Hello,
You might have noticed, that last quarter, we provided just a shorter version of the report. While we appreciate the concise presentation format that offers a quick update on both the fund and the portfolio, we understand that you may still miss our quarterly long read. Therefore this quarter we’ll combine the two and include both an update on Q3 and Q4 with a write up on reinventing VC using AI by Nick.
Q4 2023 was an incredibly active quarter in the early-stage AI VC scene. We completed a total of 15 deals, with 8 of them being new investments. One notable deal was our participation in Perplexity's Series B round, alongside IVP, NEA, Nvidia, Jeff Bezos, Nat Friedman, Naval Ravikant, and many other high-profile investors. Each of them was eager to secure our allocation for themselves, but thanks to the founders vouching for us under significant pressure from the board, we were able to increase our share in the company, on top of the shares we got from Perplexity’s acquisition of our portfolio company SpellWise in Q3. We are also hoping to get some additional allocation for secondaries in February. Thanks to everyone in the team and the community who helped us help Perplexity and made this possible.
We also celebrated the second anniversary of the firm, and we want to express our gratitude for your continued support as an integral part of our amazing community for 2 years.
Typically, it takes about 2 years for startups to find a product-market fit and begin scaling. Therefore, during the first 2 years, our key performance indicators (KPIs) focus on the average runway and survival rate in our portfolio. As we approach the 2-year mark since our initial investments, we will be able to assess which companies are default alive (able to reach profitability without further investment) and which companies are likely NGMI (not going to make it). From this standpoint, our primary responsibility is to support the growth of the default alive companies and ensure that, within the next 2-3 years, they are well-positioned to pursue a favorable exit strategy or capitalize on a promising market trend and continue growing. In Q4 multiple companies in our portfolio started raising their Series A rounds (with at least 3 getting very good rounds in - please keep an eye out for their announcements In Feb-March).
As our portfolio (and our community) grows larger, we are starting to see more operational bottlenecks associated with managing a firm with 120 LPs and 71 companies. Although the help of our community and the automation we have implemented have made us approximately 6 times more productive than in our previous firms, we cannot afford to stop building processes and developing software, or we won’t be able to achieve the planned 120 companies volume in 4 years with the same level of participation. This quarter, we have taken it a step further by implementing two initiatives:
More on this below. Since some of our portfolios are now approaching Series B level, we are planning to raise an Opportunity Fund [this part is available in the confidential version of this report].
As usual, this quarter we hosted a bunch of awesome events, with our quarterly Crosspolin-AI-tion Soiree attracting even more incredible founders and VCs, our DVC community meetings in NYC and New Year party in Los Altos Hills were a blast even though we were unlucky with the weather ☔ in both locations. Come join us next time in April (we gonna do an AI conference around those dates too)!
If you don’t have time for our amazing long-read, jump straight into the action:
(click on the arrow to expand the list).
How can I help our startups? Here's a short list of our startups' needs (expand the list by clicking the arrow on the left) [this part is available in the confidential version of this report].
The magnitude of change that LLMs are bringing to all parts of the business and consumer landscape is hard to overestimate. Language is the operational system of humanity and LLMs now allow a seamless integration of machine assistance into any part of human civilization.
When tectonic shifts like this happen it’s usually a good time to reassess everything we know about our business and try to think it in a new paradigm. We like to use thinking from First Principles - a technique often mentioned by Elon Musk.
First principles thinking is a problem-solving approach that involves breaking down complex problems into fundamental truth tokens and building up from there. It is a way of thinking that allows one to question assumptions and think creatively about solutions. To go deeper, first principles thinking encourages us not just to find answers but to question the questions themselves and, in doing so, to craft solutions that are not only effective but pioneering, which is exactly what we need if we want to innovate something truly.