Introduction: This is a sign of a bubble in the artificial intelligence startup market.
It’s been a mostly sad story for the venture capital industry over the past year, with thousands of startups struggling to raise funding and many shutting down.
However, for some luckyFounderFor now, the market is still in a bubble.
Source Note: The image is generated by AI, and the image is authorized by Midjourney
A few days ago, Dan Sirok, co-founder and CEO of Rewind AI, decided to seek new investors. He expected manyVenture CapitalWith so many people scrambling to meet, the entrepreneur decided to screen out the real interest groups and raise some money for charity in the process.
He posted to X on Friday: "We can't possibly meet with everyone, so to make sure you're serious and it's a good use of our time, we're asking $100 to meet. First come, first served."
More than 1,000 people want to pay to see someone.
Not all founders can do that. Based on his previous fundraising experience, Sirocco was prepared for waves of Zoom calls.
Last spring, the founder shared a link to his startup and a form for anyone to pitch an investment. A few weeks later, more than a thousand investors had expressed interest.
Sirocco finished the process and whittled down to 170 bids. He raised $12 million for Rewind AI, valuing it at $350 million.
Sirok told me this week that he is not actively raising money right now. He said Rewind AI raised $1.3 billion in its last round of funding.FinancingThe funds obtained are sufficient to support the company's operation and development for another four years.
Instead, he meets with investors to build relationships over time.
“This company is my life’s work,” he said in a direct message. “That means I will be working with these investors for at least a decade and possibly longer. I want to make sure it’s the right long-term match, so it’s important for me to get to know them through more than one or two meetings.”
Rewind’s digital assistant records everything you do on your computer, makes it searchable, and stores the recordings locally on your computer to ease privacy concerns. The service has a free version and a $19-a-month subscription version that unlocks more powerful features.
Rewind AI came out of stealth at the end of 2022, having received millions of dollars in investment from Andreessen Horowitz, First Round Capital, and others. Sirok said his startup now has 22 employees.
The hottest companies are getting funded, while others fight for fragmented opportunities
The rush among VCs to meet entrepreneurs — and pay for it — suggests that at least in some areas of the startup funding environment, boom times have returned.
But charging investors fees can be counterproductive to building healthy, long-term relationships.
Sirocco said that while he used the cash requirement as an “effective way to see who’s serious and who’s not,” the experiment had a knock-on effect of weeding out overconfident investors.
“I also hope that investors don’t have such a big ego, believe in our company so much, are willing to put down a little ego, and are happy to pay the fee to meet,” he said. “Most investors think entrepreneurs should bow down to them. Such selection favors those who don’t have an ego.”
This is just one example of the extreme divide between the haves and have-nots in Silicon Valley.
A large number of startups have avoided death in the past two years by cutting costs and headcount. But as the cheap funds raised by these startups in the early days of the epidemic are about to run out, many companies will have to seek capital markets this year.
Not all will succeed. Scarcity of capital for startups has also hurt funds. Last year, the industry closed 474 funds, the most since the start of the tech bull run in 2013.lowestFunding fell to about $70 billion from $173 billion in 2022, according to PitchBook.
Investors told me they are seeing more binary outcomes as they allocate less capital to fewer companies.
"When deals get hot, there's tremendous interest," Ben Lerer, managing partner at early-stage venture firm Lerer Hippeau, told Business Insider's Ben Bergman late last year. "But if you're on the wrong side of it, there's not a penny."
Investors remain enamored with AI-driven software, applications and infrastructure, which is part of the reason for the growing differentiation, said Dick Costolo, former Twitter CEO and now managing partner at newer early-stage firm 01Advisors.
This week, Business Insider reported that a startup called Perplexity, which is challenging Google with a smarter search engine, is raising additional funding at a significantly higher valuation, having raised $74 million from investors just a few months ago.
The funding frenzy in artificial intelligence shows no signs of slowing down. Anthropic and OpenAI raised new rounds last month at eye-popping valuations. Employees at Google, Nvidia, and OpenAI are striking out on their own and raising large sums of money for new startups.
“Even if you’re going to invest in early growth-stage companies, you need to meet them when they’re just getting started, get to know the team and have them get to know you — because those things get preempted," Costello said. "If you’re not there long before a fundraise, you’re not in the discussion.”
Sirocco is counting on investors to do just that. By Friday afternoon, he said, he had collected $900 from nine investors willing to pay for the meetings.
Although someone responded to Sirocco's tweet suggesting that he record the proceeds from the meeting as income for his business, Sirocco told me that he plans to donate the money to Boys & Girls Clubs and Build, a nonprofit that teaches students how to be entrepreneurs. (Business Insider)