Startup Project: Build the future

Welcome to 50th edition of the Above Average Newsletter. Your bi-weekly source of Above Average takes on the business of big technology written by Nataraj Sindam. Topic 1: What’s with Direct-to-Consumer Companies?What’s common among all these companies?All birdsBrilliant earth groupPelotonRent the runwayThey are all public direct to consumer companies whose stock is down ranging from 80 to 95% in last couple of years.If you are direct to consumer company the best time to go public was in 2021 when the pandemic has fueled an ecommerce spending spree. Once this is over, the markets realized a lot of these direct to consumer companies have no path to profitability and have unsustainable business models.So what can we learn from what is happening with direct to consumer companies -When you are willing to spend on high customer acquisition cost (CAC), you can create a short term non profitable direct to consumer company, even when industry dynamics don’t support it. If you spend enough amount of money on Facebook and Google ads you can sell any decent product.VC money was used to subsidize CAC, that is clear. But that stopped and these companies are not close to profitability and a lot of them are on the verge of bankruptcy. But if I am an investor in such brands the one thing I would look for is that the product innovation should reflect in my customer acquisition cost being low. If you are not able to get very low customer acquisition cost on your product or brand, then technically you are not creating value with your product. Your customer acquisition cost reflects whether the product/brand is actually desired by the customer & if the industry dynamics support it or not. Topic 2: Where is the AI opportunity?It’s easy to see big funding rounds in AI for foundation model companies and think AI is all about Fearsome Foursome funding Geoffrey Hinton’s ex-students or ex-open ai employees.But I think the real opportunity in AI for next couple of years is in the long tail of building specific narrow application that solve small problems that were not possible before. There is treasure trove to be exploited by teams of 1-3 developers to build SaaS applications which can generate millions in revenue.LLMs are a super power for full stack application developers. If you want to build something and are looking for such ideas feel free to reach out to me. Topic 3: 100 Days of AI experimentsAI is going to impact us all, so as part of 2024’s first 100 days I am going to spend 1-2 hrs a day learning, experimenting, reading & tinkering with the latest AI models, products & content. You can follow along by following me on Twitter or here on my blog . My goal in this 100 days will be focused on what new things we can build using AI and what to expect from AI in future. The series is also published here on hackernoon . If you are listening to this and have not subscribed to the newsletter, please go subscribe. Till next time, stay above average. Nataraj

This episode is the audio version of Nataraj's newsletter Above Average. Welcome to 49th edition of the Above Average Newsletter. Your bi-weekly source of Above Average takes on the businss of big technology written by Nataraj Sindam. 1. Why the new AI Button on Your Keyboard is inevitable?Microsoft is adding a new AI button to your PC keyboard. This is the first time Microsoft changed the PC keyboard in last 30 years. If you are a regular user of ChatGPT or its competitors you will notice your own behavior, that you use it repeatedly and it might get lost in the 10s of chrome tabs you have opened.You also realize that its a constant companion on your daily work. Microsoft already realized this and jumped head on into creating Copilots for all its products.The next step in this strategy is to have a dedicated button that will launch bing copilot which uses gpt-4 and is currently free.The move highlights couple of things:Copilots are going to an enduring form factorWe will use copilots so often that it requires its own buttonIts a great use of Microsoft’s distribution power to create a new user behaviorIf this new behavior works its acts as counter to Google search. Your first step for any answer would be to tap that button and start asking the question. A better interface potentially to transition from a search dominant world to answer dominant world.2. Who is the biggest AI VC in town?As some one who closely works with a venture fund and interacted with lots of investors and invested in 20+ startups its important to note that the unseriousness of ZIRP era was prevalent in VC industry as much as it was in any other industry.This meant higher valuations that defy the gravity of the business became common. Chasing each others and asking the question “who else is investing” became the most important criteria. Deals closed faster than ever. Crypto as a sector suck more oxygen in the room that it should. Mostly because too much capital was chasing too few deals and in the process new & some old investors lost track of what is important. Its important for a VC to invest in important things in tech.Now with AI era on us, the biggest investors in AI are not the VC firms but its the fearsome foursome - Microsoft, Google, Amazon & Nvidia.The amount of investment commitments from these 4 companies has already exceeded $20B with a conservative estimate.Big tech companies never really invested in crypto like they are investing in AI.So what’s the take away here - if you think AI hype cycle is similar to crypto hype cycle, you are wrong. AI is an enduring cycle worthy of hype, unlike crypto which was propped up by VCs with out enough depth.Topic 3 - My Experiments with AI:One of the reason this newsletter is less frequent than usual (from now on it will be twice a month) is because I am working on writing more on AI as part of a series I am calling 100 days of AI. If you are interested in gen AI experiments, ideas & trends follow along here. Here are some posts I have written about AI. - Design Thinking using Semantic Kernel - Get Insights from YouTube Podcast Video using Open AI’s GPT 4 - Build Your Own Chat with Data App Till next time, stay above average.Nataraj

