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Is Generative AI disruptive or sustaining?A quick recap of Clayton Christensen's conceptual framework of disruptive and enabling innovations...

Disruptive InnovationDisruptive Innovation: This refers to a process where a smaller company with fewer resources successfully challenges established incumbent businesses. Disruptive innovations typically start by capturing the lower end of the market – offering products or services that are more affordable and accessible. Over time, these innovations improve in quality and performance, eventually displacing the established competitors. Disruptive innovations often change the competitive landscape and can lead to the creation of entirely new markets. A classic example is how digital photography disrupted the traditional film photography industry.

Arguments For GenAI As Disruptive Innovation1. Low-End Disruption: Christensen often emphasized how disruptive innovations initially target the lower end of the market. In the case of Generative AI, it could initially appeal to smaller businesses or individuals who couldn't previously afford professional services in fields like design, content creation, or data analysis. 2. Market Transformation: Generative AI has the potential to create new markets and value networks, especially in fields like art, content creation, and design, where it enables the creation of novel content that was previously not possible or required extensive human effort. 3. Accessibility: By democratizing skills that were once niche or expert-level (like graphic design, coding, or prose writing), generative AI can disrupt traditional industries by making these skills accessible to a wider audience. 4. Cost Efficiency: It can significantly reduce costs in content production, potentially disrupting sectors reliant on human labor for these tasks. 5. Innovative Business Models: The technology could lead to new business models, particularly in personalized content creation, marketing, and customer interaction, disrupting conventional business strategies.

Arguments Against GenAI As Disruptive Innovation 6. Dependency on Existing Infrastructure: Generative AI is highly dependent on existing data and computing infrastructure, suggesting it's more of an evolution than a radical market disruptor. 7. Ethical and Regulatory Constraints: Potential ethical issues and regulatory hurdles, especially around data privacy and intellectual property, might slow down its disruptive impact. 8. Integration with Current Systems: Rather than replacing existing systems, generative AI is often used to enhance them, suggesting a more gradual market evolution.

Sustaining Innovation

Sustaining Innovation: Sustaining innovations, on the other hand, do not disrupt existing markets but rather evolve them. These innovations enhance or improve existing products, services, or processes, making them more efficient, effective, or accessible. They tend to support and extend the life of existing companies or industries rather than replacing them. An example of sustaining innovation could be the evolution of smartphones, where each new model offers improvements and additional features that enhance user experience but do not necessarily disrupt the existing market in the way the first smartphones did.

Arguments For GenAI As Sustaining Innovation1. Enhancing Current Products: Generative AI often acts as an enhancement to existing digital products, like improving software with AI capabilities, which aligns with sustaining innovation. 2. Gradual Improvement: The technology is seeing incremental improvements, aligning with the idea of gradual enhancements characteristic of sustaining innovation. 3. Appealing to Existing Market: In many cases, it serves the existing market better by offering more efficient, high-quality outputs (like in graphic design, coding, or data analysis).

Arguments Against GenAI As Sustaining Innovation 4. Potential for Market Transformation: The long-term potential of generative AI could be to completely transform markets, not just sustain them. 5. Beyond Mere Improvement: Generative AI introduces capabilities (like creating new forms of art or generating new data) that go beyond simple improvements of existing products. 6. Altering Consumer Behavior: Its ability to change how consumers interact with technology (for instance, preferring AI-generated content) suggests a shift in market dynamics, not just sustaining existing ones.

Further Reading

📺 Clayton Christensen: Disruptive innovation(Clayton Christensen presenting at the Saïd Business School at the University of Oxford, uploaded to YouTube in June 2013)

📃 What Is Disruptive Innovation?(Christensen, Raynor, and McDonald for the December 2015 issue of the Harvard Business Review)

📃 Sustaining vs. Disruptive Innovation: What's the Difference? (Catherine Cote for Harvard Business School Online, February 2022)

📺 Disruptive Technology vs. Sustaining Technology (Ashley Hodgson on YouTube, December 2022)

📃 Differences between early adopters of disruptive and sustaining innovations (Reinhardt and Gurtner, 2015)

Generative AI EconomicsThe Briefest of OverviewsThe emerging Generative AI sphere breaks the model of software economics, to an extent.

Traditional Software Economics: Building and launching a new SaaS product (for example) is low CapEx, high OpEx, and high margin.

Foundation Model Developer Economics: High CapEx (considering that as of right now progress is gated by access to chips). High OpEx (considering that data acquisition, data engineering, model training, and most importantly model inference are massive cost centers).

Training and Inference Costs

| Discriminative AI | Generative AI | | --- | --- | | Training Costs | High | High | | Inference Costs | Low | High |

AI Training: The Learning PhaseThink of AI training like teaching a student. In this phase, you're giving the AI model lots of examples (this is your data) to learn from. These examples could be anything from pictures of cats and dogs to customer reviews.

• How It Works: The AI model looks at this data and tries to find patterns. For instance, it might notice that cat pictures often have pointy ears and whiskers. It's like studying for an exam — the model is trying to learn as much as possible from the data it's given.
• The Goal: The aim is to make the AI understand these patterns well enough so that it can make its own decisions or predictions later. It's all about the model learning the rules of the game from the examples it sees.
• The Challenge: This phase can be resource-heavy. It requires a lot of computational power (think high-end GPUs or specialized hardware), and it can take a lot of time, depending on how complex the task is.AI Inference: The Application Phase

Now, imagine the student (our AI model) has graduated and is ready to apply what it learned in the real world. This is the inference phase.

Inference in Discriminative AI:

• Overview: This is like asking the AI model a multiple-choice question. You present it with new data (like an image or a piece of text), and based on its training, it categorizes or identifies this data. Think of it as asking, "Based on what you've learned, what do you think this is?"
• Application: It's widely used in tasks like image recognition (identifying objects in pictures), spam detection (categorizing emails), or sentiment analysis (understanding if a review is positive or negative).

Inference in Generative AI:

• Overview: Here, instead of categorizing, the AI is creating something new. It's like giving the AI a set of ingredients (data and conditions) and asking it to cook up a new dish (output). This output could be a piece of text, an image, or even music.
• How It Works: The model uses patterns it learned during training to generate new, original content. For instance, if it's been trained on a lot of landscape paintings, it can generate a new painting that doesn't exist yet but looks like it could belong to the same collection.
• Application: Generative AI is used in creative fields like art generation (creating new images), content writing (generating articles or stories), or even in generating synthetic data for further AI training.Further Reading

📃 Navigating the High Cost of AI Compute (Appenzeller et al. for the Andreessen Horowitz blog, April 2023)

📃 Compute and Energy Consumption Trends in Deep Learning Inference (Desislavov et al., March 2023. ArXiv ID: 2109.05472)

📃 How Inferencing Differs From Training in Machine Learning Applications (Sam Fuller for Semiconductor Engineering, January 2022)

📃 The Inference Cost Of Search Disruption – Large Language Model Cost Analysis (Dylan Patel and Afzal Ahmad in SemiAnalysis. February 2023)

Where The Value LiesAs with any emerging technology, there are generally three types of players:

• Those building core technology (e.g. doing whatever equivalent of "bench science" is in their field)
• Those packaging/implementing core technologies into specialized applications
• Those providing the infrastructure to builders and packagers

At least at this stage, it's clear that captured value is redounded to those participants, in rank order:

1. Infrastructure Providers — e.g. Cloud providers (Microsoft Azure, Google Cloud Platform, Amazon Web Services, etc.), Semiconductor developers (Nvidia, Graphcore, Groq, Cerebras. etc ... plus all the chip development efforts at big companies like Amazon and Microsoft, etc)
2. Foundation Model builders — e.g. OpenAI, Anthropic, Deepgram, etc.
3. Implementers — e.g. Companies that build "wrappers" around infrastructure and foundation models. Put differently: Companies/projects which integrate with foundation model APIs and package outputs from said APIs

Further Reading📃 Exploring opportunities in the gen AI value chain (Härlin et al. for McKinsey Digital, April 2023)

📃 The value​​​ ​​​chain of general-purpose AI​​ (Küspert et al. for the Ada Lovelace Institute, February 2023)

📃 “Behind the Hype: A Deep Dive into the AI Value Chain” (Arun Rao on Hash Collision, June 2023)

📃 Generative AI Value Chain (Matt Rickard publishing on his blog, November 2022)

📃 Basics on the Layers and Value Chain of Generative Artificial Intelligence (Florian Seemann on Medium, April 2023)

📃 Generative AI Value Chain (Andy Wu and Matt Higgins publishing a Harvard Business School Background Note, July 2023)

Other Mentions and LinksTitle Ideas* Back to the 90s * A Whale With Moose Antlers * Breathless Dorks on Twitter * Whither the Poop Shovelers? * Graham's Personal Hope * Luxurious Techno-Communism

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Many of the core technologies behind Generative AI are not exactly brand new. For example, the "Attention Is All You Need" paper, which described and introduced the Transformer model (the "T" in ChatGPT), was published in 2017. Diffusion models—the backbone of image generation tools like StableDiffusion and DALL-e—were introduced in 2015 and were originally inspired by thermodynamic modeling techniques. Generative adversarial networks (GANs) were introduced in 2014.

However, Generative AI has seemingly taken the world by storm over the past couple years. In this episode, Graham and Jason discuss—in broad strokes—what Generative AI is, what's required to train and run foundation models, where the value lies, and frontier challenges.

Fact-Checking And CorrectionsBefore we begin...

• At around 36:16 Jason said that the Pile was compiled by OpenAI or one of its research affiliates. This is not correct. The Pile was compiled by Eleuther.ai, and we couldn't find documentation suggesting that OpenAI incorporates the entirety of The Pile into its training data corpus.
• At 49:07 Jason mentions "The Open Source Institute" but actually meant to mention the Open Source Initiative

Applied Machine Learning 101Not all AI and applied machine learning models are created equally, and models can be designed to complete specific types of tasks. Broadly speaking, there are two types of applied machine learning models: Discriminative and Generative.

Discriminative AIDefinition: Discriminative AI focuses on learning the boundary between different classes of data from a given set of training data. Unlike generative models that learn to generate data, discriminative models learn to differentiate between classes and make predictions or decisions based on the input data.

Historical Background TLDR:

• The development of Discriminative AI has its roots in statistical and machine learning approaches aimed at classification tasks.
• Logistic regression and Support Vector Machines (SVMs) are early examples of discriminative models, which have been used for many years in various fields including computer vision and natural language processing.
• Over time, with the development of deep learning, discriminative models like Convolutional Neural Networks (CNNs) and Recurrent Neural Networks (RNNs) have become highly effective for a wide range of classification tasks.

