See you in 2024
Gil Dibner

This is our last newsletter for 2023, and we’ll hit your inboxes again in January after the break. This is the time of year when VCs often write up some predictions. So much is changing so fast, that I don’t feel qualified to predict anything right now. But I do want to leave you with four ideas I know I’ll be reflecting on a lot over the break:

• Company survivability. We’re living through some pretty challenging times for any company that requires funding to survive. That’s been analyzed and explained by many others. I find myself increasingly focused on understanding the survivability of the companies I am working with and thinking about. Many of the best companies will be able to raise external capital, but many will nevertheless choose to pursue a path toward profitability. In today’s climate, this is the optimal strategy for a lot of companies. It may sound old-fashioned, but I also think that it’s not unreasonable to use the mathematics of profitability to gauge whether or not a company has what it takes to truly break out. A company that is truly survivable (i.e. “default alive”) can probably raise as much capital as it needs to scale even faster.

• Sales repeatability. Early indications are that software buying budgets are going to begin to recover in 2024. Companies that overcame the massive challenges of selling in 2023 are going to face slightly fewer headwinds in 2024. If you managed to sell anything at all in 2023, you should be positioned to sell much more of it in 2024. The challenge of scaling repeatable sales (without threatening survivability) is going to be critical for a lot of startups next year.

• Tech defensibility. In this era of rapidly expanding AI capabilities and skyrocketing engineering efficiency, the challenge of maintaining defensibility is critical. We always think about defensibility (barriers to entry, intellectual property, complexity, stickiness) when we’re evaluating new investment opportunities — but the factors that define these attributes are shifting before our eyes. I know that much of my energy over the next year is going to be devoted to understanding the new contours of technology defensibility in the era of AI.

• Psychological adaptability. We are living through rapid transformations across every area that impacts our businesses: the funding climate, the technology landscape, and even the stability of the geopolitical map. I’m going into next year focused on adaptability and resiliency in the face of unexpected challenges. There is no magic formula for adaptability, but I think it’s ultimately a matter of mindset. My hope for 2024 is that I’ll be able to take unexpected challenges in stride and remain true to the values and objectives that guide me. If I can play a small role in helping the founders I work with to do the same, I will have served them well.

Happy holidays, and happy New Year from all of us at Angular Ventures.

FROM THE BLOG

It’s 3am. Do You Know What Your Third-party API Calls are Doing?
Announcing our investment in Lunar.dev.

Small & Strong Beats Big & Weak
Three startup paradigms in the LLM era.

The End of Entrepreneurship by Autopilot
The unicorn factory has stopped. What are the implications for founders?

No Words
The heartbreaking situation in Israel.

WORTH READING

ENTERPRISE/TECH NEWS

Google’s Gemini. Google launched Gemini last week, Google’s attempt to catch up to OpenAI. Gemini has three versions: Ultra (which is more powerful than GPT-4), Pro (which powers Bard now) and Nano (for mobile devices). However, Ultra won’t be launched till next year. One of the most compelling aspects of Gemini is that it’s multimodal, having the “ability to understand and produce both text and imagery simultaneously”. While the demo video got much attention and initial praise, it has since been released that the demo was essentially fake… “We created the demo by capturing footage in order to test Gemini’s capabilities on a wide range of challenges. Then we prompted Gemini using still image frames from the footage, and prompting via text.”

2023 in charts. The Information put together an interesting piece on this year in charts. 2023 has been a tough year for many, especially for startups, and The Information’s section on startups highlights that. “Investments in startups fell to 2018 levels as venture capitalists around the world pulled back from the frenetic investment of the pandemic years. With the exception of AI enthusiasm, venture capitalists are holding back from dealmaking in light of higher interest rates and resistance from their limited partners. One indicator of the pullback: More companies are raising money at lower valuations than previously. Software provider Carta, which tracks 41,000 U.S. startups, says such down rounds accounted for 18.5% of startup financings in the third quarter, versus just 5.2% of startup financings in the first quarter of 2022.”

Coding with AI. Github’s Copilot has changed the game for developers. “Copilot has changed the basic skills of coding. As with ChatGPT or image makers like Stable Diffusion, the tool’s output is often not exactly what’s wanted — but it can be close. “Maybe it’s correct, maybe it’s not — but it’s a good start,” says Arghavan Moradi Dakhel, a researcher at Polytechnique Montréal in Canada who studies the use of machine-learning tools in software development. Programming becomes prompting: rather than coming up with code from scratch, the work involves tweaking half-formed code and nudging a large language model to produce something more on point.” Through this process, Copilot is able to make programmers faster and could have a massive impact overall. “Small changes to a task that millions of people do all the time can add up fast. Iansiti, for example, makes a huge claim: he believes that the impact of Copilot — and tools like it — could add $1.5 trillion to the global economy by 2030.”

HOW TO STARTUP

Founder compensation. Riverside Ventures’ Alex Pattis wrote up a great post on the delicate balance of how much founders should pay themselves. “Taking a too low salary will mean putting your personal life in a high-stress position, while taking a too high salary will make investors question your business decisions.” While geography and cost of living should be factors to consider, according to Kruze Consulting the average founder salaries based off amount raised are:
“-0 to $2m raised → Avg = $106k
-$2m to $5m raised → Avg = $135k
-$5m to $10m raised → Avg = $171k
-$10m+ → Avg = $199k”

The VP hiring mistake. Jason Lemkin tweeted about a hiring mistake we’ve often seen founders make. “I see about 50% of SaaS founders make a truly terrible VP hire. Just terrible. Common denominator? The VP worked somewhere very well-known before, but many stages later. And/or is very well known”. Hiring VPs who have relevant stage experience is usually a better recipe for success.

HOW TO VENTURE

OpenView winding down. In news few saw coming, one of the top funds, OpenView, is winding down. The fund laid off most of its staff and will no longer make new investments. OpenView had employed at least 74 people and had raised a total of $2.4B. Why are they shutting down? Recent returns were lackluster and it is speculated that the “departure of some partners may have also triggered a clause that allows limited partners to restrict investments when certain senior leaders leave.” Gil shared his sobering take on the news “Lots of people seem to believe that there must be a scandal. I doubt it. No one wants to believe something even scarier — that even one of the best in the business couldn’t make it work.”

PORTFOLIO NEWS

Dust Identity, an Angular portfolio company that authenticates products by marking them with invisible diamond dust, raised a $40M Series B to enter new markets, including sports, luxury goods and art. The round was led by Castle Island Ventures and joined by Amex Ventures, Airbus Ventures, Kleiner Perkins and 8VC.

Reco earned a spot on the Intellyx 2023 Digital Innovator List.

CruxOCM’s CEO, Vicki Knott, weighed in on how oil and gas companies could ramp up their use of GenAI.