Meanwhile, companies without AI at the core are struggling to raise capital.
They have real businesses and revenues. They’re raising at great prices.
But they’re just not cool anymore.
Let’s take a company like Uber. Uber gets you a ride somewhere. Where does generative AI fit into that?
Nowhere I can see. But it’s still a great business.
The next Uber is out there now. But VC’s aren’t looking for it.
Worse yet, many of these buzzy AI companies have minimal defensibility. If you can spin up a service quickly with an API call to OpenAI, so can someone else.
Moreover, AI is evolving so fast that today’s amazing tech is quickly upstaged tomorrow. Deploying tens of millions in that environment is treacherous.
VC funds took a drubbing in 2022. This year, they have a chance to redeem themselves by investing in great businesses at reasonable prices.
Instead, they’re running toward a new hype cycle. And their investors will pay the price.
I think generative AI is a fantastic technology. I use it every day.
But the normal rules of investing still apply. You can’t make money investing in businesses with no paying customers at 9 digit valuations.
So how can you make money?
By investing in businesses with real customers and revenue at reasonable prices. At seed, that’s around $8-20 million.
In a way, I’m happy to see VC funds stampede toward AI. That means minimal competition and low prices for the investments I want to make.
Will AI investments work? Leave a comment and let us know what you think!
Have a great holiday weekend everyone!
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Last year, someone called my grandma pretending to be me. I was in trouble and needed money.
It was a scam. What happens when that scam uses AI?
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“AI is so intelligent it’s open to the bad players, the ones that want to trick you about who they are.”
Steve Wozniak
Apple co-founder Steve Wozniak called out serious concerns with AI in an interview this week:
Speaking to the BBC, he said AI content should be clearly labelled, and regulation was needed for the sector.
“A human really has to take the responsibility for what is generated by AI.”
Back to my grandma. In the near future, the voice on the other end of that phone could sound exactly like me.
An AI model could clone my voice and speech style. Given my podcast appearances and this blog, it has plenty of data to work with.
Then, it could deliver an incredible story to grandma. And she might part with the money she worked a lifetime to save.
I pray this does not happen. But it is a serious risk.
AI impersonation involves way more than scams, however. Already, we have seen false images of Donald Trump in handcuffs.
I don’t think many people were fooled by those. But in time, fake images and video will only become more convincing.
We may soon be living in a hall of mirrors, unsure what reality is.
So I wholeheartedly support Woz’s call for labeling. And the best way to do it would be through self-regulation.
Angel investor Jason Calacanis laid out a great template on a recent episode of This Week in Startups. Tech companies could band together like the movie industry did with the MPAA.
Just like the MPAA required ratings labels for movies, tech could require certain labels for AI content. Companies that violate this could be banned from partnerships or financing.
Industries self-regulate to head off regulation by the government. And in a complex and rapidly changing field like AI, government is ill-suited to the job.
How many people in government know anything about AI? And even if they do, government moves too slowly to regulate something this dynamic.
AI has incredible benefits. I found out about Woz’s interview using GPT-4!
But anything this powerful also has serious risks. If we don’t start protecting people, the government will.
Do you agree with Woz? Why or why not?
Leave a comment and let us know!
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For all its powers, ChatGPT has a fatal flaw: its training data only goes through 2021. Ask about anything recent, and it’s stumped.
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But a new tool lets you use the power of AI to find up-to-the-minute information. It’s called Perplexity AI, and it might be the best search engine ever.
Just a month old, Perplexity AI looks like a traditional search engine. But it uses AI to answer your question, instead of just providing links.
Its answers are pithier than ChatGPT’s — usually about a paragraph. And unlike ChatGPT, Perplexity cites its sources.
This helps us confirm the results are accurate. The lack of sources is a serious problem on ChatGPT, since it occasionally produces incorrect answers.
Let’s give this baby a test drive!
So Perplexity, how’s the market doing so far this year?
The answer isn’t perfect — it’s leaving off today’s return. But it’s accurate enough to be useful.
Meanwhile, ChatGPT is stumped:
Google doesn’t even seem to understand the question. It returns today’s performance only:
Let’s try something a little less time sensitive: what are the best selling albums ever?
Perplexity nails it, giving us a complete answer with excellent citations.
ChatGPT’s answer is restricted to US sales. It’s a decent response, but not as complete an answer as Perplexity’s.
In all, Perplexity seems better at answering questions than ChatGPT. But if you want to generate content, like a blog post or a screenplay, ChatGPT is the right choice.
I don’t think cold exposure protects you from catching the cold. And why Allsearch assumes cold plunges involve a race, I don’t know.
Meanwhile, it missed the benefits to alertness, sleep and hormone levels.
On to prompt # 2…
I decided to go with something more straightforward and historical. This time, Allsearch was on point.
Allsearch correctly notes that the USSR economy was in shambles, which led the government to collapse. Students are going to love using this for their papers!
For the 3rd and final prompt, I dug into the world of technology:
Again, Allsearch’s answer is excellent. It covers personal computing, the space race, and the computer revolution in business.