Pop Culture Example(s):

• "Hotdog vs. Not a Hotdog algorithm" from HBO's Silicon Valley (S4E4)
• Image recognition capabilities of something like Iron Man alter ego Tony Stark's JARVIS (2008)

**Real-World Example(s

• Automatic speech recognition (ASR)
• Spam and abuse detection
• Facial recognition, such as Apple's Face ID and more Orwellian examples in places ranging from China to England

Further Reading:

• Discriminative Model (Wikipedia)

Generative AIDefinition: Generative AI refers to a type of artificial intelligence that is capable of generating new data samples that are similar to a given set of training data. This is achieved through algorithms that learn the underlying patterns, structures, and distributions inherent in the training data, and can generate novel data points with similar properties.

Historical Background TLDR:

• The origins of Generative AI can be traced back to the development of generative models, with early instances including probabilistic graphical models in the early 2000s.
• However, the field truly began to gain traction with the advent of Generative Adversarial Networks (GANs) b y Ian Goodfellow and his colleagues in 2014.
• Since then, various generative models like Variational Autoencoders (VAEs) and others have also gained prominence, contributing to the rapid advancement of Generative AI.

Pop Culture Example:

• The AI from the movie Her (2013)

Real-World Example(s):

• OpenAI's GPT family, alongside image models like StableDiffusion, and Midjourney.

Further Reading:

• Deepgram's Generative AI page in the AI Glossary... co-written by Jason and GPT-4.
• Large Language Model in the Deepgram AI Glossary... also co-written by Jason and GPT-4.
• The Physics Principle That Inspired Modern AI Art (Anil Ananthaswamy, for Quanta Magazine)
• Visualizing and Explaining Transformer Models From the Ground Up (Zian "Andy" Wang for the Deepgram blog, January 2023)
• Transformer Explained hub on PapersWithCode
• Transformers, Explained: Understand the Model Behind GPT-3, BERT, and T5 (Dale Markowitz on his blog, Dale on AI., May 2021)

Further Reading By TopicIn rough order of when these topics were mentioned in the episode...

Economic/Industry Impacts of AIHow Large Language Models Will Transform Science, Society, and AI (Alex Tamkin and Deep Ganguli for Stanford HAI's blog, February 2021)

The Economic Potential of Generative AI: The Next Productivity Frontier ( McKinsey & Co., June 2023)

Generative AI Could Raise Global GDP by 7% (Goldman Sachs, April 2023)

Generative AI Promises an Economic Revolution. Managing the Disruption Will Be Crucial. (Bob Fernandez for WSJ Pro Central Banking, August 2023)

The Economic Case for Generative AI and Foundation Models (Martin Casado and Sarah Wang for the Andreessen Horowitz Enterprise blog, August 2023)

Generative AI and the software development lifecycle(Birgitta Böckeler and Ryan Murray for Thoughtworks, September 2023)

How generative AI is changing the way developers work (Damian Brady for The GitHub Blog, April 2023)

The AI Business Defensibility Problem (Jay F. publishing on their Substack, The Data Stream)

Using Language Models EffectivelyThe emerging types of language models and why they matter (Kyle Wiggers for TechCrunch, April 2023)

• • Crafting AI Commands: The Art of Prompt Engineering (Nithanth Ram for the Deepgram blog, March 2023)

Prompt Engineering (Lilian Weng on her blog Lil'Log, March 2023)

Prompt Engineering Techniques: Chain-of-Thought & Tree-of-Thought (both by Brad Nikkel for the Deepgram blog)

11 Tips to Take Your ChatGPT Prompts to the Next Level (David Nield for WIRED, March 2023)

Prompt Engineering 101 (Raza Habib and Sinan Ozdemir for the Humanloop blog, December 2022)

Here There Be DragonsHallucinations

• Hallucination (artificial intelligence) (Wikipedia)
• Chatbot Hallucinations Are Poisoning Web Search (Will Knight for WIRED, October 2023)
• How data poisoning attacks corrupt machine learning models (Lucian Constantin for CSO Online)

Data Poisoning & Related

• Data Poisoning hub on PapersWithCode
• Glaze - Protecting Artists from Generative AI project from UChicago (2023)
• Self-Consuming Generative Models Go MAD (Alemohammad et al. on ArXiv, July 2023)
• What Happens When AI Eats Itself (Tife Sanusi for the Deepgram blog, August 2023)
• The AI is eating itself (Casey Newton for Platformer, June 2023)
• AI-Generated Data Can Poison Future AI Models (Rahul Rao for Scientific American, July 2023)

Intellectual Property and Fair Use

• Measuring Fair Use: The Four Factors - Copyright Overview (Rich Stim for the Stanford Copyright and Fair Use Center)
• Is the Use of Copyrighted Works to Train AI Qualified as a Fair Use (Cala Coffman for the Copyright Alliance blog, April 2023)
• Reexamining "Fair Use" in the Age of AI (Andrew Myers for Stanford HAI)
• Copyright Fair Use Regulatory Approaches in AI Content Generation (Ariel Soiffer and Aric Jain for Tech Policy Press, August 2023)
• Japan's AI Data Laws, Explained (Deeplearning.ai)
• PDF: Generative Artificial Intelligence and Copyright Law (Congressional Research Center, September 2023)

Academic and Creative "Honesty"

• How it started. New AI classifier for indicating AI-written text (Kirchner et al., January 2023)
• How it's going. OpenAI Quietly Shuts Down Its AI Detection Tool (Jason Nelson for Decrypt)
• AI Homework (Ben Thompson on Stratechery, December 2022)
• Teaching With AI (OpenAI, August 2023)

Human Costs of AI Training (Picking on OpenAI here, but RLHF and similar fine-tuning techniques are employed by many/most LLM developers)

• Cleaning Up ChatGPT Takes Heavy Toll on Human Workers (Karen Hao and Deepa Seetharaman for the Wall Street Journal)
• ‘It’s destroyed me completely’: Kenyan moderators decry toll of training of AI models (Niamh Rowe in The Guardian, August 2023)
• He Helped Train ChatGPT. It Traumatized Him. (Alex Kantrowitz in his publication Big Technology, May 2023)
• https://www.nytimes.com/2023/09/25/technology/chatgpt-rlhf-human-tutors.html

Big Questions

• Open questions for AI engineering (Simon Willison, October 2023)

Adam Smith and the Pin Factory📚 An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (via Project Gutenberg)

Division of Labor and Specialization (Econlib)

Adam Smith and the Pin Factory (John Kay on his blog, September 2019)

The Pin Factory (Adam Smith Works, a project of the Liberty Fund)

Adam Smith and Pin-making: Some Inconvenient Truths (Timothy Taylor publishing on his blog, Conversable Economist. August 2022)

Also MentionedTraining DatasetsThe Pile

ImageNet

Articles and Books(Alleged) Leaked Google memo mentioned at around 48:05 Google "We Have No Moat, And Neither Does OpenAI (SemiAnalysis publishing a whitepaper, allegedly written by a Google staff member, which suggested that open source advancements pose an existential threat to both Google and OpenAI. May 2023)

Infinite Jest (Wikipedia page on the 1996 novel by the late David Foster Wallace), mentioned around 54:30

History of Faxes vs. EmailsIn reference to 1:08:30 or thereabouts:

A fun fact which blew our mind: The earliest instances of facsimile transmission stretch back to the 1890s, and the core technology matured up through the 1940s. The first telephonic fax patent was filed in 1964 by Xerox Corporation.

The first email was sent in 1971.

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Markets Retrace Their Steps* Throughout January 2022, US stock market indices gave up nearly a year of gains. * The tech-heavy NASDAQ Composite index closed on January 28th at 13,770, down nearly 14% from highs set in November 2021. * Why? + Nearly a decade of expansionist monetary policy is likely coming to an end. + Inflation is at its highest level in the past 40 years. + US Federal Reserve chair Jerome Powell signaled intent to raise interest rates in an effort to reign in inflation. (Goldman Sachs anticipates 5 rate hikes in 2022, expecting rates to hit between 1.25-1.5% by year's end.)

What could this mean for the VC market?* Historically, higher interest rates give more conservative investors a path toward a more risk-off strategy, diverting capital from alternative asset classes like venture capital or private equity + Higher interest rates lead to a higher discount rate on future cash flows, which could depress equity value today * That said, it still feels like investor risk appetite is close to all-time highs. (Might not be quite as hot as it was in Q2-Q3 2021, but still...) * Jason's conjecture: If we're going to see a significant decline in either check size or deal volume, it's probably going to come at late-stage first. So much value is locked into late-stage unicorn companies, and with the IPO market cooling down and a dwindling pool of entities which could afford to buy these companies, we can probably expect investor trepidation to hit late-stage first.

Some Reading The Great Deflate (M.G. Siegler, on his blog 500ish) + Excerpt: "As such, I might suggest that for the 20th year in a row, we’re not going to see a tech bubble burst. Because it’s not and never was a bubble. Instead, perhaps it’s best to think of it more like a balloon. And while those too can pop, they can also deflate over time. This feels like a more apt analogy for what is happening here. The air which had inflated earnings multiples to the Moon in tech is slowly but surely coming out, returning the balloon closer to Earth." * Vision Fund CEO Says Private Markets Are ‘Overvalued’ (Sarah McBride, for Bloomberg. January 20, 2022) + Key quotes: "According to CB Insights data, venture dollars spent on startups exceeded $600 billion in 2021, more than double the previous year’s highs. Valuations have soared, too. There are currently more than 900 startups with valuations of over $1 billion, CB Insights found." + "'That gap is going to tighten over the next six months,' [Mishra] said of the discrepancy between public and private markets." * The great startup reset: Why founders should prepare for lower valuations (Charles Fitzgerald for Geekwire) * 3 views: How should founders prepare for a decline in startup valuations and investor interest? (Alex Wilhelm, Natasha Mascarenhas, and Mary Ann Azevedo for TechCrunch) * Calling the startup valuation peak (Dan Primack for Axios) * Dear VCs: If you want startup prices to come down, stop paying higher prices (Alex Wilhelm for TechCrunch*)

About The Co-Hosts* Jason D. Rowley is a researcher who has previously worked with Uzabase, Golden.com, Crunchbase News and others. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams as a partner of FYC Labs and other technology development organizations.