For more unique insights on technology follow Nataraj on Twitter - ⁠⁠https://twitter.com/natarajsindam⁠⁠ & Instagram - ⁠⁠https://www.instagram.com/1nataraj/⁠ What late stage investors got wrong about investing in Startups? Confusion in the venture scene, especially with late-stage investments. Some firms raising funds for secondaries in startups, but a twist for LP investors: a cautious approach is needed. Skepticism about firms claiming expertise in both early and late-stage investments. Discussion on the industry mix-up and the need to reconsider how we negotiate prices. Emphasizing the importance of aligning return expectations with industry dynamics. Concerns about the pricing game not adding up in the long run, even with solid companies. Exploration of the industry's potential need for a rethink to optimize returns. Join the conversation at thestartupproject.io/nataraj/ #angelinvesting #youtubeshorts #venturecapital #investing #limitedpartners #vc #startups #tigerglobal

For more unique insights on technology follow Nataraj on Twitter - ⁠https://twitter.com/natarajsindam⁠ & Instagram - ⁠https://www.instagram.com/1nataraj/⁠ Why Rivian will become 2nd Largest EV Player in the U.S? Exploring the EV market in the US and the competition between Rivian and Tesla. Rivian stands out with a superior product, a more profitable segment, and a less controversial brand than Tesla. I predict the future paths of Rivian and Tesla, highlighting the crucial significance of the next three years for their survival and Rivian's growth. #EV #electric #predictions #technology #tesla #rivian #elonmusk #elon #electricvehicles

Over long term YouTube will win over TikTok, Instagram & other video apps. Check out the video to see why. Follow Nataraj on Twitter - https://twitter.com/natarajsindam & Instagram - https://www.instagram.com/1nataraj/

Nataraj interviewed veteran VC Matt McIlwain of Madrona Venture Group on Startup Project podcast. Matt shared his insights into the state of venture capital and the impacts of AI, drawn from his 20+ years of experience. Some key takeaways: 1. Venture is a "tale of two cities" now - later stage startups are struggling, earlier stage companies embracing AI are thriving 2. Seattle has unmatched talent but lacks local capital - still over-reliant on Silicon Valley VCs 3. Incumbents have the edge currently in leveraging AI due to data, customers, ability to integrate via APIs - but long term, AI-native startups will win out 4. Partnerships forming between big tech and AI startups provide startups with computing resources while allowing tech giants to take an open, marketplace approach to AI I highly recommend tuning in to hear Matt's take on venture capital, AI, and building an enduring company. Available on all major podcast platforms - link in comments!

