Poe: One Chatbot to Rule Them All

February 13, 2023 tremendousblog Leave a comment

Every day, there seems to be a new AI chatbot. But what if one bot could query any of them — one chatbot to rule them all?

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Enter Poe, a new chatbot from Quora. Poe can query three different chatbots to help you find the best answer.

From TechCrunch:

Q&A platform Quora has opened up public access to its new AI chatbot app, Poe, which lets users ask questions and get answers from a range of AI chatbots, including those from ChatGPT maker, OpenAI, and other companies like Anthropic. Beyond allowing users to experiment with new AI technologies, Poe’s content will ultimately help to evolve Quora itself, the company says.

Let’s see what Poe can do!

First, you’ll have to download an iOS app. Inexplicably, Poe doesn’t have a web version.

Quora makes downloading Poe so painful I would’ve given up if it wasn’t for this blog! But anything for you guys. 🙂

You enter your phone number and get a text verification code. Okay, whew, done…right?

Wrong. Next you have to enter your e-mail and get another verification code there!

Are we talking to a chatbot or launching a missile?

But once you’re in, Poe is actually pretty cool. I asked the same question to all 3 bots on offer.

Let’s see who wins!

First up: OpenAI’s Sage. “What are the most important things for angel investors to know?” I asked.

Sage’s answer is decent, but too abstract. It advises me to “have a plan to manage” risks — but what should the plan be?

A better answer would tell me to diversify.

You see the same problem throughout Sage’s response. It tells me to pay attention to investment time horizon, but gives me no idea what the time horizon is!

Somewhat useful, but woefully incomplete.

On to Dragonfly, also from OpenAI…

Dragonfly’s answer is pithy and more helpful. It tells us to diversify our bets, one of the most important things angels should know.

But Dragonfly is also too abstract. It tells me to be comfortable with the terms of the investment.

Uh, yeah. But what do good terms look like?

Okay Claude, we’re counting on you…

Claude’s answer is by far the best. It tells us to limit risk and be aware of the time horizon, just like Sage.

But unlike Sage, it tells us how to limit risk and what the time horizon is! This is a dramatically more useful answer.

Claude also tells us not to rely on “hype or gut feel.” If only we’d had this in 2021!

If Poe can fix the glaring usability problems, it could be very popular. But Quora’s real play may be in AI infrastructure.

Poe plans to offer an API to give developers a plug-and-play chatbot UI. This would let programmers turn any AI tool into a bot.

The API opportunity could be huge. Just like Stripe made integrating payments easy, Poe could be the go-to for turning your code into a usable product.

Soon, we may be able to plug into specialized data sets in seconds and answer any question. How awesome would that be?

What do you think of Poe and other AI chatbots?

Leave a comment and let me know!

More on tech:

The Hard Thing About Hard Things

Consumer Startups: What Works and What Doesn’t

ChatGPT for Medicine

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Books, Technology

Consumer Startups: What Works and What Doesn’t

February 10, 2023 tremendousblog 2 Comments

Selling to consumers is hard. They can be fickle, hard to pin down, and just plain cheap.

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As an investor, I’ve seen some business models work better than others. Let’s break down what works and what doesn’t in consumer:

Marketplaces

Marketplaces have been my biggest consumer success stories. What’s great about marketplaces is that they’re pretty easy to monetize.

If you sell a car, everyone expects you to take a percentage of the sale. And the price is high enough that even one sale generates significant revenue.

But transactions don’t have to be big.

Food delivery is another model I’ve had success with. The transactions are small but frequent, and everyone expects to pay a fee.

It’s no coincidence that the biggest successes in consumer, like Uber and Airbnb, are usually marketplaces.

Consumer Subscriptions

In my experience, these companies have not been that successful.

It’s tough to get consumers to pay for software. Even when they do, they’re likely to cancel quickly.

The price of most consumer subscriptions is fairly low, maybe $10 or $20 a month. This makes it hard to afford customer acquisition.

I recently met with a startup that had a Customer Acquisition Cost (CAC) and Lifetime Value (LTV) that were equal. This means every penny customers give them goes out the door to get another customer.

A business model like that can’t work.

That said, some consumer subscriptions take off. Calm is a huge success, with a valuation in the billions.

But most successful consumer subscriptions, like Netflix or Disney Plus, are streaming services.

Those take huge amounts of money to run. Few startups can compete.

Consumer Social

This is generally even harder than subscriptions.

Given the low value of each customer, advertising is usually out of the question. This means you have to go viral.