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Stating the Obvious about the Increase* 2021 was a crazy year for the VC market. * Top-line numbers: + CB Insights reports that venture investment reached $621 billion in 2021, up 111% from 2020 levels. + Crunchbase News’ data points in a similar direction, finding $643 billion worth of global venture investment last year, up 92% year on year. * Superbly Supergiant: CB Insights finds there were 1,556 VC rounds of $100M or more, up 147% from 2020's all-time high of 630. * Unicorn Watch: Crunchbase News pegged the rate of new unicorn creation at "more than ten each week" in 2021. CB Insights says there are now 959 unicorns as of the end of Q4 2021, up 69% from the 569 tallied at the end of Q4 2020. * Most active investors include: Tiger Global Management, SoftBank Investment Advisors, Andreessen Horowitz, and Insight Ventures

Some Reading Data show 2021 was a bonkers, record-setting year for venture capital (Alex Wilhelm and Anna Heim, for TechCrunch) * Global Venture Funding And Unicorn Creation In 2021 Shattered All Records (Gene Teare, for Crunchbase News) * Venture Capital 2021 Recap–A Record Breaking Year (Haley Bryan, for FactSet) * Six charts that show 2021's record year for US venture capital (Priyamvada Mathur for PitchBook*)

About The Co-Hosts* Jason D. Rowley is a researcher who has previously worked with Uzabase, Golden.com, Crunchbase News and others. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams as a partner of FYC Labs and other technology development organizations.

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The present and future of workThe first cases of COVID-19, the disease caused by a novel coronavirus called SARS-CoV-2, were identified near Wuhan, China as early as November 2019. A few months later, in early 2020, much of the world went into lockdown.

As the COVID-19 crisis approaches its 2nd full year, it's becoming increasingly clear that the way we work has changed, if not forever than for what's likely to be the next 5 or 10 years at least. This is especially true for knowledge workers.

Technology as an enabler* It's kind of hard to imagine what this pandemic would've been like had it happened in, say, 1989. * Tools and services like video conferencing, workplace chat, remote event/conference platforms, cloud storage, and others enable partially or fully-distributed work.

Concerns about the role of tech* "Zoom fatigue" and other phenomena are very real. * Some companies are implementing systems to surveil workers.

Flexibility as a mega-trend in knowledge work* Especially before vaccines became widely available, professionals often had to balance work, family, and personal needs all from one place: their homes. For folks with children, working adults needed to meet their professional obligations, while also serving as a teacher or supervisor of school-aged kids engaged in remote learning. These circumstances necessitated increased flexibility in work arrangements. * With more time away from the office, more workers are coming to terms with the fact that commuting to an office and spending the majority of the day there has taken up a lot of mental bandwidth.

Reading list* Is Going To The Office A Broken Way of Working? (Cal Newport in conversation with Chris Herd, in the New Yorker. September 2021) * WFH Doesn’t Have to Dilute Your Corporate Culture (Pamela Hinds and Brian Elliott for the Harvard Business Review, in February 2021) * Work can be better post-COVID-19. Here's what employers need to know (Stephen Ratcliffe and Julia Wilson for the World Economic Forum, in September 2021) * Remote Work Persisting and Trending Permanent (Lydia Saad and Ben Wigert for Gallup) * Remote Work Trends You Should Not Ignore in 2021 (Dmitry Chekalin publishing on Medium in April 2021) * Remote Work Can Be Better for Innovation Than In-Person Meetings (Gleb Tsipursky for Scientific American in October 2021)

About The Co-Hosts* Jason D. Rowley is a researcher who has previously worked with Uzabase, Golden.com, Crunchbase News and others. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Reading list* The Q3 2021 Global Venture Capital Report: Record Funding Trend Held Strong (Gené Teare for Crunchbase News) * Tiger Global And SoftBank Vision Fund Vie For Top Slot As Q3’s Biggest Startup Investor (Joanna Glasner for Crunchbase News)

Key takeawaysThe venture capital market is on fire:

• Crunchbase projects that $160 billion was invested worldwide in Q3 2021, up from $159 billion in Q2 2021.
• This makes Q3 2021 the biggest quarter ever for VC investments.
• The numbers speak for themselves, and they're staggering. As Crunchbase News points out, prior to 2021 there was no single quarter in which $100 billion or more was transacted.
• Putting this in perspective: Crunchbase projected that around $322 billion was invested in all of 2018, the previous high water mark. In other words, more venture capital has been invested in the past 6 months than was invested in the entire year of 2018.

Supergiant venture deals ($100M+) continue to dominate:

• According to Crunchbase News, supergiant deal volume in Q3 2021 was up 97% from the same period in 2020.
• Supergiant deals also accounted for the largest share of total dollar volume—64%—ever.

Let's get into some of the numbers:

• Seed stage. Crunchbase projects that $6.5 billion was invested in angel and seed-stage deals worldwide in Q3 2021, which is up 47% from the same quarter in 2020. With new, multi-hundred million dollar funds from the likes of Andreessen Horowitz, NfX, and Greylock coming online last quarter, it's likely that pre-seed and seed funding totals are going to continue to increase over the coming quarters.
• Early stage. Crunchbase projects that $49.3 billion was invested in early-stage deals in Q3 2021, which is up a whopping 104% from Q3 2020. Deal counts are projected to be up 19% from the same period last year. This is very good news, considering that a year or two ago there were concerns that seed and early-stage deal volume was declining, which could've resulted in downstream deal flow constraints in future years.
• Late stage and Technology growth. Crunchbase projects that $104.2 billion was invested in late-stage and technology growth rounds in Q3 2021, up YoY by 69%. Deal and dollar volume slipped slightly from Q2 2021 but there's nothing notable about that; dollar volume is still above $100 billion for the second quarter in a row.

Exits:

• Public market investors continue to invest in IPOs, direct listings, and SPACs. There may be some concerns about the quality of companies going public these days, however.
• M&A market keeps puttering along too.

Big numbers raise big questions* Despite the economic hardship of the ongoing COVID-19 pandemic and uncertainty about the future, public markets are near all-time highs and the VC market is experiencing its biggest-ever boom. At some point, the punch at this party will either run out or someone is going to take away the punchbowl. When will this happen? * With so much capital going into late-stage deals these days, will there be sufficient appetite by public investors or the M&A market to get liquidity for all these companies over the coming few years? * Will macroeconomic factors in China, Europe, or the United States change the market dynamic in a material way in Q4 2021? In 2022?

About The Co-Hosts* Jason D. Rowley is a researcher who has previously worked with Uzabase, Golden.com, Crunchbase News and others. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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How To Raise A Venture Capital Round?Basic Steps / OutlineSection begins at 8m25s.

1. Determine if the business you're working on is, in fact, a startup!
2. Decide how much of your company you're willing to sell in this round, vis a vis the amount of money you need to raise. This will give some rough numbers around target valuation.
3. Prepare some flavor of presentation, whether it's just a naked demo of the product or a pitch deck (usually followed up by a demo)
4. Identify investors who are a fit for your company (based on stage, industry, strategy, etc) and categorize them by the quality of fit: good fit, better fit, best fit.
5. Reach out to and pitch Good Fit investors first, to get practice and iterate on your pitch. Then move on to Better Fit and Best Fit investors.
6. As interest builds in the round, determine who you want in your round and how much room you want to allocate for them.
7. Review incoming term sheets with relevant legal counsel, co-founders, board members, and/or advisors.
8. Select offers based on the best terms (and/or value added).
9. Send wiring details. Issue shares/notes. Update your cap table.
10. Get back to work building the future!

Jason's Questions for Graham(Might not get to all of 'em but here's what I had in mind... I've got thoughts/explanations for most of these but I thought here's your time to shine!)

• What are some of the "right" reasons for a company to raise a venture capital round? Any "wrong" reasons?
  • Jason starts: 28:00
  • Graham starts: 28:18
• At different stages (Seed, Early, Late) what are some of the traits companies should look for in an investor?
  • Jason starts: 33:59
  • Graham starts: 35:06
• Understanding that every investor is different, what are some general rules of thumb entrepreneurs should keep in mind when reaching out to investors to pitch?
  • Jason starts: 45:21
  • Graham starts: 46:18
• Should startups pitch to VCs who have invested in their competitors?
  • Jason starts: 54:01
  • Graham starts: 54:43

Bonus questions:

• Should startups always seek a new investor to lead a round, or are there benefits to raising an "inside round"? What are those benefits, if any?
  • Graham starts: 1:00:15
• Can we talk a bit about general solicitation?
  • Jason starts: 1:05:10
  • Graham starts: 1:07:48

About The Co-Hosts* Jason D. Rowley is a researcher who has previously worked with Uzabase, Golden.com, Crunchbase News and others. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Some definitions"Startups" are hard to define, but many different definitions point toward similar themes:

• "A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model." – First sentence of the Wikipedia page for 'Startup company,' at least at the time of recording
• "A startup is a newly established company whose corporate form allows a clear distinction between different shareholders and the ability to receive outside financing while the goal is super rapid growth and market dominance by offering an innovative product or service." – Marius Schober, on his blog
• "A startup is an organization formed to search for a repeatable and scalable business model." – Steve Blank
• "Properly defined, a startup is the largest group of people you can convince of a plan to build a different future. A new company’s most important strength is new thinking: even more important than nimbleness, small size affords space to think." – Peter Thiel, in his book Zero To One
• "A startup is a company designed to grow fast." – Paul Graham, founder of Viaweb and Y Combinator, in September 2012
• "A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty." – Eric Reis in his book, The Lean Startup
• "A startup is a venture that is initiated by its founders around an idea or a problem with a potential for significant business opportunity and impact." – Startup Commons
• "A 'startup' is a company that is confused about: 1. What its product is, 2. Who its customers are, [and] 3. How to make money. As soon as it figures out all 3 things, it ceases being a startup and becomes a real business. Except most times, that doesn't happen." – Dave McClure, founder of 500 Startups and Practical VC, on Quora in 2013

Some differentiators between startups and small businessesIt just so happens that one of your Fully Vested co-hosts has done some writing about this. From the Startup Fundamentals cluster on Golden...