In this episode, Nataraj spoke with John Staenberg, a veteran of the tech and venture capital world. John took Nataraj through his early days growing up in Omaha and attending Stanford University, where he was inspired by the culture of creativity and trying new things. After graduating, John worked in real estate and then got his MBA, also at Stanford. He became fascinated by the nascent world of venture capital and startups in Silicon Valley. John landed a job at Microsoft in the late 1980s, when the company was still small and growing fast. He described the exciting “change the world” energy there, where people worked tirelessly to spread personal computers. After Microsoft, John started his own venture funds focused on bridging Seattle and Silicon Valley. He's been involved with around 200 startups over his venture career. John reflected on missing out early on companies like Google and Amazon that became huge wins. But he's also had some big successes, like Seagate. He emphasized that surprise and timing are always at play in VC investing. Nataraj and John also discussed how venture capital has matured and become overcrowded, making it hard to generate outsized returns. So John has pulled back on direct startup investing. Pivoting gears, they talked about John's passion project - starting a wine business in Argentina 17 years ago. He saw it as a way to pursue his interests and bring people together. John then explained his latest venture to Nataraj - launching a search fund to invest in other funds that acquire small businesses for entrepreneurs. He believes this model can provide great returns and opportunities. Throughout his wide-ranging career, John has stayed focused on connecting people and giving back, including through the many events he has hosted. Follow Jon at https://www.linkedin.com/in/jonstaenberg/ Follow Nataraj at https://www.linkedin.com/in/natarajsindam/

In this episode of the podcast, we feature Ashmeet Sidana, the founder and Chief Engineer of Engineering Capital. Ashmeet has an extensive background in engineering and venture capital, with experience as the Director of Product Management at VMWare and as a venture capitalist. During the conversation, Ashmeet discusses various topics, including his experience developing the ESx Server at VMWare and leading seed rounds of companies like Azure Power and Tubi. He also shares insights into why venture capitalists prefer startups to stay private and the importance of investing in technical insights. Ashmeet also talks about his approach to getting in front of future founders and explains why he chooses not to invest in blockchain. He discusses the significance of large funding rounds in the AI seed stage and the value of investing in open-source companies. To learn more about Ashmeet Sidana and his perspectives on investing in startups with technical risks, you can listen to the full episode on platforms like YouTube, Spotify & Apple. Full conversation includes: - Being Director of PM at VMware & Venture Capitalist - Developing ESx Server at VMWare - Leading seed rounds of azure power (public & valued at $2B) - Leading seed investment at Tubi - Starting Engineering capital - Why vcs want startups to stay private - What it means to invest in technical insights - Getting infront of future founders - Not investing in blockchain? - Large funding rounds in AI seed stage - Investing in opensource companies

To stay up to date checkout ⁠⁠⁠⁠⁠⁠thestartupproject.io⁠⁠⁠⁠⁠⁠ & follow Nataraj on twitter: ⁠⁠⁠⁠@natarajsindam⁠ and on LinkedIn at ⁠https://www.linkedin.com/in/natarajsindam⁠ Join us in this captivating episode as we sit down with Joe Heitzeberg, a multifaceted entrepreneur who has navigated the world of technology and business with remarkable success. From his early days in the tech industry to founding his acclaimed venture Crowd Cow, Joe shares his incredible journey and valuable insights on various topics. 1. Joe's Entry to Technology 2. Working for Paul Allen 3. Import Furniture Business 4. Opportunity Cost of MBA 5. Building Viral VoIP App for MySpace 6. Selling Media Piston to Upwork 7. Starting Crowd Cow 8. Problems with Chicken in the U.S 9. Fundamental Shifts from AI 10. AI Tinkerers Follow Joe on LinkedIn at https://www.linkedin.com/in/joeheitzeberg To stay up to date checkout ⁠⁠⁠⁠⁠thestartupproject.io⁠⁠⁠⁠⁠ & follow Nataraj on twitter ⁠⁠⁠@natarajsindam and on LinkedIn at https://www.linkedin.com/in/natarajsindam

Tim Chen is the Managing Partner at Essence VC, an early-stage fund focused on data infrastructure and developer tool companies. He has over a decade of experience leading engineering in enterprise infrastructure and open source communities and companies. Prior to Essence, Tim was the SVP of Engineering at Cosmos, a popular open source blockchain SDK. Prior to Cosmos, Tim co-founded Hyperpilot with Stanford Professor Christos Kozyrakis, leveraging decades of research to disrupt the enterprise infrastructure space, which later exited to Cloudera. Prior to Hyperpilot, Tim was an early employee at Mesosphere and CloudFoundry. He is also active in the open source space as an Apache Software Foundation core member, maintainer of Apache Drill and Apache Mesos, and CNCF TOC contributor.