#156 Top VC CFO Insights of May 2024

May 31, 2024

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Top Reads of Recent History, VC CFO Style

Top VC CFO Insights of May 2024

AI App Layer Wins. Most believe that LLMs are not where investments return will be had, but rather much more excitement for the app layer. Feeling is LLMs will be commoditized, and large incumbents will be the winners. Sentiment: Optimism for tech is sky-high, but investment sentiment is still tempered given the AI hype & continued deterioration of portfolios that were propped up during the ZIRP period. Liquidity: Everyone agreed liquidity market is broken. IPOs are now reserved for companies that have $200MM-$300MM+ in revs and large cap M&A is really tough given regulatory environment. Lots of discussion about continuation funds, PE led acquisition ($500MM-$2B).

…and rightfully so. Q1 earnings have been a disaster, and they’ve gotten worse as companies with April quarters started reporting. Nearly 70% of software companies who reported Q1 with an April quarter end guided Q2 below consensus! That figure is worse than the onset of Covid when everyone guided low because they weren’t sure if the world was ending! Of

Musk's $6 billion AI startup follows OpenAI's game plan. Elon Musk and his investors are betting $6 billion that bigger AI will continue to be better AI.

The big picture: Musk long ago parted ways with the other co-founders of OpenAI — but his AI startup, xAI, is borrowing OpenAI's "if you build it larger, it will get smarter" strategy.

That game plan has worked impressively so far, as OpenAI has rolled out one eye-popping demo after another, and new advances are expected from the firm's next big model, GPT-5, by year's end.

Vinod Khosla recently published the “Plausible Tomorrow’s” report with predictions about the future 2035-2049. Key insights:

  • Expertise will be free

  • Labor will be near free

  • Internet will be mostly accessed by agents

Pre-Seed Institution or “Inception Fund”

A pre-seed institution is a venture capital fund that aims to invest fairly small dollars in a high volume of companies at materially lower valuations given the risk of investing before there is even a product or a customer. Traditionally, this would be checks of $100K-$250K into 50-200 companies, at valuations less than $3m. Importantly, a "pre-seed institution” is often an accelerator—they invest in companies that are 6-16 months old, typically have a product and users, and aim to accelerate that already existing company to their seed round. Inception Funds on the other hand will work with founders even before incorporation, and almost always before there is a product or users.

Early Stage Venture Capital

Early stage venture capital is what you more traditionally think of as VC. High conviction, deep diligence, industry expertise, repeat founders, $500K - $5m investments at $10m-$25m valuations. Typically these funds are making 20-30 investments.

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