Startups tend to share several characteristics which serve to distinguish them from small businesses:

• Innovation. Startup companies are typically built around a new idea, method, or product. While the products and services a startup may offer are enabled by technology, not all startups are rooted in unique, defensible intellectual property. They may offer a new type of business or service model (ex. app-based ride-hailing services vs. the traditional taxi industry) or a unique design or interaction model which sets them apart from established competitors.
• Risk. Startup companies often operate at the edge of a technical field or market for their product or service. Given their small size, limited resources, and often unproven demand for their commercial offerings, startup companies experience high rates of business failure. However, with high risk can come high reward.
• Scale. Almost by definition, startup companies start small. At launch, they may serve a small geographic area or a specific customer segment, sometimes referred to as a "beachhead market." However, from a management and economic standpoint, startups are designed to scale up beyond their initial markets and serve many, many customers. For startups, economic viability is often predicated on very large scale.
• Speed. Small team sizes and relatively flat organizational structures let startup teams make decisions and move quickly to seize upon a market opportunity. Limited available resources (see runway) and competitive pressure makes speed a necessity.

Some resources* What The Hell Is A Startup Anyway? (Alex Wilhelm for TechCrunch in December 2014) * What’s the Difference Between a Small Business Venture and a Startup?(Candice Landau, for Bplans.com)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Overview* Cryptocurrency markets have seen their biggest bull run yet. After a pretty docile couple years since the last bubble in late 2017. * Crypto prices began picking up in Q4 2020 as more institutional interest poured into the space. Open interest in Bitcoin (BTC) futures on the CME went from roughly $400M in October 2020 to $1.6B in January 2021. Crypto exchanges saw a similar run-up in volume. * Meanwhile, Ethereum (ETH) also began to see some price traction starting in mid-Q3 2020. Ethereum, a blockchain platform which enables decentralized applications, also started to firm up plans for Ethereum 2.0, which would take the platform away from Proof of Work and toward Proof of Stake * At time of recording, both Bitcoin and Ethereum hit all-time highs in Q2 2021. Ethereum hit nearly $4,400 per coin on Coinbase in mid-May and Bitcoin hit roughly $65,000 in mid April.

Other weird side-tangents Elon Musk and Tesla's will-they won't-they stance on Bitcoin + February 8, 2021. Tesla buys $1.5 billion in bitcoin, plans to accept it as payment (Steve Kovach for CNBC) + February 9, 2021. A Brief History of Elon Musk's Devotion to the Crypto Cause (Kristine Servando for Bloomberg) + May 1, 2021. Elon Musk’s History in Crypto: the Good, the Bad and the Doge (Andrey Kartsev for CoinMarketCap) + May 13, 2021. As much as $365 billion wiped off cryptocurrency market after Tesla stops car purchases with Bitcoin (Arjun Kharpal for CNBC) + May 23, 2021. Elon Musk Has Become Bitcoin's Biggest Influencer, Like It or Not (Akane Otani for the Wall Street Journal ) * Environmental impacts of proof-of-work + Proof of Work (PoW) definition on Investopedia.com + Cambridge Bitcoin Electricity Consumption Index is a project from Cambridge University tracking estimated electricity consumption of the Bitcoin mining network. + April 2021. Why Bitcoin is Bad For The Environment (Elizabeth Kolbert for The New Yorker) + September 2018. Why Bitcoin Is Not an Environmental Catastrophe(Diego Zuluaga for The Cato Institute) + April 2021. Policy assessments for the carbon emission flows and sustainability of Bitcoin blockchain operation in China * Currency controls and banking restrictions imposed by non-U.S. financial regulators (e.g. China) + August 2020. Cryptocurrencies help Chinese evade capital and currency controls in moving billions overseas (Karen Yeung for the South China Morning Post) + March 1, 2021. China's furtive bitcoin trade heats up again, worrying regulators (Samuel Shen and Andrew Galbraith for Reuters) + May 18, 2021. China bans financial, payment institutions from cryptocurrency business (Reuters newswire) + May 19, 2021. Bitcoin's Obstacles Mount amid China Cryptocurrency Warning (Vildana Hajric and Joanna Ossinger for Bloomberg Quint*)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Major trendsEach one of these could probably get its own episode of Fully Vested, but it's important to mention them briefly here. It's hard to believe all these mechanics were at work all in the first months of 2021.

• New POTUS.
• U.S. COVID-19 vaccination campaign kicks off in earnest. Variants of Concern spread worldwide. All eyes are on India and Brazil.
• Cryptocurrency market surges. NFTs gain (temporary) traction.
• Pre-merger SPAC valuations may have peaked (temporarily?) as sidelined cash goes in search of work amid ZIRP environment.
• Venture capital funding continues its multi-year surge in total dollar volume.
• Major U.S. stock indices ended the quarter at or near all-time highs.

Some highlights of VC funding dataGlobally* Crunchbase reports that Q1 2021 hit a high water mark for total venture capital dollar volume. Crunchbase's reported totals for the quarter was $125 billion, up 50% QoQ and up a massive 94% compared to Q1 2020 (which, keep in mind, was affected by the emerging coronavirus pandemic) * Crunchbase reports that angel and seed-stage deal counts continued their decline, falling 19% from the prior quarter. Seed-stage dollar volume remains largely flat though. This might be attributable to reporting delays. * Crunchbase reports that early-stage activity (defined as Series A and Series B, with a subset of other round types based on deal size) is up markedly. With reported dollar volume at $35.5B globally, Q1 2021 saw a 45% QoQ increase and a 63% jump over Q1 of 2020. Deal volume is also up QoQ but down relative to the same time last year. Of course, this is also affected by data reporting lags. * Late-stage (Series C and later) and technology growth (PE rounds raised by privately-held previously venture-backed startups) activity is where the world saw the most growth. With $85.6B in dollar volume reported across 751 deals, late-stage dealmaking drove global totals higher. Dollar volume grew 56% QoQ and a massive 122% relative to Q1 of 2020

U.S. & Canada* North American seed and angel deal and dollar volume are down relative to last quarter. Dollar volume is reported to be slightly up from the same quarter last year. * Early-stage deal and dollar volume are also up relative to last quarter, as well as last year. Similar to global figures, it's clear that average deal size at this stage is up markedly. * Late-stage and tech growth deals in North America reflect global trends: Crunchbase reports that Q1 2021 dollar volume clocks in at $51B vs $29.8B in Q4 2020 and vs $21.3B in Q1 2020.

Links to various data companies' Q1 '21 VC reports Crunchbase News' Q1 '21 Global VC report (by Gene Teare) + Disclosure: Jason was previously on the Crunchbase News team and has a minor stake in Crunchbase via exercise of stock options granted to him as an employee of the company.* * KPMG's Venture Pulse reports for Q1 2021 * PitchBook-NVCA Venture Monitor + "Three-quarters of all VC investment dollars in the US were deployed in late-stage deals, the highest portion since 2010." * PwC & CB Insights' Venture Capital Funding Headline Report Q1 2021

Links to Q1 2021 VC market commentary Inside the US’ epic first-quarter venture capital results (Alex Wilhelm and Anna Helm for TechCrunch) * [U.S.] Venture funding soared to record $64 billion in Q1 (Ari Levi covering findings from Ernst & Young, for CNBC*)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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DisclaimersNeither Jason Rowley nor Graham Peck are financial advisors or tax professionals. We're just a couple of friends talking about our opinions of money and tech stuff on the internet.

Fully Vested content is primarily for entertainment purposes only; although we do try hard to stick to the facts according to the best of our knowledge at the time of recording, this content is not to be taken as legal or investment advice. Consult your own advisors and do your own research before deciding to make investments in private-market companies.

Equity CrowdfundingNew companies have several options for funding their startup and scale-out. They may solely rely on revenue from customers and clients, may be funded through the personal savings of their founder(s), may sell securities to outside investors, or some combination thereof.

Equity crowdfunding is a relatively new option for raising capital. Prior to June 2015, equity crowdfunding in the U.S. was limited to accredited investors participating in Regulation D offerings brokered through registered online portals like AngelList, CircleUp, SeedInvest, and others. These offerings were limited to accredited investors only.

Title IV of the JOBS Act of 2012 became effective in June 2015, which allowed unaccredited investors to invest in Regulation A+ offerings (with some minor restrictions depending on the terms of the deal).

Title III of the JOBS Act went into effect in May 2016, which allows companies to sell shares to unaccredited investors through a registered online portal. Under these Regulation CF offerings, unaccredited investors are limited in the amount of money they can invest annually, and issuers (companies) are required to disclose significantly more information about their businesses than they would otherwise be required to under a traditional private placement offering.

2020 changes coming into effect for Reg CFIn March 2020, the Securities and Exchange Commission released a proposed set of changes to various regulations governing exempt securities offerings. Many of those rule changes were passed in November 2020 and went into effect in early 2021.

A vastly simplified list of changes includes:

• Raising the offering limit in Reg CF offerings from $1.07M to $5M
• Removing annual investment limits for accredited investors
• Changing the investment limits for non-accredited investors by taking the "greater" rather than the "lesser" of annual income or net worth when calculating the investment limits. For most non-accredited investors, this rule change results in significantly increased limits.

Further reading* Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers (Needs updating to new limits, as of time of publishing, but it's still a solid resource on SEC.gov) * SEC's page on exempt offerings * SEC's overview of Exempt Securities Offerings

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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ZIRP Has Been Eating The World* ZIRP explains the world

More about ZIRP Market Edges Toward Euphoria, Despite Pandemic’s Toll (Matt Phillips for The New York Times) * How Do Interest Rates Affect the Stock Market? (Mary Hall for Investopedia) * Zero interest-rate policy (Wikipedia*) * What Explains the Stock Market’s Reaction to Federal Reserve Policy? (Ben S. Bernanke and Kenneth N. Kuttner in a paper published by the U.S. Federal Reserve in March 2004)

ZIRP as possible explanatory variable for some recent trendsIf ZIRP results in both the cost of money being low, and sources of risk-free returns in excess of inflation to dry up, then it follows that the later stages of an economic cycle under ZIRP may be characterized by speculative surges in certain markets and assets.

Possible recent events spurred on by ZIRP:

• Dislocation in the housing market. Rents are down but home prices are up significantly. Derek Thompson's March 5, 2021 article for The Atlantic covers it well.
• The recent run-up of Bitcoin may be tied to inflation fears brought on by a combination of ZIRP and making the money printer go BRRRRR. What's arguably a speculative bubble in non-fungible tokens is also somewhat exacerbated by so much risk capital coming off the sidelines.
• The proliferation of (relatively) affordable margin trading for retail investors has likely accelerated the meme stock trend.

This said, much like how no individual severe weather event can be tied to global climate change, few if any of these speculative rushes can be directly attributed to ZIRP. But just like how a warming planet is more likely to generate severe weather events with greater frequency, the froth and churn of markets grows choppier under ZIRP.

