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#191 Top VC Reads & CFO Takes This Week
Doug Dyer
October 24, 2024
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“Today is a new day. Even if you got it wrong yesterday, you can get it right today.”
Picture of the Day: Austin Oktoberfest (AustOberfest)
Recap
The Latest & Greatest Fund CFO Posts
“As we (and others) have written about in recent months, the venture market is experiencing some systemic challenges that have the potential to depress returns for some time. Simply put, there is too much capital seeking too few opportunities, particularly at the seed stage. Multi-stage firms have eliminated pricing discipline at seed stage and the proliferation of seed firms has made the task of investing at this stage as competitive as it’s ever been, leading me to believe that indexed seed investing in today’s environment will produce poor returns.”
CFO Take: VC investors have already been washed out with total number of investors dropping below 2014 levels. Will 2025 be the best venture fund vintage of all time?! Arguably, there is more upside than ever before…
Seed valuations don't behave like valuations:
They are too stable over time for such a speculative asset
They are impervious to shifting interest rates
They don’t follow public tech valuations
CFO Take: seed valuations have climbed from ~$10m in 2020 to ~$15m in 2024 (Carta) - throw these out the window if you are investing in top tier founders, YC, or AI. Entry valuations matter but what matters more? The path to your RTF (“return the fund”) valuation. Does that path exist for that company?!
With both OpenAI and Anthropic rumored to be raising new financing rounds, some of their financial metrics have been reported by various publications. In this piece, I’ll discuss what we know about their financials and highlight a few observations from that data.
CFO Take: revenue still matters! It’s refreshing to see in the world of VC valuations. For OpenAI, at a $157 billion valuation and ~$5b of run-rate revenue (majority consumer w/ ChatGPT), we’re talking ~31x run-rate, 13.5x forward . For Anthropic, at a $40 billion (rumored) valuation and ~$1b of run-rate revenue (majority API), we’re talking ~40x run-rate, anyone’s guess on forward!
OpenAI has a big lead in consumer but the race is close in the API market ($1.4b at OpenAI vs. $850m at Anthropic). This will be a fun race to watch!
That’s all for today folks! Thanks for your support and spreading the word!
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