When predatory investors hurt your chances of success

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You know what’s not a good idea for my energy levels? Enjoying a week of TechCrunch Disrupt and then jumping straight on a plane to attend a startup event in Oslo, Norway. I just got over my jet lag, so now it’s time to get back on a plane and do it all over again. Hrrgh. I must really love startups.

In 2016, I also spent some time in Oslo and complained about the lack of sophistication in the Norwegian startup ecosystem. She was curious to know if they had started to figure out how to start. The answer? Yes a bit. The startups themselves are much more competent than they were seven years ago, and it is incredible what seven years of ecosystem development achieves. There are great accelerators, good support systems and even several investors are starting to appear.

I was moderately horrified and quite surprised to find a contender to wear the crown of “Let’s destroy this fragile, nascent ecosystem”: investors. Not all, obviously, but many of those I spoke to had an uncanny affinity for myopic thinking. Specifically, I saw a fairly common recurrence of a mistake I saw frequently in the UK ecosystem about 15 years ago: angels and pre-seed investors trading too much capital into companies. That’s not a good idea, not in an industry where the financial model is driven by outliers. Bottom line: Venture capital works even if most startups give lousy returns, but only if a few startups in the portfolio are able to hit a home run. It’s a numbers game that falls apart if your deal structure is such that it virtually guarantees that later-stage investors will take a look at the cap table and realize that if they invest, the founders risk losing interest. . Greed now leads to poor returns in the future.

In other words, requiring a 30% stake in a startup is short-sighted and should not be allowed by founders. Fortunately, an astute investor who is willing to take a smaller stake in the companies for the same amount of money can easily figure this out. That does two things: it’s friendlier for founders and it means the investment becomes much more competitive against other investors. Founders just need to know that it’s okay to reject unreasonable terms, and hopefully investors will realize they’re in this for the long haul.

With that rant of discontent aside, let’s take a look at what else happened in the startup world this week!

Disrupting the disruptors

Yes, yes, TechCrunch Disrupt was last week, but our evil team of keyboard warriors have been hard at work, summarizing and pulling out some of the gems from the sessions that you may have missed. Also! There’s plenty of fun video content available, in case you weren’t able to be there in person this year.

Here are some of our most read Disrupt stories:

Keeping an ai with you: Devin reports that Signal’s Meredith Whittaker believes ai is fundamentally “a surveillance technology.”

Developers, we still need you: Paul reports that GitHub’s CEO said that despite advances in ai, demand for software developers will continue to outstrip supply.

open a ticket: I interviewed the CTO of Atlassian (and conspired with him to sneak it back into the Disrupt stage next year, which I thought was funny, and the Disrupt planning team probably disapproves), and covered how Atlassian was slow to move to the cloud, but was on track with ai.

Investors? We don’t need damn investors: Dominic-Madori reports that Bootstrapping is cool again.

Is technology recovering?

Image credits: erhui1979/Getty Images

So Talkdesk may have made its third round of layoffs in less than 14 months, but it seems the tide is turning: Alex reports figures that seem to indicate that tech layoffs are almost a thing of the past. Layoffs in January of this year reached almost 90,000, but so far in September there are just over 3,000. Does that mean everything is going smoothly? Well, not entirely, but maybe the deep cuts have already been made and everyone is waiting for it to happen.

Anecdotally, it is very difficult to raise a venture capital fund right now, but there has been no shortage of new fund announcements in recent weeks. Here are some of the highlights:

Return the chain to the tracks: Jacquelyn reports that Blockchain Capital launches two new funds totaling $580 million.

fresh dosh for cascadia: Kyle reports that venture capital firm Fuse is closing a $250 million fund to invest in Pacific Northwest startups.

Making it rain in Africa: Tage reports that pan-African contrarian investor P1 Ventures reaches a first close of $25 million for its second fund.

In ai-ural ass: Christine reports that Mythos Ventures raises $14 million for its ai fund.

Compulsive buying: Connie reports that Industry Ventures just raised $1.7 billion to acquire more holdings and companies.

2 and what now?: For TC+, I took a look at the new Carta numbers, which show that while the “2 and 20” rate structure is the most common, there are definitely plenty of exceptions.

The ghost in the shell

Image credits: Oleksandr Hruts/Getty Images

Another week, another wall of ai coverage from my colleagues and I, as it remains the darling of the startup world, with some stratospheric valuations this week. OpenAI is reportedly raising a valuation of over $80 billion, and ai-based market intelligence company AlphaSense raised a price tag of $2.5 billion. Yowzers!

Devin interviewed Anthropic’s Dario Amodei on the Disrupt stage, and the company’s CEO shared the surprising conclusion that he’s not sure there are limits to what ai can do. The Equity podcast team went into the lovefest in this week’s episode titled “Everyone Loves Anthropic,” which makes sense: Amazon is writing a check for up to $4 billion to the company.

Other ai stories you’ve read a lot this week:

Okay, computer.: Paul reports that OpenAI gives ChatGPT voice for verbal conversations.

ai sees what YouTube did there: Sarah reports that YouTube Shorts will have a generative ai feature called Dream Screen.

Cross out: Amanda reports that the writers’ strike is over. She took a look at how the ai ​​negotiations unfolded. This was an interesting story after the conversation I had with a film industry ai CEO, who stated that “no one has lost their job because of what we do.”

Top Reads on TechCrunch This Week

Swipe up and right: Sarah reports that Tinder snobs can now pay $499 per month to be matched with the “most searched” profiles.

Ca-Splunk: Ron reports that Cisco is planning to acquire Splunk in a $28 billion mega deal, giving shareholders a hefty bonus along the way.

I’m sorry we almost put you out of a job. We can still be friends?: Kirsten reports that Uber is strengthening its relationship with taxi companies.

Well done, take a boat: Amanda reports that Reddit will start paying users real money for popular posts.

Looking over your shoulder: Zack reports that yes, you should update your Apple devices again, because spyware is bad.