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Topic: Valuations of Public Markets and the Recent Short Squeeze of Gamestop and OthersA note from your hostsNeither of us are registered financial professionals and all information discussed on Fully Vested is the personal opinions and interpretations of the hosts, and should not be taken as financial advice.

We as hosts are speaking from the perspective gained from information that is publicly available at the time of recording.

What is going on with GameStop?TLDR:

• WallStreetBets (WSB) is a group on community platform site Reddit. WSB is an irreverent, often profane community of folks sharing stock tips, self-styled due diligence analysis, and screenshots of their brokerage accounts.
• Users of WSB noticed that shares in GameStop – a brick-and-mortar video game retailer which found itself on the wrong end of several trends (digitization of game purchasing, decline of physical retail, pandemic stress, etc.) – were sold short at a ratio of 140% of the float.
• Users started buying up positions in GameStop, driving up the price over 8,100 percent over a 1-year period (based on the closing price of $325.00 on January 29, 2020), causing a partial short squeeze.
• Meanwhile, several online brokerages – most notably Robinhood – limited trading activity on GameStop and several other stocks which the WSB community have been buying. Some assert a conspiracy between Robinhood and its order clearinghouse/counterparties drove the limits (which included temporarily blocking buy orders while allowing sell orders to go through, before simply placing limits on the number of shares which can be purchased). Robinhood asserts that it was simply trying to met requirements set by its clearinghouse and financial regulators.
• The fallout so far:
  • On February 1, Robinhood announced it had raised an additional $3.4B in capital led by late-stage finch firm Ribbit Capital, with participation from existing investors including ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA. That figure includes $1B in equity financing announced on January 29th. On January 28th, Bloomberg reported that Robinhood had drawn down "at least several hundred million dollars" from credit lines to meet liquidity requirements.
  • Melvin Capital, one of the largest short sellers in GameStop, lost 53% in January, and took in additional capital from Citadel and other investors.

Some good links: GameStop Short Squeeze (Wikipedia) * Game. Stop. (Ranjan Roy in The Margins) * Reddit, the Elites and the Dream of GameStop ‘To the Moon’ (Noah Kulwin in the Opinion section of the New York Times on Jan. 28, 2021) * Bots hyped up GameStop on major social media platforms, analysis finds(Michelle Price covering a report from PiiQ Media for Reuters on February 26, 2020) * GameStop’s New Mission: Level Up to Its Lofty Share Price (Sarah E. Needleman and Nina Trentmann for the Wall Street Journal*)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Topic: Pro Rata RightsGeneral guides* How Pro Rata Works In Venture Capital Deals (Jason D. Rowley for Crunchbase News, September 2017) * Pro rata rights (Holloway Guides) * What all Entrepreneurs Need to Know About Prorata Rights (Mark Suster on his blog, Both Sides Of The Table, in October 2014) * The Pro-Rata Participation Right (Fred Wilson on AVC, March 2014) * VC Lingo: What are pro rata investment rights? (Accelerator group SOSV on its blog, August 2018)

Other Posts And Articles About Pro Rata* Why Super Pro-rata Rights are Not a Good Deal for Entrepreneurs (Mark Suster on Both Sides Of The Table, September 2011) * Small Funds and the Pro Rata Right (Ken Wallace writing on the blog of Industry Ventures, November 2014)

What Is Pro Rata?* Pro rata rights typically protect investors when things go well for a company; price-based antidilution provisions protect investors when things go poorly. Conceptually, they're related though: both deal terms help shareholders at least maintain the % of a company they own as valuations change from round to round. * Pro rata rights are a form of anti-dilution protection which grants investors the right but not the obligation to invest additional capital in subsequent rounds such that an investor can maintain their proportional stake of the company's shares as the company raises more money * Pro rata rights are a typical term for investors to ask for in the venture deal-making process. However, they're a negotiated term; startup founders are able to deny an investor's request for pro rata rights, but this may preclude an investor from making a commitment. (Many investors' financial models and, sometimes, their LP agreements, pre-suppose pro rata rights after the first check.) * Pro rata rights also serve to protect investors from downside events like equity cramdowns, wherein a company may issue a vast number of shares to its employees and other investors, thus diluting the equity stake of a particular investor or class of investors. * Percentage-based pro rata rights are most common, but some investors may push for dollar-for-dollar or fixed-sum pro rata rights, which may result in super pro rata rights, granting an investor the right to increase their relative stake in a company in subsequent rounds.

Key Concepts* Investment required to maintain pro rata stake = percent of the stake you want to maintain * number of new shares being issued * share price at new round

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Companies Which Raised Money During Covid TimesRun The WorldBased in Mountain View, California, Run The World is a startup founded in July 2019 which builds software tools to help conference organizers produce virtual conferences. It provides event templates, streaming video, real-time chat and other features which help structure interactions between conference speakers and attendees, as well as community features to help attendees network with one another.

At time of recording, the company has raised $14.8 million to date. Run The World closed $10.8 million in a Series A funding round co-led by Founders Fund and Andreessen Horowitz.

Articles:

• Connecting the next Nobel Prize Winner and Billboard artist, one idea at a time (Run The World's funding announcement, from the company's Substack-hosted blog)
• With High-Profile And Celebrity Backers, Run The World Closes $11M Series A For Its Event Platform (Christine Hall for Crunchbase News)
• Virtual events startup Run The World just nabbed $10.8 million from a16z and Founders Fund (Connie Loizos for TechCrunch)
• Investing in Run The World (Andreessen Horowitz partner Connie Chan on the a16z blog)

TockTock is a Chicago-based company behind restaurant and winery booking software of the same name. The company's business user base consists of nearly 3,000 restaurants, wineries, and pop-ups across 28 countries, as of February 2020, according to the company. Many of those businesses were forced to close due to the public health response to COVID-19, the disease caused by SARS-CoV-2. In response, Tock built out Tock To Go, which aims to help restaurants with pickup and delivery booking. Tock has onboarded 1,000 businesses in April onto the new platform. Tock's take rate is 3% as opposed to the 25% or more charged by bigger platform providers like Uber Eats and DoorDash. It looks like mostly high-end restaurants use the platform.

Tock raised $10 million in an "oversubscribed" funding round led by Valor Siren Ventures with participation from prior investor Origin Ventures. The round was announced on May 12.

Articles:

• Tock Announces $10M in Funding (Press release)
• Tock raises $10 million to help fancy restaurants do takeout (Ari Levy for CNBC)

QuillBotFounded by alumni (and one dropout) from the University of Illinois system, Chicago-based QuillBot is a company which uses natural language processing technology to summarize and paraphrase text. It identifies and suggests synonyms to replace words and phrases contained within text. The company offers its service through its website and offers extensions for Microsoft Word, Google Docs, and Google's Chrome web browser. QuillBot's service is free to try with limited functionality, but the company sells premium subscriptions for as little as $80 per year, depending on billing frequency.

In late April, QuillBot announced that it raised $4.25 million in a seed funding round co-led by Sierra Ventures and GSV Ventures, which saw participation from Service Provider Capital.

Articles:

• Announcing QuillBot’s $4.25M Seed Round (QuillBot's official announcement)
• QuillBot Raises $4M to Help You Become a Better Writer Using AI (Gordon Gottsegen for Built In Chicago)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Cashdrop's $2.7M SeedCASHDROP, a Chicago-based contactless payments and mobile-first e-commerce platform company founded by Mexican immigrant Ruben Flores-Martinez, announced that it raised $2.7 million in seed funding back in early August. Harlem Capital led the deal, which saw participation from Founder Collective, Long Journey Ventures, and M25. Individual investors in the round include Cyan Banister (now a partner at Long Journey Ventures), Adobe chief product officer Scott Belsky, Fullscreen founder George Strompolos, and YouTube pioneer Michelle Phan.

CASHDROP's unique differentiators are its economic model and software platform. The company says new merchants can spin up an online storefront for their products and services in as little as 15 minutes. CASHDROP includes inventory management and reporting features, and may expand to more service business verticals in the future. Its biggest point of leverage is its economic model. Rather than taking a commission/marketplace fee from businesses on the platform, CASHDROP charges the customer a 5% convenience fee, leaving the platform free to use for businesses and relatively inexpensive for consumers. The company has seen significant user growth during COVID, mostly from restaurants seeking to sidestep high marketplace fees imposed by incumbent food ordering platforms like DoorDash, GrubHub, and Uber Eats.

Read more about the deal:

• Mobile-First Commerce Platform CASHDROP Announces $2.7M Seed Round to Empower Small Business Owners (Press release on PR Newswire)
• Start-Ups Braced for the Worst. The Worst Never Came. (Erin Griffith in The New York Times)
• A Mobile Storefront In Under 15 Minutes: Cashdrop’s Platform Secures $2.7M In Seed Funding (Christine Hall for Crunchbase News)
• Cashdrop Raises $2.7M to Grow Its E-Commerce App (Nona Tepper for BuiltInChicago)
• Mobile-First Commerce Platform CASHDROP Announces $2.7M Seed Round to Empower Small Business Owners (Jim Dallke for BizJournals)

(Disclosure: Jason and Graham are friends with members of the CASHDROP team. Jason served as a compensated advisor and service provider to the company during its funding round announcement, and Graham has financial ties to one of the firms which invested in the round.)

Trove's $16M Series AOn August 25th, Bay Area-based startup Trove announced it had raised $16 million in a Series A round, with media reporting it was raised at a $75 million post-money valuation. Andreessen Horowitz led the round. The company was part of Y Combinator's S20 batch and successfully raised their round pre-Demo Day.

Trove is in the business of helping startups communicate the potential value of equity (usually offered as options of some sort) issued as part of typical employee compensation packages to prospective recruits and current members of the team. This, in theory, gives employees greater transparency into the current and potential value of the shares they're issued, while also helping employers allocate equity more wisely. Simultaneously, Trove grants access to anonymized market performance data to help employers understand what other industry participants are offering their prospective employees.

Read more about the deal:

• YC’s most anticipated startup raised $16M from a16z before Demo Day(Natasha Mascarenhas publishing in TechCrunch)

Barn2Door's $6M Series A2On August 26th, Seattle area online marketplace startup Barn2Door raised $6 million in a new round of funding led by Bullpen Capital. Participating investors in the deal include Sugar Mountain, Raine Ventures, Quiet Capital, Lead Edge Capital, and Global Founders Capital. Crunchbase lists the round as a Series A, though the round type was not named explicitly in media coverage of the transaction. Barn2Door raised $3.4 million for the first tranche of its Series A back in October 2019; that particular round was led by Lead Edge Capital out of New York. According to Golden, the company has raised nearly $12.5 million across its publicly-disclosed funding rounds.

