Quick test: How can you tell if you're observing a genuine technological shift, rather than a fleeting tech trend?
TL;DR
- Genuine tech shifts impact all levels, from chips to applications, unlike fleeting trends.
- Assess ventures by their ability to overtake workflows, integrate distribution, and improve with users.
- Valuations may surge, but some companies show unprecedented growth trajectories.
- Distinguish between features and workflow-overtaking offerings for long-term viability.
Observe the entire structure. According to Steve Jang of Kindred Ventures, a genuine technological shift impacts every level, not merely a single component. He points out that this is precisely what's occurring with AI. “Right now you’re seeing it all the way from chips all the way up through the application layer.”
Jang, who established Kindred and serves as its managing partner, addressed attendees at Coins2Day’s Brainstorm AI summit in San Francisco on Monday. He participated in a discussion panel focused on venture capitalists' perspectives regarding the current dynamic AI market. His central argument suggests that the anxiety surrounding a potential AI bubble is somewhat irrelevant. The crucial factor, he contends, is the authenticity of the fundamental technological shift.
Cathy Gao, a partner at Sapphire Ventures and a panel participant, stated that the valuations for certain businesses have evidently surged well past any basis in reality. However, she also pointed out that the growth trajectories of specific firms at this moment “far outstrip the growth curves of companies we’ve ever seen before.”
To help distinguish between the buzz and the startups with genuine longevity, Gao mentioned she employs a three-question assessment.
Initially, is the venture's offering a “feature” or a “workflow?” The most notable ones, she states, are “companies that are able to actually embed and fully overtake an existing workflow, while building significant switching costs.”
Furthermore, is distribution integrated? Individuals are reluctant to acquire proficiency with an additional instrument, according to Gao. The essential characteristics in this context are whether the instrument is “integrated in usability and in all the other solutions that it needs to be in order for the workflow to be fully functional?”
And does the business grow more robust as time passes? Gao refers to this phenomenon as “compounding durability,”. “With every new user, does the solution get better, does it get cheaper, does it get faster?”
We’ll have more questions, and answers, at Brainstorm AI today. Watch the livestream here.
See you tomorrow,
Alexei Oreskovic
X:@lexnfx
Email:[email protected]
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Venture Deals
- UnconventionalAIa San Francisco-based firm specializing in chips and computer systems engineered for AI secured $475 million in initial funding. AndreessenHorowitz and Lightspeed led the round and were joined by Sequoia, LuxCapital, DCVC, FutureVentures, JeffBezos, and others.
- Airwallexthe payments and banking platform for companies, with operations in San Francisco and Singapore, secured $330 million in its Series G funding round. Addition led the round and was joined by T. Rowe Price, Activant, Lingotto, and RobinhoodVentures.
- BlueCurrenta Hayward, Calif.-based firm specializing in silicon solid-state batteries, secured $80 million through a Series D extension from Amazon, KochDisruptiveTechnologies, PiedmontCapital, RusheenCapitalPartners, and Allen& Company.
- Crown, a São Paulo, Brazil-based stablecoin issuer, raised $13.5 million in Series A funding. Paradigm led the round.
- ResembleAIa Mountain View, Calif.-based security platform for enterprise AI, secured $13 million in investment from SonyInnovationFund, BerkeleyFrontierFund, ComcastVentures, CraftVentures, and others.
- Scowtta Seattle, Washington-based company that uses artificial intelligence to enhance advertising strategies has secured $12 million in its Series A financing round. InspiredCapital led the round and was joined by LiveRampVentures, Angeles Investors, and AngelesVentures.
- Equixlya Verona, Italy-based agentic AI platform focused on API security testing has secured €10 million (approximately $11.6 million) in Series A investment. 33NVentures led the round and was joined by existing investors.
Private Equity
- ContextLogic agreed to acquire US Salt Parent Holdingsa producer of evaporated salt items located in Watkins Glen, N.Y., from investment funds overseen by EmeraldLakeCapitalManagement for $907.5 million.
Exits
- BerkshirePartners agreed to acquire UnitedFlowTechnologiesa provider of process and equipment solutions for water and wastewater systems, headquartered in Irving, Texas, from H.I.G.Capital. Financial terms were not disclosed.