Where Allsearch beats ChatGPT hands down is in citing sources. If you want to know more about a topic, you have a reading list right there on the page!
You also trust results more when you see where they came from.
I think this is an amazing tool. The results aren’t perfect, but for a version 1.0, it does a great job.
Never one to miss an opportunity, I just contacted the creators to schedule a meeting. This might make a juicy investment. 🙂
What do you think of Allsearch and generative AI? Leave a comment at the bottom and let me know!
Last Thursday, I was preparing to judge a startup pitch competition. I thought to myself, “How can I make sure every startup hits the key points?”
Then, it came to me: a checklist!
Every time you pitch investors, you need to give them certain key pieces of information. Without those details, they may just move on to the next company.
Make sure that never happens to your business! Whenever you pitch, make sure you check off these 6 key elements:
1) Problem. What problem do you solve? For example, Uber solved the problem of expensive, hard to get taxi rides.
2) Solution. How do you solve that problem?
Uber makes it easy to get a ride with a simple smartphone app. You always know exactly what you’re paying and where your driver is.
3) Traction. Show us a chart of your revenue, broken down monthly or quarterly. Also, compute a growth rate using a tool like this.
Investors want to see a strong growth trend. Make absolutely sure you give them that, if at all possible.
Don’t have revenue yet? Show us monthly active users, signups, etc.
4) Market + Competitors. How big is your market? Who do you compete with?
I’m more interested in your competitors. Who do you lose deals to? Who do you beat for deals? And why?
Hint: “we don’t have any competitors” is rarely the right answer. Maybe no company does exactly what you do, but who is close?
5) Team. This is especially critical for early stage startups. At this point, there usually isn’t a ton of performance to sell.
So you have to emphasize the quality of the team. Why are these the best possible people to take on this challenge?
6) Ask. Here’s one of the strangest things I see: a founder telling a great story with solid traction, and then saying “thank you” and sitting down.
Umm, don’t you want something from us?
Never forget to tell the investors exactly what you’re asking for! Tell us how much you’re raising, at what valuation, and specify if that’s pre or post-money. (If the valuation includes the money you’re raising, that’s “$X post-money,” also referred to as “$X cap.”)
It’s also good to specify what type of fundraise you’re doing. Is it a SAFE, a priced round, or a convertible note?
Say something like this: “We are raising a $1 million SAFE at a $10 million cap.”
If you hit these 6 key elements, you’ll have a solid pitch that gives investors the details they need. You’ll also have a leg-up on other founders who provide incomplete or unhelpful information.
Best of luck on your fundraise!
Next, I asked ChatGPT to write an article on the same topic:
Here is its answer:
Raising money for a startup can be a daunting task, but having a solid fundraising pitch can make the process a lot smoother. Here is a checklist of items to include in your pitch to give investors a clear understanding of your business and why it’s worth their investment:
Problem: Clearly articulate the problem your business is solving and why it’s important.
Solution: Explain how your product or service addresses the problem and how it’s different from other solutions on the market.
Market size: Provide data on the size of the market you’re targeting and how you plan to capture a share of it.
Traction: Share any traction your business has already gained, such as customer testimonials, partnerships, or revenue.
Team: Introduce the team behind the business and highlight their relevant experience and qualifications.
Business model: Explain how the business will make money and provide financial projections.
Use of funds: Clearly outline how the funds will be used, such as product development, marketing, or hiring.
Ask: End your pitch by clearly stating the amount of funding you’re seeking and the terms of the investment.
Bonus: Show a clear path to exit and give an idea of what investors can expect to gain from the business.
By including these items in your pitch, you’ll be able to give investors a comprehensive understanding of your business and why it’s worth investing in. Remember to keep your pitch clear, concise, and visually engaging.
A strong pitch will also demonstrate that you understand your market, your customers, and your competition. It will also show that you have a clear vision, a solid team, a scalable business model and a sound plan for using the funds.
What strikes me most is how similar they are!
ChatGPT included all 6 of the items on my checklist. It also added 3 more.
For the most part, I think ChatGPT’s answer is excellent. Clearly stating a problem, showing how you solve it, and showing your traction are critical.
But at certain points, ChatGPT gets sidetracked. It suggests showing projections, which most investors discount pretty quickly.
It also tells us to show how the company will exit. This is wildly premature for most startups.
An exit is often 10 years off or more. There’s no telling how it will shake out.
What’s more, a founder who’s too focused on an exit is a red flag to investors.
Are they just looking for a quick win by flipping the company to Big Tech? If so, this will only be a small outcome for the VC’s.
Also, ChatGPT doesn’t provide examples. Examples are helpful in knowing how to frame a problem simply or how to describe the terms of your fundraise.
Moreover, ChatGPT lacks a personal tone. I describe experiences meeting actual founders, which a computer program can’t do.
Sometimes, you want a little of that human touch!
In all, ChatGPT’s writing was surprisingly good. But I think it has a way to go before it puts me out of business. 🙂
Which post did you like better, mine or ChatGPT’s, and why?
Tremendous 