Please wait. . . updating priors
Gil Dibner

This is a column about entrepreneurship and technology, I promise. But I’m going to start with the US election because it’s the only thing that seemed to matter this week. No one who knows me would wonder who I voted for and - to avoid all doubt - she lost fair and square. Since Tuesday, I’ve been consuming a lot more political analysis than I usually do. It’s been fascinating and educational to listen to a series of thoughtful and experienced analysts (David Axlerod, Mike Murphy, John Heilman, James Carville, Al Hunt, Bill Crystol, Ron Brownstein, Van Jones, Kara Swisher, Sarah Longwell, and many others) try to reflect on what happened and why. Obviously, tech (and tech people) played a major role in this election and there will definitely be implications for entrepreneurs and investors - both in the US and around the world. This is definitely not a political newsletter, and we’re not going to change that now, so I’ll leave it to others to comment on the politics and consequences of this election and its aftermath.

The political priors were wrong. For me personally, one of the most interesting things about the aftermath of this election is watching people updating their priors. I am also working to update mine. I am not changing my assessments of Trump or Harris. There is currently no reason to do that. But I do think that many of the underlying assumptions that so many on the left believed going into this election have simply been proven to be untrue: assumptions about how various demographic groups would vote, assumptions about how the electorate would receive certain statements, assumptions about how candidates should be selected, assumptions about the role of money and grassroots organization in a campaign, assumptions about the role of celebrity, assumptions about how media itself works, and even assumptions about what issues would matter to voters. All the above were simply proven wrong. The losing side in the election ran a campaign in 2024 that might have worked in 1996. But the world around them had changed, rendering old assumptions and stale strategies useless. If the Democratic party doesn’t begin radically updating its priors, it will keep losing. (The same, of course, can be said for Republicans who tried unsuccessfully to challenge Trump for the past 12 years.) As odious as Trump is to me, he must be credited for understanding (either instinctively or intellectually) the moment we are in better than any of his rivals and, certainly, far better than me.

A reminder to stay humble. The reshaping of American politics we’ll now witness will certainly have implications for our work (some bad, some potentially good). I will leave it to others to comment on those, as I am not confident I have any ability to predict them. My focus right now is trying to thoroughly apply the personal lessons of the last week to my work as a venture capitalist. The big lesson for me is the importance of updating one’s priors in a rapidly changing world to avoid the sort of strategic surprise that tanked the Democratic party last week. While Trump’s victory is not exactly surprising, the revelation of just how wrong so many of the assumptions that underpinned the Harris camp were is humbling - and an excellent reminder that humility is the best defense against strategic surprise.

A forced re-examination: which technology priors are wrong? For most early-stage companies, the path to exit is around ten years, maybe more. A lot can change in that time - and the pace of change right now is staggering. So many of the assumptions that underpinned the venture capital business and the business of building tech companies themselves are coming under incredible pressure. The majority of these assumptions and beliefs are probably just wrong by now, and - consequently - the only viable path forward for both founders and investors is to discard anything that looks like an outdated assumption (an unsubstantiated prior) and focus on first principles and empirical data. Is it still true, for example, that complex software can be a barrier to entry? Is it still true that ARR is the most attractive and most likely form of software revenue? Is it still true that data can be a moat? Is it still true that $100M of revenue can be worth $1B or more at exit? Is it still true that $500K of revenue per employee is a good level? Is it still true that $3M of revenue can support a “Series A” fundraising round? Is it still true that software engineering talent is an asset? Is it still true that IPOs are a viable exit strategy that will drive the majority of venture returns? Is it still true that hardware is hard? There are so many beliefs we picked up along the way, and many of them contain wisdom - wisdom I still believe in. But all datapoints have a timestamp, and the age of some of this data is starting to show. I don’t have any of the answers to any of the questions above - but I have been finding myself asking them with more of an open mind lately. For me, the election was a reminder that, like the future, the present is also an unknown. We think we know what is true, but we don’t. We can only gradually discover it as we move forward with an open mind.

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Israel / Software. Kardome raised $10M, led by Korea Investment Partners, for its spatial hearing software that enables devices to respond to voice input.

France / SaaS. Siit raised $5M, led by StageOne Ventures and Seventure Partners, for its AI-powered service desk platform.

France / TechBio. Theremia raised €3M, led by Eurazeo and Salica Investments, for its AI-powered platform that will, based on individual patient pathophysiological characteristics, update frequency, dosage, and drug formulation to improve efficacy.

German / SaaS. Paretos raised €8.5M, led by Acton Capital, for its AI-powered decision-making platform.

Norway / SaaS. Glint Solar raised $8M, led by Smedvig Ventures, for its SaaS platform that helps solar developers plan and pre-design solar installations to accelerate construction.

