Reddit’s IPO, Consumer vs. Enterprise AI, and Sam Altman’s New Fund and more! | 1903

• 92% of successful unicorn companies had a small fund like Jason's in their early days.
• Small funds rarely invest beyond the seed stage, with less than 5% participating beyond the C stage.

Discussion on Reddit’s IPO and potential as an advertising business (00:01:19)

• Reddit, a highly influential social network and forum with nearly 100 million daily users and 500 million monthly users, has officially announced its intention to go public via an S1 filing, revealing over $84 million in revenue.
• Despite its large user base, Reddit's advertising revenue is relatively low compared to other platforms like Uber, with an estimated $800 million in revenue for 2022.
• Reddit's strength lies in its influential audience, as many users turn to the platform for product reviews and advice, often appending "Reddit" to their Google searches.
• The company's interface has remained largely unchanged over the years, contributing to its organic growth and longevity, similar to Craigslist and Amazon.
• Reddit's data is of particular interest, with the platform reportedly earning $60 million annually from a deal with Google. The possibility of additional licensing deals could potentially double Reddit's revenue.
• Reddit is planning to go public in 2023.
• The company is valued at $10 billion.
• Reddit has been growing rapidly in recent years, with its user base increasing by 44% in 2021.
• The company is expected to generate $100 million in revenue in 2022.
• Consumer AI is focused on making tasks easier for individuals, such as using voice assistants or language translation tools.
• Enterprise AI is focused on helping businesses improve their operations, such as using AI to automate tasks or analyze data.
• Consumer AI is more accessible and user-friendly, while enterprise AI is more complex and requires more expertise to implement.
• Sam Altman, the former CEO of OpenAI, has launched a new fund called "Worldcoin Capital".
• The fund will invest in startups that are using AI to solve global problems.
• Altman believes that AI has the potential to revolutionize the world and wants to help startups that are using AI for good.
• Google is shutting down its Stadia cloud gaming service.
• Microsoft is acquiring Activision Blizzard for $68.7 billion.
• Elon Musk is buying Twitter for $44 billion.

Reddit’s IPO and potential as an advertising business cont. (00:10:23)

• Reddit's annual revenue is a surprising $800 million despite challenges with content and its unique user base.
• Reddit's wholesome communities, such as makeup enthusiasts and mothers, attract advertisers due to the authentic conversations and deep discussions fostered by the platform's anonymous nature.
• Reddit's upcoming IPO faces challenges due to the current tough advertising market and competition from large media companies.
• Reddit's successful ad business has convinced the market to take its advertising seriously, leading to more interesting and effective ads on the platform.
• Reddit is building a large language model (LLM) exclusively trained on its own data, which will provide users with unique answers to their questions, setting it apart from competitors.
• Reddit's proprietary data stance, as emphasized by Steve Huffman and Elon Musk, raises concerns about the potential use of unlicensed Reddit data in models like OpenAI's GPT-3.

AI Integration in traditional businesses (00:16:44)

• Key considerations when evaluating AI companies:
  • Proprietary data: Reddit has a unique advantage due to its large scale of truly unique data.
  • Data moat: Most startups lack a strong data moat, but some have unique access through partnerships or expertise in antiquated industries.
• Michael's perspective on AI investments:
  • AI investments are expected to follow a similar trajectory as mobile and cloud investments in the mid-2000s.
  • Focus on individuals with a unique technical background in AI, especially those with experience in mlops teams.
  • Infrastructure layer is the current focus due to numerous opportunities in that category.
  • Simple application concepts are avoided due to the risk of extinction events from larger companies like OpenAI.
• Craft Ventures is looking at everything in the AI space.
• The AI landscape is constantly changing, making it difficult to predict specific trends.
• Focus on picking the best people and teams, trusting them to navigate the uncertainty.
• Proof is required in later-stage investments, beyond just hype or ideas.