But how?

Unlike building a B2B sales team, there’s no readily repeatable way to go viral. Or if there is, only Nikita Bier seems to know it. 🙂

Monetization is tough. People usually won’t pay for a social app, and ads don’t pay much either.

And don’t forget the incumbents! It’s pretty hard to get people to use your little app instead of Instagram or Tik Tok.

D2C

D2C is the most difficult type of consumer business.

These startups involve physical products. That means messy, hard to scale, low-margin “stuff.”

Supply chains get tangled. Cut-rate imitators pop up daily.

You also face the same problem with customer acquisition as consumer subscription companies. The only difference — your margins are even lower, making it harder to afford ads.

Even the biggest outcomes in D2C are modest compared to pure software companies. Two of the most iconic D2C brands, Warby Parker and Allbirds, are valued at $1.7 billion and $400 million respectively.

Compare that to $70 billion for Uber and $69 billion for Airbnb.

Wrap-Up

Today, SaaS is the darling of investors. Indeed, the vast majority of my investments are SaaS companies.

But it’s important to distinguish between consumer business models.

Look for marketplaces that can transact tons of value, either in big transactions (Airbnb) or numerous small ones (Uber).

What do you think of consumer today? Leave a comment and let me know!

Have a great weekend everyone!

More on tech:

The Hard Thing About Hard Things

I Like Big TAM’s and I Cannot Lie!

Google is Losing the AI Race

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Business, Science, Technology

ChatGPT for Medicine

February 9, 2023 tremendousblog 2 Comments

What if you could ask the best scientists on earth any question you want, any time? New chatbots are making that a reality.

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Consensus searches 200 million scholarly publications to answer questions on medicine, science, and even economics. Let’s give it a try!

I love going outside in the morning with my coffee. I get a little sun, which I vaguely suspect is good for me, and look at the sky.

On a day like today with a calendar full of meetings, is this still worth doing? Let’s find out what the science says about the benefits of sunlight:

Instantly, Consensus pulls up an answer to my question. It explains how morning sunlight can help circadian rhythms.

It also cites a specific source, and notes the quality of the journal. This result comes from a top publication.

So cool! Let’s compare that to Google Scholar:

Google Scholar just gives me the traditional page of links. I get weird, context-less snippets of text that only kinda sorta answer my question.

Better than nothing, but nowhere near as useful as Consensus. Now let’s try ChatGPT.

ChatGPT’s answer is pretty good and well-organized. But since it has no citations, we have no idea if the information is reliable.

ChatGPT simply isn’t designed to answer scientific questions.

It was trained on data including books and Reddit posts. But as far as we know, it hasn’t been trained on scientific papers.

Consensus isn’t the only chatbot for science. Microsoft recently released BioGPT, a chatbot trained on biomedical literature.

Will these bots replace doctors? I don’t think so.

Instead, doctors, scientists, and curious laymen will use these tools to make research easier. With better access to the latest data, they can make better decisions.

After all, nail guns didn’t replace carpenters.

I’m very bullish on AI chatbots trained on niche data sets. That data could be scientific papers, court cases, or computer code, just to name a few.

I’m also excited about data brokers. Someone has to collect all this data and get it to the people who need it.

If you’re working on such a company, I want to hear from you!

In just a few weeks, we’ve gone from general purpose chatbots to a profusion of tools for science, medicine, and more. We are living through a Cambrian explosion of technology.

I’m here for it!

How do you think AI will change science? Leave a comment at the bottom and let me know!

More on tech:

GPT-Powered Search with Perplexity AI

Google is Losing the AI Race

The Hard Thing About Hard Things

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Business, Technology

How I Decide to Double Down

February 8, 2023 tremendousblog 1 Comment

Many startups I invested in are coming back and asking for more. So how do I decide to double down — or cut my losses?

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Here’s how I approach follow-on funding:

Performance

I want to see startups triple revenue year over year after I invest. This level of growth shows they’re finding product market fit.

The best companies grow fast. Meanwhile, those with weak products or a poor sales strategy struggle to sign new customers.

But growth has to be efficient. I like to see a startup burning no more than $2-3 to add $1 of new Annual Recurring Revenue (ARR).

New Investors

Are any new investors joining this round? Or are existing investors just hoping to save a failing company?

If the founder could not find a new investor who wanted to make a bet on the business, that’s a strong negative signal.

Runway

This fundraise has to give the company enough money to ride out today’s tough market. I like to see startups raise enough cash for 24 months or more.

