Streamlined Ventures Newsletter

Dear Friends,

The last 6 months since our prior newsletter has been turbulent, to say the least. The combined effects of continued rising interest rates, a looming recession, the turbulence in regional banking (SVB, FRB, Signature, etc.), the war in Ukraine and other geopolitical saber rattling have had a dampening effect on overall public sentiment as well as that in the tech ecosystem. It has led to a meaningful slowdown in the rate at which venture capitalists have been deploying capital and banks have been deploying venture debt and other forms of credit. These factors have resulted in an even tighter fundraising environment for entrepreneurs seeking capital to fund their businesses. Unfortunately, we expect this dampened effect to persist for another few quarters.

In addition to the factors outlined above, one of the more significant developments in the last 6 months has been the dramatic advancements in the AI space, catalyzed by the public release of ChatGPT by OpenAI as well as other chatbots such as Google’s Bard, based on large language models (LLMs). For the last 12 years, since the inception of Streamlined Ventures, we have been investing in various iterations of what is now broadly referred to as ‘AI’ (see our website for our AI portfolio). To us, the developments in the field in the last 24 months and especially since the public release of ChatGPT have been nothing short of breathtaking.

The immense and rapid adoption of ChatGPT and the blistering pace of activity in open-source AI development has resulted in the underlying foundation models for LLMs becoming significantly better in a very short period of time. We expect this pace of development to continue and even accelerate in the coming months and years. Given how significant the exponential developments in AI have been, we have taken a departure from our normal newsletter format and have outlined in the section below our thoughts on AI and its implications for our society. 

Despite the recent slowdown in VC funding in tech, we continue to invest at a reasonable pace in exceptional companies that apply AI, data science and software automation in individual vertical markets or in focused consumer applications. Below you can see some of our more recent investments in these spaces. If you come across amazing founders seeking to build exceptional companies in these areas, please continue to refer them to us.

Best wishes,

     The Streamlined Ventures Team

The AI Revolution and its Implications 

At Streamlined Ventures, we are both optimistic and concerned about the dramatic pace of development in AI. We believe that the next 5-10 years will see the emergence of increasingly powerful AI technologies for consumer applications as well as for every business vertical market, which will meaningfully transform the dynamics of those markets. This will lead to massive productivity increases in almost every field, but at the same time, will likely result in an increased risk of job losses, starting first with white-collar jobs and then migrating to the rest of the economy. Goldman Sachs estimates that 300M jobs globally will be impacted by the deployment of AI and software automation. The graphic below shows their estimation of the job types that stand to be impacted the most.

The exponential rate of change in AI technologies combined with the increased penetration of software automation has the potential to displace jobs faster than we might be able to reskill our vast working populations. This scenario could create meaningful stress across all major countries and socio-economic systems. At its extreme, it could set the stage for various tipping points to be reached that could prove to be quite challenging to navigate and will require strong political and business leadership to help guide our world through their intricacies.

In the past, our societies have progressed based on the creativity and output generated by entrepreneurship and the supporting ecosystem that helped it thrive. However, given the capabilities of AI and the potential for rapid commoditization of software, it is possible that it will become harder for technology entrepreneurs to build and sustain value based on software logic alone, as they have been able to do in the past.

In addition, in the AI economy, incumbent companies such as Alphabet, Microsoft (including through their partnership with OpenAI), Apple, Amazon, Meta, etc. will have disproportionate power and leverage in the near term. They have spent the last decade and significant resources in developing deep competence and intellectual property by building the core infrastructure elements that are being widely used in AI. They are now using this advantage to further improve their lead by deploying advanced AI-based capabilities into their vast application installed bases. The reinforcement learning that will result from humans using these applications (and thus training their AIs further) will continue to give the incumbents a lot of advantage in this race for the foreseeable future.

Given this disparity in access to the deep know-how or IP of the larger companies, it could be harder for startups to compete against them in the near term, except perhaps in highly specialized (or vertical) application areas that the incumbents may not value immediately. As a result, we think the ability for entrepreneurs to broadly create sustainable value could be negatively affected in the near to mid-term. This development will also likely sub-optimize the average returns of the venture capital industry during that time, especially given how over-capitalized the asset class has been in the last few years.

On the positive front, we think AI has the potential to meaningfully boost the productive and creative output of companies and human beings alike. AI will likely help us make significant strides in various application areas such as the treatment of numerous previously untreatable diseases, the development of materials and solutions to help remediate climate change, the improvement in the quality of services available to humans, and more. We are also hopeful that new applications will emerge that we have not yet envisioned and which could spawn the rise of whole new industries. Given the current exponential rate of improvement in AI technology, it is hard to envision these applications at present, but as with prior technology revolutions, we have confidence that large new application spaces will emerge over time.

The rate at which AI technologies are improving is truly astonishing and exponential. We think it is going to be difficult to broadly regulate or slow down the rate of change in AI tech and hence believe our societies should be prepared for dramatic change for the better and worse in the next 5-10 years. For our part, we are advocating thoughtful industry-led and governmental regulation in the development of AI technologies and in the imposition of reasonable safeguards such that these powerful technologies will be used for the betterment of humankind and our planet.

New Seed Investments 

We have recently led or co-led five new initial seed investments from our fifth seed fund. Listed below are the companies with which we have recently partnered. One investment is still in stealth and will be listed in our next newsletter.

Our Opportunity Fund Investments 

Our Opportunity Funds allow us to continue to invest in the mid-stage financings of companies whose seed rounds we have led from our Seed Funds. Recently we have made three investments from our third Opportunity Fund: FLYR Labs, Findigs, and Laika.

What’s new with our portfolio

A number of our portfolio companies have secured meaningful follow-on financing rounds recently.  Below are some of the financings that have been publicly announced along with new product launches.

Sohail Prasad has raised $100M to build Destiny, a Disruptor of BlackRock

With $9.4 million in funding to date, Caden is just beginning its journey

VitalXP raises $3M for Web3 shooter Lowlife Forms

Flip announced their MagicOS, allowing brands to go live in 15 minutes

Resilinc Receives Strategic Growth Investment from Vista Equity Partners