Barn2Door operates a vertical-specific marketplace platform aimed at helping farmers sell their produce, proteins, and other agricultural products directly to consumers via e-commerce. The company's platform works for different types of farms (dairy, produce, animal proteins, flowers, etc.) and service models ranging from subscription community-supported agriculture (CSA) boxes, to on-farm pickup, local delivery, and even shipping, depending on the model of the farm's direct-to-customer business. Barn2Door, founded in March 2015, is part of a growing trend of companies which offer more direct connections between farmers and end consumers. The growing D2C side of some farm businesses helps the farmer generate higher margin on agricultural products.

Read more about the deal:

• Barn2Door raises $6M as demand rises for its software used by farmers to sell food online (Taylor Soper for Seattle tech-focused publication GeekWire)
• Barn2Door Raises $6M for Platform that Connects Farms and Consumers(Chris Albrecht for food tech-focused online news outlet The Spoon)

UndockBased in New York City, Undock is a company building software which helps people who schedule lots of meetings (which is probably most of us these days) schedule those meetings right from their email inbox. The interaction model is neat: Using a little NLP magic, Undock's plugin detects when a user is proposing times for a meeting; based on the user's availability and preferred times to meet, Undock will drop down some times which work, and the proposed time is entered as a link in the outgoing email. Recipients can confirm the time by clicking the link in the email. Undock detects if a message is going to another Undock user, and is able to suggest times which are mutually agreeable for all parties. On August 24, the company announced it raised $1.6 million in a seed round led by Lightship Capital. Participating investors in the deal include Bessemer Venture Partners, Alumni Ventures Group, Active Capital, Lerer Hippeau, as well as individual investors Arlan Hamilton (founding partner of Backstage Capital) and veteran startup ops exec Sarah Imbach.

Read more about the deal:

• Lightship Capital Leads $1.6 Million Financing Round for Undock (Lightship Capital)
• Lightship Capital Leads $1.6M Financing Round For AI-Enabled Productivity Platform, Undock (Shanique Yates for AfroTech.com)
• Undock Raises $1.6 Million for Its Software to Make Virtual Meetings Less Terrible (Sherrell Dorsey for The Plug)
• Startups To Watch: CH4 Global, Mustard, Undock, LaunchNotes (Christine Hall for Crunchbase News)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Links about VC scout programsGeneral stuff about deal sourcing* LP Corner: How VCs Source Deals * OpenLP: When Money Isn’t Enough: How to Distinguish Yourself as a VC in a Crowded Market

What Scout Programs Are* Scout Programmes (#7 edition of The Rookie VC newsletter, published on Substack by Ulysse Laroche) + Super good * Established VCs turn to "super angels" to grow their network (Kia Kokalitcheva for Axios) * Founder Investors & Scout Programs (Elad Gil on his blog) * A view from the other side: “VCs are exploiting underrepresented people to solve their diversity problems” (Anisah Osman Britton in Sifted.eu)

Examples of Scout Programs At Established Firms* Sequoia Capital + Sarah Lacy's 2012 article about Sequoia's scouting program is super good. It explains the strategy of spinning up LLCs for scouts. + Connie Loizos's 2019 article for TC is also very good. * Canaan Partners * Village Global * A16Z * Upfront Ventures * Lightspeed Venture Partners (This year focusing on bringing together people from Black, Latinx, Indigenous and Pacific Islander communities) * Accel * Founders Fund * Index Ventures * Spark Capital * First Round Capital

VC Scout Programs Today* Indie.vc has a wide scouting program. The firm also launched what it calls a Cub Scouting program. * Spearhead.co basically gives founders a $1M "search fund" they deploy into startups of their choosing. * Cleo Capital, launched by former Sequoia scout Sarah Kunst, has a scout program primarily comprised of women in business

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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NotesHey App Dispute with Apple Apple Doubles Down on Its Right to Profit from Other Businesses (Sarah Perez for TechCrunch) * Why Apple's App Store is under fire (Kif Leswing for CNBC*) * Hey's Own Page Tracking the Various Coverage of the Story

Segway Ends Production Segway, the most hyped invention since the Macintosh, ends production (Mark Wilson for Fast Company*)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Notes: Quarterly VC Data Q2 2020 Global Venture Report: Funding Through The Pandemic (Gené Teare for Crunchbase) * Also for Reference Pandemic Survey Finds Founders Less Worried (Gené Teare for Crunchbase*)

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Notes: Related to the deaths of George Floyd, Breonna Taylor, and Ahmaud ArberyWhat Happened* For roughly nine minutes on Memorial Day 2020, white police officer Derek Chauvin knelt on George Floyd's neck in Minneapolis. Floyd died on the scene. His death was ruled a homicide by the medical examiner. A bystander's cell phone video went viral on Facebook and other social media sites, and catalyzed the protests we're seeing now. Floyd was 46 and left behind 5 children. Chauvin and attending officers have been charged with second degree murder and other charges. * Just after midnight on March 13, 2020, Louisville, KY police officers used a battering ram in a no-knock raid on Breonna Taylor's apartment. This was in conjunction with an investigation of two men suspected to have been selling drugs out of a house 10 miles from Taylor's apartment. Police shot Taylor eight times. She died in her home at 26. * Father and son Gregory and Travis McMichael, both white, allegedly participated in the killing of 25 year-old Ahmaud Arbery, a black man, while Arbery was jogging through Glynn County, Georgia. Travis fatally shot Arbery with a shotgun and rammed Arbery with his truck, shouting racial epithets. A man named William Bryan Jr. recorded the killing on cell phone video. In a plot twist, it was revealed this past week that former law enforcement officer Gregory McMichael himself was the person who leaked the video of the murder. Gregory, Travis, and accomplice

Our Response* Black Lives Matter. This is the official stance of Fully Vested. * If you, your company, or your investment firm has the means, consider donating to one of the many organizations supporting racial justice and police and prison reform. To support protesters and others who are kept in jail before trial, donate to a bail fund. * However your company can, find ways to support employees who participate in protests and the broader movement for racial justice and to end police brutality. This can and should include matching employee donations, if your company has the means. * It's not merely enough to just not be racist these days; one must be actively anti-racist. People will not feel welcome at your table if you tell them to bring their own chair; if you've already got your seat, make space and invite folks in.

Startup & Venture Capital Community's ResponseSince Fully Vested is primarily a show about VC and startups, we'll focus on the response from that community:

• What black VCs are saying
  • Hat-tip to former Crunchbase News colleague Sophia Kunthara for collating this.
  • Precursor Ventures, an all-black VC firm. "The Precursor team is grieving the loss of our brothers and sister to police violence. We are an all black team. We invest in black founders. We believe that their lives and our lives matter. We remain steadfast in our efforts to create a more just venture ecosystem. We stand alongside those who work to combat the effects that institutional racism and police brutality have on communities of color."
    • Disclosure: Precursor Ventures backed a company run by friends of Graham and Jason. Our mention of the statement from Precursor Ventures founding partner Charles Hudson was not motivated by those associations.
  • Harlem Capital, an all-black VC firm. "While the protests are striking, we encourage people to focus on the root cause of these events, which are racism, injustice, and oppression. Words can be meaningful, but actions speak louder. Actions like texting a black colleague, educating yourself and your network, speaking up publicly, voting in elections and voting with your dollars are the start of meaningful change. As a firm with a mission focused on increasing access for minorities and women, we continue to focus on economic empowerment and using our energy to make the world a more equitable place."
• VC firms commit to support black founders & promote diversity.
  • SoftBank raised $100M for a fund earmarked for companies founded and led by people of color. While this is a nice gesture, SoftBank has invested tens of billions of dollars in startups founded by white guys, many of which have a history of discrimination or lack of inclusivity.
  • Andreessen Horowitz announced its Talent x Opportunity (TxO) fund, which consists of $2.2 million donated by A16Z partners. The donor-advised fund's returns will be reinvested in the fund, making more capital available to underserved founders over time. Also worth noting, A16Z raised its Cultural Leadership Fund back in 2019, which is aimed at advancing more African Americans into technology.
    • Disclosure: A16Z is an investor in Jason's employer and a A16Z partner sits on the company's board. Our mention of these efforts is unconnected with A16Z's association with Jason's employer.

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open-source community, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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NotesFacebook Buys Giphy On Friday, Axios broke the news that Facebook was going to acquire popular Gif-sharing and search platform Giphy, reportedly for $400 million. Giphy is going to retain its branding and will have its functionality wrapped into Instagram. * Giphy had raised just north of $150 million in equity funding. Its last reported private market valuation was $600 million, which Giphy earned in its $72 million Series D round from October 31, 2016. Giphy's later-stage investors may have taken a haircut on their shares, and the liquidation preference stack of Giphy is not public knowledge. In other words, it's likely that common shareholders walked away with something, but it's unclear how much. * There's speculation that Facebook's decision was motivated by the company's insatiable hunger for user data, as folks like Owen Williams of OneZero and Fabrizio Bulleri of Reclaim The Net* point out. * This is reminiscent of Facebook's acquisition of VPN service Onavo, which the company reportedly used as a way to track up-and-coming competitors. Facebook shut down Onavo, which TechCrunch characterized as "its spyware VPN app," in February 2019. * It's unclear the extent to which Giphy will be able to access user data on the individual level. Others have pointed out that many large services which include Giphy integrations serve content and requests through proxies. This may not let Facebook know what individual users are searching for, but may provide aggregate activity insights to Facebook over time.

Andreessen Horowitz backs the hottest new social app on the block Listeners who don't spend lots of time on VC Twitter may not have heard of Clubhouse, a "spontaneous" voice-driven social networking application developed by successful founder Paul Davidson. * In April 2020, for TechCrunch, Josh Constine wrote about Clubhouse and a wash of related, new social networking apps that have recently sprung up. It's interesting that there's so much activity in the social networking space all of a sudden, and that the platforms are incredibly diverse in their interaction models. * Alex Konrad reported in Forbes* that Andreessen Horowitz led a seed round in Clubhouse which valued the startup at $100 million. The deal involved $10 million in primary equity backing, plus $2 million in a secondary sale of company shares, presumably netting founder Paul Davidson a tidy little payday. The application had less than 5,000 users at the time of reporting.

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open source community,and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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NotesLayoffsAccording to Layoffs.fyi as of 2:18 PM on May 13th, 408 startups have laid off roughly 46,000 people since March 11.

