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Three Questions With Madrona Venture Group’s S. Somasegar
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Good day. In the four months since San Francisco-based startup OpenAI launched ChatGPT, a generative artificial intelligence chatbot, corporate boardrooms have been especially taken by the tool’s humanlike ability to respond to queries in a conversational style, generate instant business reports or marketing pitches, and write code for software applications—potentially cutting labor costs from call centers to sales and information-technology departments. But users say it can also produce wild inaccuracies and give terrible advice. We asked S. Somasegar, managing director at emerging-technology investor Madrona Venture Group, whether companies should think
twice about integrating ChatGPT and generative AI into their business software stack:
ChatGPT and other generative AI tools are getting a lot of attention these days, but how ready are they for the enterprise market?
We are starting to see early innovation in productivity tools, knowledge management and searching for information across an enterprise. But because these applications can generate false, biased and inaccurate content, full adoption will take time. And enterprises will need to have sophisticated AI and machine learning teams, as well as strong AI governance and security in place, before adoption.
What industries are likely to be among the first to adopt these tools at scale?
While the technology industry is likely to adopt generative AI tools at scale first, we see possibilities for vertical applications across healthcare/life sciences, insurance, financial, and real estate because these industries are ripe with repetitive manual tasks. These industries will likely first adopt vertically focused text-based tools to help improve productivity.
What role do startups play in getting generative AI into the enterprise? Where are we in that process?
For generative AI adoption to be ready for the enterprise level, there needs to be more innovation at the tooling layer, specifically. We believe more powerful and flexible tooling will make the foundation model stack accessible to a much broader population of builders. We have already seen many early-stage startups building at all layers of the stack over the last few months, and we are excited to see more innovation in the months ahead.
And now on to the news...
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PHOTO: SHELBY KNOWLES FOR THE WALL STREET JOURNAL
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Silicon Valley is watching. Elon Musk is trying to run Twitter Inc. with an ever-shrinking fraction of the staff the company had when he took over. Silicon Valley is watching to see if he will succeed, The Wall Street Journal reports. Across the tech industry and many businesses broadly, companies are trying to do more with less—using layoffs to unwind recent hiring sprees and cutting back on some long-shot projects. Mr. Musk’s cuts are of a different magnitude. He said in December that Twitter’s staff was down to roughly 2,000 from close to 8,000 before he acquired the company in October and that he was “cutting costs like crazy.” He conducted more layoffs over the weekend, employees
said. Twitter declined to disclose the number of cuts. Mr. Musk’s moves raise the question: How much can companies cut without going too far?
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17%
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The share of consumers who used a buy now, pay later loan between 2021 and 2022, according to the U.S. Consumer Financial Protection Bureau. They were much more likely to be younger than 35.
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Private Fund Investors Flood Secondary Markets Trying to Raise Cash
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The start of this year brought a glut of assets for sale on the secondary market by institutional investors facing a growing need for cash, but so far buyers have been slow to bite. Secondary buyers and bankers that broker such deals estimate that as much as $18 billion of private-equity fund stakes have been offered for sale so far this year, WSJ Pro reports.
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Many buyers are holding out for better pricing than sellers are willing to accept, partly out of a belief that current portfolio valuations don’t accurately reflect the economic and market pressures facing the assets being sold.
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After several years of record or near-record secondary transaction volume, buyers also have less capital on hand than they could bring to the table in 2021.
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Buyer of Moribund Brands Faces Financial Struggles
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A retail venture that built a business giving second life to famous brands like RadioShack and Pier 1 Imports after they closed their stores in bankruptcy now faces its own financial struggles and has hired restructuring lawyers, according to people familiar with the matter, WSJ Pro reports. Retail Ecommerce Ventures LLC, known for reviving distressed retail brands as online-only businesses, has been working with lawyers from Kirkland & Ellis LLP to explore options including a financial restructuring, people familiar with the matter said. The firm, founded by entrepreneurs Alex Mehr and Tai Lopez, recently told its investors it would pause payments on its debt, according to a lawsuit
filed against it earlier this week. Retail Ecommerce Ventures also is working with investment bank Piper Sandler Cos. and financial adviser Riveron Consulting LLC, people familiar with the matter said.