If the founder is only raising a small round to survive another couple of months, it’s likely a bridge to nowhere.

The Founder

Has the founder shown good leadership in these tough times? Has he taken responsibility for mistakes and kept investors updated?

If so, that makes me a lot more likely to open the checkbook.

How Much to Invest

I recently re-invested in a startup I first backed in 2021. They increased revenue by 5x in a year and brought in a new lead at a higher valuation.

Re-investing was a pretty easy choice. But how much should I put in?

I Invested about 2.5 times as much as my initial check. If the company keeps performing like this, I want to do about the same in their next round.

In all, I like to invest 4-5 times as much money in follow-on as I do in the first investment.

This lets me concentrate capital in winners. I also avoid major exposure to companies that are struggling.

The Human Factor

It’s very hard to say no to a hard working founder who’s trying his best.

Unfortunately, it’s also our job. If we don’t want to make tough decisions, we shouldn’t be in this business.

Even if I can’t re-invest, I’m happy to support the founder in other ways. I can introduce them to potential employees and business partners, provide advice, etc.

Done right, follow-on funding is a super power.

It increases my exposure to the best companies while minimizing my exposure to struggling ones. It gets money to the companies most likely to change the world.

How do you think about follow-on investments? Leave a comment and let me know!

More on tech:

The Hard Thing About Hard Things

I Like Big TAM’s and I Cannot Lie!

GPT-Powered Search with Perplexity AI

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Books, Business, Technology

The Hard Thing About Hard Things

February 7, 2023 tremendousblog 7 Comments

“As a start-up CEO I slept like a baby. I woke up every 2 hours and cried.”
Ben Horowitz

Today, Ben Horowitz is the billionaire co-founder of a16z and one of the most important people in tech. But 20 years ago, he was the CEO of a penny stock startup called Opsware.

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By persevering through layoffs and withering criticism, Horowitz built his company into a colossus. In 2007, Opsware sold to HP for a cool $1.65 billion in cash.

Horowitz’s most important lesson: no matter what happens, don’t give up!

“Whenever I meet a successful CEO, I ask them how they did it. Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say, “I didn’t quit.'”

How to Lead

Horowitz often had to bet the company’s future on a decision made with limited information. As a founder, that’s all you’re ever going to get.

He also didn’t shy away from getting involved in details. Companies tend to stand still unless someone forces them to move.

“…when you are a startup executive, nothing happens unless you make it happen.”

Above all, a leader has to put the company and his people first. If you take care of your customers and employees, success will follow.

Finding the Right People

Horowitz dedicates much of the book to how to find and train the right people.

Horowitz favors team-oriented hires. He looks for people who rarely say “I” or “me,” even when discussing their own accomplishments.

Once you have those great employees, Horowitz urges you to invest in them:

“Training is, quite simply, one of the highest-leverage activities a manager can perform.”

In fact, no one at Opsware could even start looking for an employee until they had a training plan ready for that person.

Layoffs

Many startups are facing layoffs today, as Opsware did.

Horowitz advises CEOs to first speak to the entire company, making clear that the company has failed. Then, managers must lay off their own people.

Be sure to treat the departing staff well: the rest of your employees will be watching closely.

Lessons for Investors

When he started a16z, Horowitz wanted to change one icky thing about venture capital: forcing founders to wait forever in the lobby.

Horowitz made a simple rule.

Anyone late to a meeting with a founder would be fined $10. A minute.

“We wanted the firm to respect the fact that in the bacon-and-egg breakfast of a startup, we were the chicken and the entrepreneur was the pig: We were involved, but she was committed.”

I’m instituting this rule in my own meetings with startups, with the fines going to charity.

Horowitz also provides some great guidance on finding promising founders.

He notes that successful CEO’s he’s met all have different styles. There’s no one type to look for.

But one thing all great leaders share is a desire to improve. So I’ll be asking “How could you improve as CEO?” a lot more frequently.

Horowitz’s memoir is a window into what life as an entrepreneur is really like — at turns, nerve-wracking and exhilarating. It makes great reading for founders and investors.

What do you think of Horowitz’s advice? Leave a comment and let me know!

More on tech:

Zero to One

The Power Law (Part One)

Amp It Up

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Business

Shorts Are Covering Even Faster than Jan ’21

February 6, 2023 tremendousblog Leave a comment

Short sellers are running for the exits as markets rally. Short covering has hit its highest level in over 7 years, according to a Financial Times report:

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Equity markets have risen sharply so far this year, led by many of the speculative stocks that were clobbered hardest during 2022’s global sell-off. Many of the funds that profited from the rout have found themselves poorly positioned for the rebound, which has recently accelerated as investors sensed that interest rates were close to peaking in many major economies.