• Uber laid off 3700 employees via a 3-minute zoom call and were given no notice prior to their dismissal. That represents about 14% of the company. The Information reported at the end of April that Uber was contemplating laying off 20% of its workforce. More layoffs may be in the works.
• Lyft laid off 17 percent off its staff, or 982 employees, at the end of April. The company also furloughed 288 other employees.
• Airbnb laid off 1,900 people, some 25 percent of the company, in early May. The company did create a talent directory to help its laid-off employees find new jobs.

Changing business models and climate* Uber is in the middle of some big-money moves. The company approached Chicago-based GrubHub in February about an acquisition offer, and Uber led a funding round in Lime. Uber laid off its staff in the JUMP Bikes and scooter division, but through the Lime deal, Uber retains the right to acquire Lime in the future. * Lyft meanwhile plans a $650 million debt offering, which can be convertible to cash or stock at the time of maturity in 2025.

Both Uber and Lyft are facing regulatory pressure around their classification of workers as independent contractors. In states with ABC-test based employee classification rules, Uber and Lyft may be compelled to provide benefits to their workers.

• Airbnb raised $1 billion in debt and equity from Silver Lake and Sixth Street Partners on April 6, 2020. Airbnb previously stated it's intent was to go public in 2020, but the virus may delay that.
• All the while, frustrated with company policy and mass cancellations, many Airbnb hosts are building their own booking websites.

About The Co-Hosts* Jason D. Rowley is a researcher and writer, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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NotesA couple of books mentioned:

• Technological Revolutions and Financial Capital by Carlota Perez
• VC: an American History by Tom Nicholas

Articles we discussed:

• Venture capital investors should harpoon more whales (John Thornhill in the Financial Times on February 3, 2020)
• Debt is Coming (Alex Danco on his blog at alexdanco.com)

About The Co-Hosts* Jason D. Rowley is a researcher and writer, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Notes* Jason interviews AikoAI, r2c, and SLAppForge * Mary Meeker, on Wikipedia * The "Our New World" Report, on BondCap.com * "Bull Trap" on Investopedia * Why April was Wall Street’s best month in decades – despite dismal mainstreet news by Kim Kiavanto in The Conversation * Control of the coronavirus gives China the world’s best-performing stockmarket in The Economist

About The Co-Hosts* Jason D. Rowley is a researcher and writer at Golden.com. He volunteers with startup outreach for the open source community,and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Links Distributed Bio * Payroll Protection Program fact sheet * Small-Business Rescue Shows Not All States Are Created Equal (Bloomberg) * 8 Startups that have raised since the COVID-19 lockdown(BusinessLeader.co.uk) * CB Insights Q1 2020 Report * The Q1 2020 Globa VC Report: Funding Sloly Impacted by Coronavirus (Gené Teare and Joana Glasner for Crunchbase*)

About The Co-Hosts* Jason D. Rowley is a researcher and writer, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Links* Out Of Office: 65+ Startups Helping You Work From Home (CB Insights) * COVID-19 proves we need to continue upgrading America’s broadband infrastructure (Blair Levin for the Brookings Institution) * Keeping our network infrastructure strong amid COVID-19 (Urs Hölzle, Senior Vice President, Technical Infrastructure for Google, publishing to Blog.Google)

About The Co-Hosts* Jason D. Rowley is a researcher and writer, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Links Affiliation in the Context of SBA Loans Guidance for Venture Capital Investors(NVCA, as of March 27, 2020) * New guidance on SBA loans means most startups are still excluded from $349 billion stimulus (Jonathan Shieber for TechCrunch*) * VC Backed Startups and PPP: Do You Really Need It? (USV general partner Albert Wenger on his blog, Continuations)

About The Co-Hosts* Jason D. Rowley is a researcher and writer, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Links About COVID-19 Golden.com's COVID-19 knowledge cluster has a lot of information about the disease, including studies on its treatment, lists of equipment manufacturers, and other related topics * Johns Hopkins's Coronavirus Dashboard * Dr. John Campbell is a UK-based health educator and nurse (now retired) and has a Youtube channel where he gives daily updates on SARS-CoV-2's spread. More information about him can be found on his website. * CovidActNow.org shows outcomes of various approaches to SARS-CoV-2 response on a state-by-state basis. For example, at time of publishing, the site's model suggests that a worst-case scenario for a Shelter In Place policy for 3 months would still result in 192,000 deaths in Illinois alone. * Understanding the Economic Shock of Coronavirus (Philipp Carlsson-Szlezak , Martin Reeves and Paul Swartz for the Harvard Business Review) * Captured Western Governments Are Failing the Coronavirus Test (Luigi Zingales for ProMarket, a blog of the Stigler Center at the University of Chicago) – "Even the simplest cost-benefit analysis suggests that the US government should be willing to spend up to $65 trillion and lock down the country to avoid extra deaths."* * Coronavirus: Why You Must Act Now(Shout out to Tomas Pueyo for the great work here!) * Coronavirus: The Hammer and the Dance (Same as above) * The Sober Math Everyone Must Understand about the Pandemic (Jason S Warner) * Visualizing the History of Pandemics (Nicholas LePan for Visual Capitalist)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Big Funds* Section starts at 10m0s * Here's the Form D rss feed Jason follows: Raw feed from the SEC * Ribbit Capital Targets $420M For Its Sixth Flagship Venture Fund + Ribbit Capital VI, L.P. (SEC filing) + Bullfrog Capital, L.P (SEC filing) * 8VC Aims To Raise $640M For Third Flagship Fund, Filings Show + 8VC Fund III, L.P. * For Startups, VC Funding Is Always In Season

SoftBank Section starts at 39m0s * SoftBank wants its on-demand portfolio to stop losing so much money (Alex Wilhelm for TechCrunch) * Update since recording: Doordash has filed to go public * SoftBank is Funding Every Side of Latin America's Bruising Startup Battle (By Robbie Whelan and Eliot Brown for Wall Street Journal*)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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SummaryIn which Jason and Graham discuss the ins and outs of liquidation preferences, one of the more complicated features of private company finance.

The Pleasures And Sorrows Of Liquidation Preferences Coding Bootcamp Galvanize Agrees to $165 Million Acquisition (Kate Clark for The Information) * FanDuel founders to receive no cash from sale to Paddy Power Betfair(Margaret Taylor for Scottish newspaper The Herald) * What Happens When You Sell Your Startup? (Jason D. Rowley for Crunchbase News) * The Ultimate Guide to Liquidation Preferences (Charles Yu, currently of Bling Capital, on Medium*) * Samsung once sent a lot of nickels to Apple to settle a lawsuit, out of spite (maybe).

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Surveillance Culture Section starts at 10m 35s * The Secretive Company That Might End Privacy as We Know It (Kashmir Hill for the New York Times*) * What Will Happen In The 2020s (Fred Wilson) * Graham mentions Wilson's predictions about transparency and the lack of privacy that might be in the future.

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Quarterly VC Data* Section starts at 4m58s * The Q4/EOY 2019 Global VC Report: A Strong End to a Good But Not Fantastic Year (Jason Rowley for Crunchbase) * Also for Reference North American Venture Funding was Below Peak in Q4 but 2019 Totals are Still Near Highs (Joanna Glasner for Crunchbase)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Followup on Vice* Section starts at 4m10s * Cannabis is now legal for recreational use in Illinois * The Trump administration instituted a partial ban on flavored vaping products

Venture Returns* Section starts at 12m0s * Snapchat Quietly Acquired AI Factory the Company Behind its New Cameos Feature for $166M (Ingrid Lunden for Techcrunch)

Past Decade (and a tiny bit the Next Decade)* Section starts at 18m30s * What Happened in the 2010s (Fred Wilson for AVC.com) * What Will Happen in the 2020s (Fred Wilson for AVC.com)

Awesome Podcast Advertising (for fun!)* Thanks Family Guy!

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Venture Debt* Section starts at 6m25s * SaaS Focused Scaleworks Spins Out Debt Fund (Mary Ann Azevedo for Crunchbase News) * Lighter Capital

WeWork Debt Update* Section starts at 27m30s * Goldman Sachs to Extend $1.75B Credit Line to WeWork (Jason D. Rowley for Crunchbase News)

Venture Returns* Section starts at 35m05s * Angel List's Startup Growth and Venture Returns: What We Found When We Analyzed Thousands of VC Deals * Angel List's Startup Growth and Venture Returns Report (Fair warning - 26 pages and lots of detailed math about Power Laws)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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IMPORTANT DISCLAIMERS: Neither of us are lawyers, and we don't play them on the internet. We have not personally reviewed the evidence which led the DOJ to make its decision to file charges against Outcome Health. The following discussion is based on our reading and personal interpretation of news reports, press releases, and other publicly available documents.

In late October, Outcome Health paid out $70M to victims of its fraud scheme to settle charges. https://www.justice.gov/opa/pr/outcome-health-agrees-pay-70-million-resolve-fraud-investigation

In late November, the DoJ filed felony fraud charges against former executives and employees https://www.justice.gov/usao-ndil/pr/former-executives-and-employees-health-technology-company-outcome-health-charged-1

It's important to note that these are two distinct incidents. - The first, settled, case involves the company selling advertising inventory that didn't actually exist. - The second involves the repercussions from those allegedly intentional misstatements... that Outcome had inflated its revenue numbers it reported to investors and banks it was negotiating a loan agreement with.

Really good reporting from John Pletz at Crain's Chicago Business:https://webcache.googleusercontent.com/search?q=cache:JEosP5VJexwJ:https://www.chicagobusiness.com/technology/everything-about-outcome-saga-has-been-over-top-latest-twist-particularly-jarring+&cd=1&hl=en&ct=clnk≷=us

Pletz, quoting Howard Tullman: "Regardless of the outcome or the accuracy of the allegations, it's such a black eye for the tech community and the city. It's like our version of Theranos. I think it's really sad and unfortunate."

Takeaway from the Pletz piece: "Failure is one thing, fraud another" - Startups fail all the time. - Failure does not necessarily mean a shutdown. It could simply be a failure to meet growth targets. - As much as failing sucks"

Big questions about Shah and Aggarwal's status in the Chicago startup ecosystem:

• Shah, Aggarwal, Purdy, and Jim Demas (who, curiously, isn't named in any of the lawsuits) were founding partners of Jumpstart Ventures, which made dozens of startup investments. Some of those investments include Chicago unicorn SMS Assist, Built In, Base CRM, and YCharts.
• Rishi Shah told Crain's Chicago Business, back in 2014, that JumpStart "It's more of a personal investment vehicle than anything else, We don't have (limited) partners or a particular mandate." That same article states that JumpStart made LP investments in funds including Avia, the Firestarter Fund angel group, and Chicago Ventures.
  • http://webcache.googleusercontent.com/search?q=cache:eQCw3w8oHRwJ:https://www.chicagobusiness.com/article/20140318/BLOGS11/140319735/contextmedia-founders-rishi-shah-shrada-agarwal-investing-in-more-startups&hl=en≷=us&strip=1&vwsrc=0

Private company protection Legal is a necessary but insufficient standard

Additional Reading:

Outcome Health Lays Off More Employees (John Pletz for Crain's Chicago Business)

About The Co-Hosts-Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report.

-Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Front Matter Huldufólk, the elves of Iceland * WeWork founder worked on Kushner's Mideast peace plan: report (John Bowden writing in The Hill*)

Tesla Cybertruck* Section starts at 13m10s * Tesla's Cybertruck * Elon Musk hints that Tesla has 250,000 Cybertruck orders (Sean Keane for Road Show by CNET)

Shrimp Boil* Section starts at 41m40s

RecipeCredit goes to the Prune cookbook, by Gabrielle Hamilton

Shrimp Boil

• 1 batch Homemade Old Bay (recipe to follow)
• 5 quarts of water
• 3-ish pounds of shrimp, shelled and deveined
• 1.5 pounds small potatoes, blanched or microwaved to kickstart cooking process
• 1.5 pounds sweet Italian sausage, parcooked (I usually brown them in a skillet until they're mostly cooked through, but you could also bake/roast them in the oven.)
• 3 large red onions, peeled and cut into wedges
• 3-4 ears of yellow corn, husked
• 1 cup smoked paprika butter (recipe to follow)
• 1 cup sweet butter, softened

Steps:

• Boil water with the seasonings for at least 30 minutes before cooking
• Potatoes and corn in first. 4-ish minutes
• Sausage and onions. Let simmer for a minute or two
• Shrimp in, cooking until just cooked through.
• Remove to big bowl or serving platter using a slotted spoon or spider. You will get bits and pieces of whole spices in there, which lends to the rustic aesthetic of the dish
• Slather everything in the softened butters (paprika and plain) and pour one ladle-full of the boiling liquid over the platter and its contents, accelerating the melting of the butter.
• Serve at once. Serves 4-5 hungry dudes, with some leftovers.

Homemade Old Bay

• 10 dry bay leaves
• 2 tablespoons mustard seeds
• 1 tablespoon allspice berries
• 1 tablespoon celery seeds
• 1 cinnamon stick
• 1 tablespoon cardamom pods
• 1 cup kosher salt
• 1/4 cup sweet paprika (not smoked)
• 6 branches fresh thyme (equivalent amount of dry thyme works fine in a pinch)
• 1 head of garlic, cloves separated from each other but left unpeeled

Smoked Paprika Butter

• Half a pound of sweet butter, softened
• 1 tablespoon sweet Spanish paprika
• 1 tablespoon smoked Spanish paprika
• 2 teaspoons coarse kosher salt

(Makes 2 cups of butter. Extra butter can be used to spread on rolls.)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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iOS 13 Keyboard* Section starts at 6m10s

Web Summit* Section starts at 9m48s * Web Summit * Web Summit's Crunchbase Profile

WeWork Turnaround* Section starts at 26m50s * The Best Slides from SoftBank's WeWork Focused Earnings Report (Alex Wilhelm & Sophia Kunthara for Crunchbase) * Quick Notes from SoftBank's Uber and WeWork Dinged Earnings (Alex Wilhelm for Crunchbase) * WeWork Details Its Turnaround Strategy Including Divestments and New Old Focus (Alex Wilhelm & Sophia Kunthara for Crunchbase) * Data Sheet for the Second Quarter Ended September 30, 2019 * SoftBank Group Corp. Consolidated Financial Report For the Six-month Period Ended September 30, 2019 * Earnings Results for the 6-month Period Ended September 30, 2019

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Congratulations to Crunchbase on it's $30MM Series C* Section starts at 5m13s * $30M Series C: Looking Forward to the Future at Crunchbase (Jager McConnell CEO of Crunchbase)

Google's Acquisition of Fitbit* Section starts at 7m30s * Google to acquire Fitbit, valuing the smartwatch maker at about $2.1 billion(Lauren Feiner for CNBC) * Google is acquiring Fitbit for $2.1 billion (Brian Heater for TechCrunch) * Apple Dominates Global Smartwatch Sales (Felix Richter for Statista) * W3 Stand for Apple Watch ($12.99 from Elago)

Leafly Potentially Signals Issues with Cannabis Industry* Section starts at 36m50s * Leafly.com * Leafly Crunchbase Profile * Cannabis Review Site Leafly Takes On Debt Following Company-Wide Hiring Freeze (Jason D. Rowley for Crunchbase News)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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WeWork & SoftBank (Update)* Section starts at 11m45s * WeWork.com * WeWork's Crunchbase Profile * SoftBank.jp * SoftBank's Crunchbase Profile * Fair.com * Fair's Crunchbase Profile * Fair, the SoftBank-backed car subscription startup, lays off 40% of staff, sacks CFO (Ingrid Lunden for TechCrunch) * Sprint.com * Sprint's Crunchbase Profile * SoftBank is turning to its Sprint leaders to bail out WeWork—they’ll need to do better this time (Ari Levy and Alex Sherman for CNBC) * SoftBank’s Son uses rare structure for $93bn tech fund (Arash Massoudi in London, Kana Inagaki in Tokyo and Leslie Hook in San Franciscofor Financial Times)

Zuckerberg Testimony* Section starts at 33m15s * Facebook CEO Mark Zuckerberg faces sharp questioning in Congress about Libra cryptocurrency (Irina Ivanova and Grace Segers for CBS) * Zuckerberg’s testimony left lawmakers just as concerned about libra as they were beforehand (Lauren Feiner for CNBC)

Blind Technology* Section starts at 54m35s * Accessibility, the future, and why Domino’s matters (Kate Cox for Ars Technica) * Be My Eyes

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Silicon Valley Adopts Profitability Mindset* Section starts at 8m15s

Q3 Global Venture Capital Report* Section starts at 21m10s and 53m55s * The Q3 2019 Global Venture Capital Report: Seed Stage Deals Increase While Broader Funding Environment Shows Signs Of Erosion (Jason D. Rowley for Crunchbase News)

China Invests in Many Fewer Supergiant Venture Rounds* Section starts at 45m55s * China Share Of Supergiant Rounds Slips Further (Sophia Kunthara for Crunchbase News)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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Open Source Software (OSS)* Section starts at 4m5s * Open Source: From Community to Commercialization (Peter Levine and Jennifer Li of Andreessen Horowitz) * Deck as source for the above article

SaaS Benchmark Report* Section starts at 39m40s * 2019 Expansion SaaS Benchmarks

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations

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WeWork (Update) and JUUL (update)* Section starts at 6m * WeWork.com * WeWork's Crunchbase Profile * JUUL.com * JUUL's Crunchbase Profile * JUUL Replaces Its CEO with Tobacco Executive (Sheila Kaplan, Matt Richtel and Julie Creswell for the New York Times)

Impeachment's Effect on Business* Section starts at 11m40s

Softbank Executive Departures Especially at Compass* Section starts at 25m25s * SoftBank.jp * SoftBank's Crunchbase Profile * Compass.com * Compass' Crunchbase Profile * Compass Execs Leave in Another SoftBank-Fueled Real Estate Exodus(Natasha Mascarenhas for Crunchbase) * SoftBank-Backed Real Estate Broker Compass Hit by High-Level Exits(Katherine Clarke and Laura Kusisto for The Wall Street Journal)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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WeWork (Update) and Airbnb (Update)* Section starts at 10m15s * WeWork.com * WeWork's Crunchbase Profile * Airbnb.com * Airbnb's Crunchbase Profile * $31B Airbnb Announces Plan to go Public in 2020 (Steven Tweedle and Aaron Holmes for Business Insider)

Vice Investing/JUUL* Section starts at 18m40s * JUUL.com * JUUL's Crunchbase Profile

Venture Return J Curves* Section starts at 51m25s * Inside the Ups and Downs of the VC J-Curve (Jason D. Rowley for Crunchbase) * Andreessen Horowitz Returns Slip, According to Internal Data (Zoë Bernard for The Information) * J-Curve (Will Kenton for Investopedia) * We Have Met The Enemy And He Is Us (A 2012 report from the Kaufmann Foundation)

About The Co-Hosts* Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. * -Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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WeWork (Update)* Section starts at 4m45s * WeWork.com * WeWork's Crunchbase Profile * WeWork Makes Sweeping Corporate Governance Changes Ahead of IPO(Annie Palmer for CNBC) * WeWork's IPO Spells Rough Landing for CEO Neumann (Herbert Lash for Reuters)

Airbnb/Atlas Obscura* Section starts at 20m59s * Airbnb.com * Airbnb's Crunchbase Profile * AtlasObscura.com * Atlas Obscura's Crunchbase Profile * Mapping Airbnb’s Corporate Investment Strategy: Atlas Obscura And Beyond(Jason Rowley for Crunchbase News) * Airbnb Leads $20 Million Funding Round Into Atlas Obscura (Lukas I. Alpert for The Wall Street Journal) * David Plotz is leaving as Atlas Obscura pivots to ‘experiences’ (Deanna Ting for Digiday)

Venture Returns* Section starts at 44m05s * Venture Capital - No, We're Not Normal (David Coats, Co-Founder, Correlation Ventures)

About The Co-Hosts-Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report.

-Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.

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GeneralSubscribe to Fully Vested on SimpleCast, or wherever you listen to podcasts.

Recorded on 9/8/2019

Fyllo* Section starts at 4m50s * HelloFyllo.com * Fyllo's Crunchbase profile * Press release announcing Fyllo's seed round * BuiltIn's writeup of Fyllo's seed round

WeWork Section starts at 21m37s * WeWork.com * WeWork's Crunchbase profile * The VentureBeat article Graham mentioned: WeWork is the latest sign tech IPO valuations are nonsense * WeWork landlord, spooked by scrutiny over IPO filing, sues to get out of lease (Mary Diduch for The Real Deal, a website tracking New York real estate news) * WeWork’s Long List of Potential Conflicts Adds to Questions Ahead of IPO (Elliot Brown for The Wall Street Journal) * Scrapping the IPO may be WeWork’s best option (Alex Sherman for CNBC*)

About The Co-Hosts-Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report.

-Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.