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Funds
A growing share of limited partners said they will not increase their commitments to private-markets funds this year, according to a survey of 106 pension funds and other investors globally conducted through early 2023 by investment adviser Adams Street Partners. Among the respondents, 14% said they will not increase commitments to any managers, up from 6% saying so a year ago. LPs are also less likely to back new managers, with 60% saying they will invest in new managers, down from 64% the previous year. A strong investment track record was cited as important by 32% of respondents, up 6 percentage points from the prior survey.
—Yuliya Chernova
Felicis Ventures, a Menlo Park, Calif.-based venture firm, raised an $825 million fund which it’s calling Fund 9. The firm has $3 billion in assets under management. Felicis also added AI expert Javier Soltero as a senior venture partner. Most recently, he served as vice president and general manager of Google Workspace, overseeing Google’s communication and collaboration products and business.
Atlanta-based TTV Capital raised $250 million for its Fund VI, making this its largest fund. The firm makes early-stage investments into fintech startups, including those with products in payments, banking, cybersecurity, and crypto. The firm typically writes checks of between $2 million and $7 million. It also has some capital set aside for small investments of as little as $250,000.
People
Web3 Foundation, the Zug, Switzerland-based company behind the Polkadot blockchain project, named Thomas Fecker Boxler as chief financial officer. Mr. Boxler was previously chief operating officer at venture firm Serpentine Ventures AG. He had previously founded t10r Kapital, and was co-founder, chief operating officer and CFO of crypto company flovtec.
San Francisco-based Tribe Capital named Prateek Alsi as a partner and co-lead of the ventures team. Mr. Alsi was previously a partner at Village Global and before that a partner at General Catalyst. Prior to becoming a venture investor, Mr. Alsi served as director of distribution partnerships at Square.
Elixia, a tech-enabled clinical-site organization that helps pharmaceutical companies with clinical trials, said it has named life sciences executive Sam Searcy as its chief commercial officer. Mr. Searcy will oversee activities related to marketing and will enhance the company’s service offerings and expand Elixia’s national site network, the company said. He also will manage the company’s offices in Research Triangle Park, N.C., and the North Carolina-based operations team, Elixia said. Elixia is based in Research Triangle Park and Palm Beach, Fla.
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Shef Inc., a San Francisco-based chef-to-consumer marketplace, landed $73.5 million in Series B funding led by CRV. The previously undisclosed round was raised last year and included $7 million in debt financing. Andreessen Horowitz and Amex Ventures also invested.
SpotDraft, a New York-based contract management software provider, closed a $26 million Series A round. Premji Invest led the investment, which included additional support from Prosus Ventures, 021 Capital, Arkam Ventures and 100x Entrepreneur Fund.
London-based Attio Ltd., a company selling customer relationship management software, raised a $23.5 million Series A round led by Redpoint Ventures, with participation from existing investors Balderton Capital and Point Nine. Redpoint Managing Director Alex Bard joined Attio’s board.
Fitix Visualization Ltd., which does business as Hexa, is a Tel Aviv-based 3-D asset visualization and management platform. It raised a $20.5 million Series A round from Point72 Ventures, Samurai Incubate, Sarona Partners and HTC.
TeraPore Technologies Inc., a South San Francisco, Calif.-based startup that develops advanced nanofiltration membrane systems for biomanufacturing, raised $10 million in new financing. The round was led by existing investor Anzu Partners with participation from Entegris Inc.
San Francisco-based Fifty Foods Inc., which sells plant-based instant ramen under the brand immi, raised $10 million in Series A funds led by Touch Capital, with participation by celebrity investors such as Naomi Osaka and Usher, as well as Siddhi Capital, Gold House Ventures, Anti Fund, Harizury, Lab Capital Advisors, and others.
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PHOTO ILLUSTRATION: ELENA SCOTTI/THE WALL STREET JOURNAL, MAURIZIO MARTORANA (5)
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