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Future of Capital Allocation

Your weekly newsletter on the fast-evolving world of investing
The week's developments in investing & technology, explained | 27.06.24

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This week’s AI news is all about musical chairs at the top. Leading the charge is Ilya Sutskever, former chief scientist at OpenAI, who's looking to develop safer AI models with his new venture, Safe Superintelligence. Meanwhile, Stability AI, the image-generating company, welcomed Prem Akkaraju, formerly of Weta Digital, as their new CEO.


And speaking of change, we also take a look at why VC money is chasing chipmakers other than Nvidia, how Big Tech became a founder factory for AI startups and a VC’s take on what’s hot and not-so-hot in AI right now — in the CogX Must Reads.


— Charlie and the Research & Intelligence Team

P.S You are now able to sign up for the super early bird offer (75% off) to the CogX Leadership Summit in London on October 7th here.


The investment ecosystem

🛡️ AI safety gets a boost: Former OpenAI chief scientist Ilya Sutskever, who left the company after disagreements over AI safety concerns, has launched his own AI firm, Safe Superintelligence. This new venture focuses solely on building a powerful yet safe AI system.


💵 Stability AI gets new CEO and funding. The beleaguered startup has a new CEO at the helm: Prem Akkaraju, formerly of visual effects giant Weta Digital. This leadership change follows the departure of Stability AI's previous CEO, Emad Mostaque, earlier this year alongside other key personnel.


  • Additionally, tech heavyweight Sean Parker, co-founder of Napster and former Facebook executive, joins the company as Executive Chairman after being part of a recent investment round. 


🚀 Data from Accel confirms Big Tech is now a founder factory for AI startups. Over 60% of Europe's top 10 generative AI startups have founders with past experience at US tech giants like Google, DeepMind, Meta, and Amazon.


💸 2021 VC funds turned sour: Funds raised during that boom year are underperforming, dragging down returns and making fundraising a slog. This is causing frustration among investors who are seeing their returns suffer.


Chart of the week

The boom in AI investment appears to be settling. Investors injected $90 billion across 7,909 deals compared to $102.2 billion spread over 9,355 transactions the year prior, according to PitchBook data.


How AI is transforming investing 


🤖 Top VCs dish on hot and not-so-hot trends in AI. AI is still a bright spot in a gloomy startup landscape, but VCs are picky about where they invest. Here's what excites them and what they're tired of seeing.


What's hot: 

  • Unstructured data: This messy data (text, images, etc.) is crucial for AI to understand the real world.

  • Ultra-specific AI: Forget generic solutions. Investors want AI that tackles a single, well-defined problem in an industry.

What's not:

  • Big language models like ChatGPT have grabbed headlines, but VCs say the market is saturated. They'd rather see startups focus on the "picks and shovels" of AI: the infrastructure that makes AI more powerful and user-friendly.

💰 VCs money is chasing chipmakers that aren’t Nvidia: Generative AI companies might be at the mercy of current chip-making powerhouses (Cough, Nvidia, Cough), but that also means there's great demand for innovative upstarts who want to shake things up. That's why a new startup called Etched just snagged $120 million to build a special kind of chip – one that only runs a specific type of AI model. 


📉 Nvidia's stock price has fallen sharply after briefly becoming the world's most valuable company last week. A combination of profit-taking, insider selling, and concerns about valuation metrics likely triggered the decline, according to Sky News.


⚠️ Silicon Valley rejects AI safety bill: Joining forces with over 140 startup founders, Y Combinator is pressuring the Assembly to reject a California bill that would require AI companies to undergo risk assessments before releasing new models.


🤔 VCs often miss out on great ideas because they focus on familiar markets. Bloom Money founder Nina Mohanty shares tips for founders to win them over: target open-minded investors, prove market size with data, and highlight similar success stories.


🇨🇳 China's AI startups rush westward: Despite rising tensions, Chinese AI startups like Moonshot are targeting the U.S. market. The reason? Saturated competition in China makes profitability difficult, pushing many to look elsewhere for profits.




Noteworthy deals

  • iOnctura, a Switzerland-based company developing therapies for neglected and hard-to-treat cancers has raised €80m in Series B funding led by Syncona.


  • Isar Aerospace, a Germany-based company building launch vehicles for transporting satellites into Earth’s orbit has raised €65m in Series C extension funding from investors including the Nato Innovation Fund, G3T, 10x Group and Besant Capital.


  • GenZ social media BeReal acquired by Voodoo for €500m to build new features, and kickstart growth again.


  • Poland’s CampusAI raises €10m pre-seed from angel investor Maciej Zientara, to create a metaverse for learning AI skills. 


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Disclaimer: This content is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice.

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