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🤑 Finance & Liquidity

The Right Criteria for the Right Investor

Battery Ventures discusses the importance of selecting investors based on deep alignment rather than solely financial incentives. Key areas of alignment include:

1. Market Diagnosis: A shared understanding of market dynamics ensures both parties are aligned on the target audience and value proposition, leading to more effective strategies.

2. Strategic Planning: Collaborating on a well-defined strategy allows for unified efforts in navigating challenges and capitalizing on opportunities, facilitating smoother execution.

3. Operating Principles: Mutual agreement on operational guidelines helps maintain focus on key performance metrics, ensuring accountability and adaptability during fluctuations.

4. Talent Management: Alignment on sourcing and evaluating talent fosters a strong company culture, crucial for sustaining growth and innovation.

5. Company Culture: Shared values create an environment of trust and collaboration, enabling both founders and investors to work cohesively toward long-term success.

👉️ Read the full article here

🤖 Everything in AI

Vertical SaaS: Now with AI inside

a16z looks into how AI is increasing revenue per customer for vertical SaaS businesses. To understand why, we need to see how the VSaaS playing field evolved.

Initially, VSaaS businesses only started by augmenting processes by bringing them to the cloud.

After this, they expanded their revenue capabilities by bringing in embedded finance (cloud + fintech).

Now, A16Z argues that VSaaS businesses have another lever to increase their revenue per customer through AI. This will be done by adding in capabilities to lower customer labour and marketing costs, therefore increasing their potential take-rate.

👉️ Read the full article here

Research to Reality

Lightspeed outlines the progression of AI from research to real-world applications, highlighting key developments over the last 15 years that have driven innovation in the sector.

1. Model Architecture Improvements: Breakthroughs in AI models, such as the introduction of Transformers, have laid the foundation for numerous startups.

2. Developer Productivity Gains: Tools like TensorFlow and Hugging Face have significantly enhanced developer efficiency.

3. Task Performance: Increased interest in AI has led to innovations in efficiency and task execution capabilities.

4. Compute Optimization: New optimization techniques have improved model performance and stability.

Looking ahead, the report identifies opportunities in robotics, AI agents, interpretability, and verticalized applications as areas poised for growth and impact.

👉️ Read the full article here

📈 Market Trends

State of Enterprise Tech Spending

The report reviews trends in enterprise technology spending, based on insights from the Battery Q3 2024 Cloud Software Spending Survey, which includes feedback from 100 CXOs managing over $35 billion in annual tech budgets.

Tech spending is increasing, with 74% of companies expecting budget growth, up from 55% in Q1 2024. This uptick signals renewed confidence in tech investments, particularly for experimental initiatives and new technologies.

Despite excitement around AI, only 5.5% of identified AI use cases are in production, revealing a gap between optimism and reality. Notably, two-thirds of enterprises are looking for external support for AI implementation.

Hiring trends show improvement, with just 27% of companies considering a hiring freeze, a decrease from 46% in Q1 2023. Additionally, 42% of respondents plan to expand their workforce, indicating a more favorable growth outlook.

The report highlights the rising importance of AI/ML, with 60% of enterprises planning to increase spending in this area. As organizations face growing data and security challenges, investment in these sectors becomes essential.

Overall, the report paints a positive picture for tech spending, offering startups opportunities to meet enterprise needs in AI, data, and security.

👉️ Read the full article here 

Southeast Asia - Resetting Expectations

The report addresses the contrasting perceptions of Southeast Asia's tech landscape, swinging between optimism and skepticism.

The region, home to 600 million people, has experienced rapid economic growth, leading to expectations for significant tech breakthroughs.

However, the report cautions against unrealistic euphoria, emphasizing the need for a grounded understanding of local market dynamics and consumer behavior to achieve sustainable growth.

Founders and investors are encouraged to reset their expectations by focusing on the fundamentals, which include adapting to regional challenges and recognizing the unique characteristics of Southeast Asian consumers.

The insights aim to guide startups and investors toward a more realistic and informed approach, enhancing their chances of success in a still-promising market.

👉️ Read the full article here 

API Enabled Marketplaces

FJ Labs details the growth in prominence of API-enabled marketplaces, i.e. API-based modular marketplaces that build capabilities from existing software.

Whilst most developers are extremely familiar with building with APIs, the extent of their use in marketplace development remains nascent, especially for investors who remain in the dark about the potential of API-enabled marketplaces.

FJ Labs outlines the 5 core tenets of these marketplaces, being:

1. API-first strategy,

2. Founding team (tends to be people with deep vertical domain expertise)

3. Vertical integration (integrating different levels of the value chain remains key)

4. B2B > B2C (B2B marketplaces are more nascent and have higher AOVs)

5. Analytics (API-level data is key in understanding usage)

👉️ Read the full article here 

📖 Startup stories of the week!

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See you next week!

Rahul & Aryaman