The resulting flurry of short covering — when investors buy back stocks they had been betting against to limit their losses — was the largest since November 2015, according to a Goldman Sachs note to clients seen by the Financial Times.

Short sellers tend to pile into the same, heavily shorted stocks. When they rush to close their positions, this can cause a short squeeze.

A short squeeze happens when many short sellers all try to buy at once to close their positions. This can cause a stock’s price to skyrocket.

Short squeezes in stocks like AMC Entertainment Holdings and GameStop in 2021 took down hedge funds including Melvin Capital. Today, those same stocks are some of the year’s best performers.

Despite big increases in heavily shorted stocks, short sellers still have massive exposure. AMC’s short interest has dipped only slightly, remaining at a lofty 29%.

This indicates such stocks could have a lot of room to run. Short sellers will have to buy many more shares to close out their positions.

Shorts are also facing some of the heaviest retail buying in history. Retail buying hit an all-time high of 23% of all stock buys, according to a recent Forbes report.

Retail investors are the biggest buyers of many heavily shorted stocks, including AMC and GameStop.

Over a month ago, I predicted a market rally in 2023. I guess the hedge funds missed that post. 🙂

If the Fed remains dovish, I expect many more losses for short sellers. 2023’s short squeezes could make 2021 look almost quaint.

What do you think the future holds for short sellers? Leave a comment at the bottom and let me know!

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Photo: Melvin Capital founder Gabriel Plotkin

Business

SEC Demands Citadel Employee Cell Phone Records

February 3, 2023 tremendousblog 2 Comments

The Securities and Exchange Commission has ordered Citadel and several other financial firms to produce employee cell phone records.

From a new report in Bloomberg:

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The Securities and Exchange Commission recently asked Steve Cohen’s Point72 Asset Management, Ken Griffin’s Citadel and several other firms to search through the devices for evidence of business dealings on unapproved channels, according to people familiar with the matter who asked not to be identified discussing the private requests. The SEC is also probing the practices of brokerages, money managers and private equity firms.

Representatives for Point72 and Citadel declined to comment. Neither firm has been accused of wrongdoing.

By law, investment firms must retain all business communications. But sometimes, Wall Street traders would rather no one hears their conversation.

So, many turn to encrypted messaging apps like WhatsApp and Signal. Using their personal phones, traders can evade the scrutiny of their employer, as well as regulators.

What might be in those WhatsApp messages? Time will tell, but violations could include front-running clients’ trades or naked short selling.

The Financial Industry Regulatory Authority (Finra) has fined Citadel for front running clients in the past. Citadel has also received subpoenas in a probe of short sellers.

The SEC has already levied over $1 billion in fines on banks for failing to maintain records. But unless those fines get a lot bigger, nothing will change.

Citadel made $16 billion in profit last year. Any fine in the millions will be nothing more than a speeding ticket.

I urge the SEC to find out what is being hidden in these messages. And when they do, the penalty should sting, big time.

What do you think the SEC will find? Leave a comment and let me know!

Have a great weekend everyone!

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Business, Technology

How I Source Deals (Part 2)

February 2, 2023 tremendousblog Leave a comment

We investors have no function except to find and help the next Google. But, uh, where is it?

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Finding the great companies of the future is a huge part of our job. I look at 150-250 companies every month.

I choose one.

Since I wrote about sourcing deals last fall, my approach has changed a lot. Here’s how I’m finding great startups now:

1) Pitch events. There’s nothing like being in person, right?

Wrong. The best pitch events I attend are usually virtual.

Founders from anywhere on earth can attend. My latest investment is in an incredible company based in the UK.

I never would’ve met that founder at a New York pitch event.

My favorites are Remote Demo Day and LAUNCH Accelerator Demo Day, both put on by Jason Calacanis’ venture firm. Stonks also has some great events.

For in person tech events in NY and SF, check out Gary’s Guide.

2) Portfolio company founders.

For me, this is the highest signal intro I can get. Any meeting with a founder recommended by someone I’ve already invested in goes to the top of my list.

This also is a great strategy for founders to approach investors. Find some founders they’ve already invested in and ask for an intro.

You may already know some of their portco CEO’s!

3) Venture firms. Great deals are currency.