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Consumer vs. enterprise AI (00:22:02)

• Smaller AI teams are achieving rapid growth by leveraging AI tools, demonstrating the potential for startups to scale quickly with limited resources.
• The investment landscape for AI startups may change as smaller teams require less funding and generate profits earlier, potentially impacting venture capital funding strategies.
• Reddit's potential IPO and the increasing cost of compute resources for AI companies could further influence investment strategies.
• Secondary offerings in later-stage funding rounds provide liquidity to employees and founders without raising additional capital, offering potential benefits such as increased focus and efficiency for startups.
• Founders should exercise caution when considering venture debt before achieving product-market fit, as it can lead to financial difficulties and loss of control over their company.
• Investors should be transparent with founders about the risks of overspending and prioritize efficiency and focus.
• Venture debt is not a suitable financing option for small companies without the ability to repay the debt or generate profits.

Miro - Sign up for a free account (00:37:10)

• Miro and Founder University have collaborated to create a pitch deck template for founders.
• The template can be found by searching for "pitch deck" on Miro.com.
• Miro is a useful tool for remote and hybrid teams to brainstorm ideas and collaborate on projects.
• Miro offers more than just a digital whiteboard, allowing teams to collaborate on planning, research, design, and feedback cycles.
• Faster inputs lead to faster outcomes and increased product velocity, which is crucial for startups.
• Founders can sign up for a free Miro account at miro.com/startups to access the new Miro verse template and thousands of others.

Sam Altman’s venture capital fund and the future of the AI ecosystem (00:38:18)

• Sam Altman's OpenAI fund, launched in 2021, has committed $175 million to AI startups, offering access to proprietary data, early software access, and a competitive advantage.
• OpenAI's strength lies in its top AI talent, deep product roadmap understanding, and strategic value as a potential kingmaker in the AI industry.
• Corporate VCs provide early validation but may have drawbacks, including the need for a blue-chip lead investor, limited follow-on funding, and potential board meeting challenges.
• Startups should consider seeking funding from VCs aligned with building sustainable, large-scale companies rather than strategic investors like OpenAI, who may prioritize their own interests.
• OpenAI's investments don't come with special rights or control over companies, making it an attractive partner for startups.
• Concerns exist about the control and limitations of certain AI models, leading to a preference for open-source models for specific applications.
• Apple's release of an open-source image project signals a shift towards open-source AI development.
• OpenAI's revenue is currently consumer-driven, surprising investors who expected more enterprise adoption.
• Reddit's potential IPO and Yammer-like approach could lead to individual adoption of AI tools and eventual integration into organizations.
• Enterprise B2B AI opportunities are Brian's focus, but he's surprised by the lack of interesting consumer sector opportunities.
• Jason sees more opportunities in Enterprise due to higher success rates but also invests in consumer startups as a power law investor, concentrating on the top 5% of investments.
• Craft's portfolio construction is flexible, focusing on Series A or B investments depending on market conditions.
• AI investments at the seed or growth stage are more attractive due to proven metrics, while Series A and B investments are challenging due to overpricing and lack of traction.
• Portfolio construction for a billion-dollar fund requires identifying companies with the potential to return the entire fund, leading to passing on opportunities that may be suitable for smaller funds.
• Michael's unique approach involves investing in small emerging manager funds with no management fees or carry, charging fees only on direct investments into outliers from those portfolios.

Rapid fire segment on recent investments (01:05:06)

• Brian shared investments in Solist Health, a marketplace connecting individuals with healthcare advocates, Aent, an ad platform connecting brands with YouTubers, and Jack Altman's new fund, Alt Capital, which invests in operator-turned-investors.
• Michael's last three investments were in funds: Recursive Ventures, a small fund that has found great deals, Original Capital, a generalist fund with a unique skill set, and Silent Ventures, a unique manager focused on investing in the aerospace and defense tech area.
• J.K. mentioned Recall, a toolbar that allows users to save web pages, podcasts, and YouTube videos into their own language model for future search and use.
• Reddit's IPO is highly anticipated, and its paid product is already popular among users.
• Microverse is a fast-growing AI-powered startup that vets developers and connects them with companies needing their services.
• MLANGO is a successful AI-driven platform that simplifies the process of designing and producing custom products.