Today, Google is the king of search. But is it about to be dethroned?
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The search giant seems to face a new competitor every day. ChatGPT launched on November 30, with Perplexity and Allsearch coming shortly thereafter.
The “page of links” is starting to look antiquated.
Meanwhile, with nearly 200,000 employees, Google has released nothing in response. But new reports indicate Google may finally release a competitor this spring:
In addition to an ethical AI chatbot such as LaMDA, Google is now planning to reveal 20 more AI-based products at its I/O conference scheduled for May 2023. ChatGPT has sparked worry about the use and viability of conventional search engines, as the chatbot aims to provide answers to searches instead of just giving relevant links to users.
Taking over 5 months to respond to a mortal threat to your business is unacceptable. Google should’ve worked day and night to produce a ChatGPT competitor within 90 days.
So what’s the holdup?
Google has shown wariness in revealing AI products and services, especially with the raging debate on the ethics of using AI, with the potential for bolstering biases present in training data. All current AI offerings by Google are heavily restricted in terms of what they can be used for.
Large companies are obsessed with risk. Meanwhile, startups have to release something or they’re dead in the water.
By the time Google does release a competitor, it may already be outdated. OpenAI’s GPT-4 may come out in the first half of this year.
I don’t know what GPT-4 will be capable of. But seeing the massive improvement between GPT-3 and ChatGPT, I expect it to be very impressive.
How fast you launch and iterate is especially important in AI because AI tools can improve at incredible speed. From a recent column by economist Tyler Cowen:
ChatGPT, the model released late last year, received a grade of D on an undergraduate labor economics exam given by my colleague Bryan Caplan. Anthropic, a new LLM available in beta form and expected to be released this year, passed our graduate-level law and economics exam with nice, clear answers.
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?
Tough times in startupland show no signs of ending. Venture funding fell 67% in December from a year earlier, according to a new report by S&P Global:
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The aggregate value of venture capital-backed funding rounds worldwide dropped 66.7% year over year in December 2022 to $19.71 billion, which is around the same level of annual decline seen in November 2022, according to S&P Global Market Intelligence data.
The number of completed rounds fell by 57%.
These grim stats match what I’m seeing in the market every day. Far fewer deals are getting done, and those that are take longer to close.
The weakest companies have left the market.
The $100 million “seed” rounds in crypto startups with no product or customers were everywhere in 2021. Now, those companies have either given up on fundraising or gone out of business.
The good news is that good companies are still getting funded. I’ve been a part of several multimillion dollar seed rounds in recent months.
These companies have annual revenues in the hundreds of thousands, growing fast. They also have a head start in huge markets.
Even for these companies, rounds take months to close and sometimes don’t fill completely.
If your startup doesn’t have rapidly growing revenue, your chances of raising today are slim. Instead, I’d focus on getting more customers first, which will make your fundraise much easier.
If you are fundraising, you want to raise enough to give yourself runway for two years at least. The 18 month standard I used in 2021 just isn’t enough in this bleak environment.
And don’t count on all that “dry powder” saving you. VC funds may be sitting on a lot of cash, but they’re also deploying more slowly.
As for me, I’m investing in about one company a month, same as I always have.
A few great companies are born every year. In venture, our only job is to own a piece of them.
What do you see in markets today? Leave a comment at the bottom and let me know!
Let’s say I come to you asking for a raise. “Sorry Francis, we’re tapped out for the year.” I could leave — if only I didn’t sign that noncompete.
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Noncompete agreements restrict a worker from starting or working for a competing company for a period of time. The Federal Trade Commission is considering banning them.
Here’s why this is absolutely the right policy…
If I can’t work at a competitor, that means I cannot work in the field in which I have experience. And if I move to another field I know nothing about, my wages will be much lower.
So rather than leave my employer, I’m going to stick it out, even if the pay isn’t great.
California is the most innovative state in America, by far.
California also happens to be one of the few states in the country that doesn’t enforce noncompete agreements. Workers are free to leave a company and start a competitor.
Is California so innovative because it scoffs at noncompetes? I don’t know.
But it certainly doesn’t seem to be holding them back.
Benefits of Noncompetes are Dubious
The economist Tyler Cowen argues that banning noncompetes will lower wages. From his latest Bloomberg column:
Say you run a hedge fund. Many members of your trading team will have partial access to your firm’s trading secrets, and if they leave they can take those secrets with them. In the absence of noncompete agreements, firms would be more likely to “silo” information — becoming less efficient and less able to pay higher wages.
Cowen’s argument is purely theoretical. He offers no evidence that states or employers without noncompetes have lower wages than those with them.
Cowen also argues that without noncompetes, employers will have less incentive to train. After all, their employees could jump ship at any time.
But again, he offers no evidence that companies without noncompetes invest less in training.
My Experience with Noncompetes
I’ll admit it, I have an ax to grind here. In my first job out of college many years ago, I had to sign a noncompete.
I didn’t want to sign it. But I was fresh out of school with barely a dime and no work experience — what else could I do?
When I found out other people in the industry were making two or three times what we were, naturally I wanted out. But the noncompete stopped me from working in the field for a whole year.
Unable to work in the field I knew, I applied for jobs outside it. But with no experience, there were no takers.
So I lived off my savings for a year until the noncompete expired. And sure enough, I dramatically increased my pay just days after it ended.
Let’s Ban This Nonsense
Noncompetes offer workers a terrible choice. Would you prefer indentured servitude, or unemployment?
In the absence of powerful evidence of their benefits, noncompetes should be banned. I urge you to write your representatives and ask them to end this abusive practice.
What’s your view on noncompetes? Leave a comment at the bottom and let me know!
There will be no blog on Monday for the holiday. See you Tuesday.
Many founders work incredible hours. So what’s all this for…just to make someone like me money?
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I know startups can change lives because I’ve seen it happen.
My mom lives in a small town in Wisconsin. Getting around without a car is nearly impossible — but she can’t drive.
She was born blind in one eye, making depth perception a mess and driving a nonstarter. The basic things we take for granted — getting groceries, making a doctor’s appointment, or just grabbing coffee at Starbucks — are very difficult for her.
Or were…until Uber and Instacart!
When I was a kid, we often waited over an hour for a taxi home with our groceries. And we did that outside in frigid temperatures, lest we miss the car.
Now, neatly packed bags appear on Mom’s doorstep, like magic.
We stood in deep snow waiting for the bus if we wanted to go anywhere. I think I spent half my childhood saying “Where the heck is this thing?”
Now, an Uber glides up in minutes, taking Mom wherever she likes.
One of my companies got acquired today. It made me think that despite this financial win, we do this job for a lot more than money.
Whether you’re a founder, investor, or startup employee, we want to make something amazing! We want to make a nicer life for other people.
So the next time you’re staring at your computer at 3am, remember this: what you do matters. You’re creating the future, and it’s going to be awesome!
What motivates you? Leave a comment at the bottom and let me know!