Whenever there’s space in the round, I send out deals I’m doing to a number of venture firms in my network. This helps the startup and the VC’s if they find a great deal.

In return, they introduce me to some founders they’re investing in. These entrepreneurs are pre-vetted by smart investors, making my job way easier!

4) Seedscout. Seedscout is a really cool new platform that lets founders request intros to investors.

This is especially useful for founders who aren’t in Silicon Valley or New York.

I made an investment in an incredible Utah SaaS company I met on Seedscout. I never would’ve met them otherwise.

I like the platform so much I actually invested in Seedscout itself!

Seedscout is free for investors. Check it out!

5) Syndicates. As I approach the two year mark as an angel, I’m doing fewer and fewer syndicate deals.

Four out of my last 5 new investments have been direct. Over time, I’ve built a network that helps me find great deals on my own.

That has two huge advantages.

You’re not at the mercy of whatever a syndicate lead decides to send you. And you don’t have to pay anyone 20% of your gains!

But for a new angel without a great network, syndicates are an absolute must.

The best one is Jason’s, here. Flight VC, an arm of Gaingels, also has some great deals.

I am still happy to do syndicate deals if that’s the best deal available. 80% of something beats 100% of nothing any day!

How do you source deals? Leave a comment and let me know!

More on tech:

HOW I SOURCE DEALS

I LIKE BIG TAM’S AND I CANNOT LIE!

GOOGLE IS LOSING THE AI RACE

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Business, Technology

I Like Big TAM’s and I Cannot Lie!

February 1, 2023 tremendousblog 3 Comments

I just passed on a company growing 80% month over month. Instead, I chose one growing more slowly. Have I lost my mind?

Not yet.

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These two companies illustrate one of the most important principles in venture capital: market size matters. Without a large enough Total Addressable Market (TAM), a startup can only grow so big.

Company A

Company A is a fantastic consumer subscription company. It has an awesome product and growth rates you rarely see anywhere.

So they’re scaling like crazy — but for how long? To answer that question, I did a little back of the envelope math.

They have about 25 million potential customers, according to my research. At their average revenue per user of $10/mo, that’s $3 billion a year in potential revenue.

And unfortunately, like many consumer companies, churn is heavy. So the company has to be rebuilt every year or two.

Company B

Company B handles international corporate money flows. And while A has a substantial market, the potential for B is staggering.

Corporations move $23.5 trillion across borders every year. At B’s take rate, that alone is a $60 billion a year revenue opportunity.

Better yet, B also charges SaaS fees! That expands the TAM to around $70 billion.

If B takes even a small slice of the market, it could exceed $1 billion in revenue. At a typical 10x multiple, that means a $10 billion company.

And just because B isn’t growing as fast as A doesn’t mean it’s not growing! Revenues jumped 10x year over year, an amazing performance.

Why We Hunt Elephants

VC’s and angels are obsessed with big markets because the largest outcomes matter most. In venture capital, they drive almost all of our returns.

Let’s look at 3 examples: a company that’s acquired for $100 million, a startup that IPO’s for $1 billion, and another that IPO’s for $10 billion.

Assuming 50% dilution from the time we invest until exit, here’s what our returns look like:

That $100 million outcome, as big as it sounds, accounts for less than 1% of our returns! Meanwhile, the $10 billion Big Kahuna makes up fully 90% of all our gains.

If one type of company gives you 90% of your gains, that’s where you have to focus.

Expanding Your TAM

Let’s say your market is small. But you love your business and you don’t want to shut it down!

Think about how you can sell your product to more customers! Can a product that’s useful for auto garages also work for cleaning services?

There’s nothing wrong with focusing on a small market in the beginning. You have to start somewhere.

But if you want to build a venture scale business, you also have to think big!

Best of luck to all startups, big and small!

How do you think about market size? Leave a comment at the bottom and let me know!

More on tech:

Google is Losing the AI Race

GPT-Powered Search with Perplexity AI

Me vs. ChatGPT: Who’s a Better Blogger?

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Tremendous

Monthly Archives: February 2023

Poe: One Chatbot to Rule Them All

Consumer Startups: What Works and What Doesn’t

ChatGPT for Medicine

How I Decide to Double Down

The Hard Thing About Hard Things

Shorts Are Covering Even Faster than Jan ’21

SEC Demands Citadel Employee Cell Phone Records

How I Source Deals (Part 2)

I Like Big TAM’s and I Cannot Lie!

An angel investor's take on life and business