| Over 300 organizations rely on The Information for exclusive insights into public and private companies, including in-depth analysis of the ways in which tech moves markets. Click here to contact our corporate and enterprise team to learn more. Before we get into today's column, check out my colleague Sri's story on the venture fund limited partners that are selling stakes in their venture portfolios as the winter in initial public offerings lingers on. She's got details on Nokia pension plans, Lee Fixel's family office and more. As she notes, the market is great for those buyers looking to snap up stakes on the cheap in funds that own Stripe, Databricks and other hot startups.
A few months ago, I wrote about a number of early-stage startup founders who chose not to raise venture capital after an initial seed round, instead running their startups on the sales their businesses were generating. Dan Shipper, founder of media and artificial intelligence software startup Every, is taking this "seed-strapping" approach a step further. His 14-person startup said last week it had raised $2 million in seed funding from LinkedIn co-founder Reid Hoffman and Starting Line, its second round of venture funding after raising $700,000 in pre-seed funding from Bedrock and other investors. But instead of receiving the new round all at once, as is typical for startups, Every will only draw on that cash when it needs it. "It's a little bit like a line of credit," Shipper told me. "I just didn't want to be staring at a bunch of cash in a bank account." This financial discipline speaks to a mentality among some founders who have either experienced the perils of raising too much money or have watched their peers navigate painful down rounds after pandemic-era funding sprees. This approach is also partly a symptom of AI's incursions. Startups say they're tapping AI tools to cut costs—say, by using coding assistants for engineering tasks and chatbots for customer support. That means some are getting by with a lot less VC money. Recent examples of this leaner approach include Gamma. The four-year-old startup, whose AI software creates presentations, has become profitable and hit $50 million in annual recurring revenue, after only raising a $12 million Series A a year ago, according to newsletter Upstarts. Aragon.ai, whose AI software develops headshots, is another example. And notably, image generator Midjourney grew to about $200 million in revenue without raising any money from outside investors. "AI startups need less capital to get that idea off the ground and get to that initial 'Is it going to work?'" said Yin Wu, co-founder of Pulley, whose software helps startups manage their equity. Some venture capitalists, of course, are skeptical that startups may opt to skip raising multiple rounds of money altogether. They note that young companies need starting capital for the best talent and for hosting costs to use the public cloud services run by Google and Amazon Web Services. "For many fast-growing AI companies, hosting costs outstrip employee costs, and since some are giving away their products for free or at discounted rates in order to grow, the cost early on does add up," said Anamitra Banerji, general partner at early-stage venture firm Afore Capital. At the same time, it's likely that some AI startups are raising hundreds of millions of dollars as a bulwark for when the funding isn't so plentiful. AI search engine Perplexity, for instance, is in talks to raise $500 million, which if closed would mean the company has raised four funding rounds, totaling more than $1 billion, in just over a year. For context, it still had about $850 million in the bank at year end. As for Every, the five-year-old startup has generated $1 million in annual revenue from sales of its tools, which includes AI writing software that costs roughly $200 a month, according to The New York Times. It raised the new capital on a simple agreement for future equity note, which means the investment will convert into shares when Every raises its next round. This structure poses a risk to investors if the company never raises more venture money, as may be the case if business is booming. As an insurance against that risk, Every's round includes a clause that allows its investors to convert their notes into equity if the startup doesn't raise a qualifying round, sell or allow investors to exit in another way. Could this fail-safe make such arrangements more popular? Probably not, but I wouldn't be surprised if a few more entrepreneurs tried to keep venture funding at a minimum and opt for a more creative fundraising path. | 
0 comentários:
Postar um comentário