where the company can go from here.
Several months ago, McKinsey published a paper on the market potential of generative AI, and the implications of the technology across a variety of industries. The paper has continued to be recirculated going into the new year.
In December 2023, Duolingo conducted a large round of layoffs for contractors who performed translations, instead opting to use AI for similar translations.
Register here for our next Tech Talk on Jan 30th, 2024, in SF - featuring founders & senior engineering leaders from Stytch, Figma, Linear, and Hex!
Hosted by Contrary’s tech team, it’s an evening built by engineers for engineers — each company will live demo their latest features for leading builders in the Bay.