ENTERPRISE/TECH NEWS

SV to DC. In the wake of Donald Trump’s landslide victory in last week’s election, Silicon Valley's Trump supporters – including Elon Musk, Marc Andreessen, and David Sacks – are celebrating a significant political shift. Trump’s administration is expected to be heavily influenced by some of the tech industry’s most prominent entrepreneurs and VCs. In particular, Elon Musk has been meeting with Trump almost daily since the election. Vivek Ramaswamy, the biotech entrepreneur turned politician, is reportedly on the shortlist for Secretary of State; while VP JD Vance brings deep ties to Silicon Valley from his time as a VC and his work with Peter Thiel. Reflecting on the election and the tech industry's involvement, Eric Newcomer offers a candid perspective: “While I’ve loathed Silicon Valley’s Trump embrace, I have to say that waking up this morning I’m glad that at least some of Silicon Valley has its talons into Trump… I want America to succeed. I am highly skeptical that Trump is a step in the right direction. I hope Silicon Valley pulls every lever it can to push Trump toward tech’s vision for his presidency. But I think his tech supporters have made a tremendous mistake. I’d love to be proven wrong.”

Israel’s stealth startup era. Despite all the hardships Israel and her people have endured this past year, 2024 has been a remarkable year for the Israeli startup sector. According to VC Eyal Niv: "We estimate that the total fundraising volume will reach approximately $12 billion, with early-stage fundraising alone amounting to around $3.2 billion. These numbers are significantly better than in 2023, and if we exclude the bubble years of 2020 and 2021, we're seeing consistent growth since 2018, when we raised $1.7 billion." A big shift in Israel in recent years has been a surge in stealth startups, companies operating completely under the radar. “This approach is convenient for companies for various other reasons, which came up in conversations with key figures in the industry. Many cited the need for secrecy to reduce pressure on entrepreneurs during the early stages of building a startup, as well as to avoid revealing technology that isn’t yet mature. Another major factor is the shift in the labor market: companies no longer need to compete aggressively for talent and, therefore, aren’t pressured to enter a hiring race.”

GenAI hype. Linus Torvalds, the creator of the Linux kernel, shared his thoughts on GenAI, and how 90% of AI marketing is hype. “I think AI is really interesting and I think it is going to change the world and at the same time I hate the hype cycle so much that I really don't want to go there, so my approach to AI right now is I will basically ignore it,” said Torvalds. “I think the whole tech industry around AI is in a very bad position and it’s 90 percent marketing and ten percent reality and in five years things will change and at that point we’ll see what of the AI is getting used for real workloads,” he added.”

HOW TO STARTUP

Partnering with your board. Nilam Ganenthiran, the former President of Instacart, shared some great insights on how CEOs should manage, view, and partner with their boards. “Treating the board meeting as a chore: I have found that prepping for board meetings is a gift. It is a forcing function to get everyone internally on the same page on progress-to-date, it is a driver of accountability, and it forces thinking regarding go-forward plans. You should start thinking about your next board meeting just after finishing your previous board meeting (assuming you run quarterly meetings). I typically have a Google Doc going where I have some quick bullet points of an outline and key points I want to show at the next meeting. I find this helps me now during the quarter how things are going, and it makes the actual creation of board materials so much easier/less of a scramble. Treating the board as a customer to sell: Yes – board members are important stakeholders, especially since they have the power to fire you (or not give you more money to fuel the business). However, I think viewing your board as an audience to be ‘sold’ to instead of a partner in your journey will orient your board to be less trusting and collaborative. People who serve on boards are usually smart. They know when they are getting a hyper polished version of the facts. Treating your board in this way will have them have their guard up looking for inconsistencies and the “gotcha’s”. I have found it is easier just to explain your thinking, being relatively transparent, and seeking engagement from your board members on problem solving – vs. pretending you have it all figured out.”

Crafting a GTM strategy. Maja Voje wrote a terrific post in Growth Unhinged on how to build a GTM strategy from scratch. The entire post is worth reading, but this section is especially important for early stage founders. “Framework #3: Create a GTM masterplan to secure traction without breaking the bank: If you have not secured Product-Market Fit yet, we cannot talk about GTM motions just yet — but there are actions you can try to figure out what would work best for your target market? Always go where the audience is. If you do not know that, ask them. Run some interviews or send them an email/survey in which you ask “You have a problem X - where would you turn for inspiration, guidance and suggestions to solve it?” After you have secured Product-Market Fit, your next job is to systemize and optimize GTM motions. These are predictable and scalable ways to get customers. For most companies, two or three GTM motions will work best.”

HOW TO VENTURE

Drop in new small and medium VC funds. This year, the VC landscape has experienced a notable decline in the number of new small and midsized VC funds. “So far in 2024, just 118 small and midsized U.S. startup investors have raised new funds of $500 million or less, per Crunchbase data. That puts this year on pace to deliver by far the fewest new funds in the category in years.” This downturn is largely due to a challenging fundraising environment for VCs caused by the slowdown in the exit market. Additionally, many existing funds remain well-capitalized, reducing the urgency to raise new ones. On the positive side, “for those who did manage to close on capital, it helps that there is a history of funds raised in sluggish fundraising environments going on to do quite well.”

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