Glenn's Weekly Digest - 2/16/24
Your Weekly Guide to the Startup Universe: Navigating the World of VC & Startups for Students
Stories of the Week
Script to Screen: OpenAI's Sora Turns Words into Worlds
OpenAI’s newest model Sora can generate videos — and they look decent [TechCrunch]
OpenAI continued their rapid innovation by launching Sora, a new AI model capable of generating videos from text descriptions or still images, joining the ranks of startups and major companies like Google and Meta in the video generation space. Sora is designed to produce high-quality 1080p scenes that can include various characters, motions, and detailed backgrounds based on the input it receives.
Why it matters: The product’s ability to generate hyper-realistic videos, has sparked a wave of astonishment across social media platforms, where users are hailing the technology as a groundbreaking leap forward, describing the outputs as a genuine game changer. The richness and precision of the videos produced by Sora have left numerous people astonished by the possibilities it unveils. This innovative leap by OpenAI into video generation signifies a monumental shift in digital content creation, promising new possibilities in storytelling, education, and entertainment.
What are the risks? While most of the response has been positive, OpenAI's unveiling of Sora also raised concerns about its potential misuse, particularly with the upcoming global elections. The rise of deepfake technology, capable of creating convincing video content of public figures and private individuals, raises significant ethical and safety concerns, particularly in the context of a presidential election year and ongoing global conflicts where disinformation can have severe consequences. In response, the Federal Trade Commission has proposed new regulations on Thursday to combat the misuse of AI by making it unlawful to generate artificial impressions of real people, expanding the scope of protections against impersonation of government and business entities.
What’s next? The potential safety issues have prompted the company to outline several safety measures prior to its public release. The organization is engaging with experts to rigorously test Sora for vulnerabilities related to misinformation and bias. OpenAI is also developing detection tools and plans to incorporate origin-marking metadata into videos generated by Sora for future public use. The company emphasizes the unpredictability of both beneficial and harmful uses of its technology, advocating for the importance of learning from real-world applications as a key strategy for enhancing the safety of AI systems over time.
Instacart Checks Out with Savvy Stock Strategy, while Uber Gets Taken for a Ride
Instacart Shows Up Uber on Handling Stock Comp [The Information]
Instacart has taken a strategic leap ahead of Uber by offering employees the option to receive more cash and less equity in their compensation, effectively reducing the dilution from stock compensation. While Uber embarks on a $7 billion stock buyback to counteract dilution, albeit at higher prices, Instacart has already mitigated this issue by repurchasing $70 million of its shares, with plans to expand the buyback to $1 billion. This approach not only highlights the hidden costs of stock compensation but also showcases Instacart's proactive measures to manage its share count and financial health, marking a significant contrast in handling equity between the two companies.
Why this matters? This reflects a deeper understanding of the implications of stock compensation on company valuation and shareholder equity. By choosing to offer more cash compensation, Instacart is directly addressing the issue of dilution, thereby preserving the value of existing shares and demonstrating a commitment to shareholder interests. Furthermore, the vastly different approaches between Instacart and Uber highlight the importance of strategic financial management in the tech industry, where innovative compensation strategies can significantly impact a company's long-term sustainability and investor confidence.
Why is stock based comp a risk? Tech companies' long-standing practice of generous stock compensation is facing increased scrutiny as growth rates slow and investor attention heightens, revealing a structural issue that could lead to shareholder dilution and underperformance. SVB's analysis indicates that companies with lower stock-based compensation expenses have historically offered better returns, highlighting the negative impact of high equity compensation on stock performance. As the industry grapples with this challenge, strategies like reducing stock compensation, adjusting salaries, and increasing buybacks are suggested to mitigate dilution, though evidence of widespread adoption is lacking.
What happens next? Public tech companies, recognizing the unsustainable trajectory of stock-based compensation amid slowing growth and increased scrutiny, are poised to shift their strategies towards offering more cash in lieu of stock. This pivot is driven by the need to manage dilution more effectively and maintain shareholder value, as the tech sector confronts a new financial landscape marked by cautious investment and demand for fiscal responsibility. As a result, we're likely to see a trend where tech firms increase cash salaries, possibly at the expense of the lavish stock options that have characterized the industry's compensation packages for years.
Top Reads This Week
YC’s latest Request for Startups [Y Combinator]
At the heart of YC Group Partners' weekly meetings is a vibrant discussion on founder ideas, highlighting which concepts are gaining traction and which are being set aside. These conversations reveal not only the trends but also the unexplored opportunities that YC is eager to fund, leading to the inception of a new Request for Startups (RFS). This tradition, dating back to 2009, serves as a signal for founders, encouraging them to bring to life ideas in areas deemed crucial for future decades, hoping to inspire and attract new talents and innovations to YC.
Happy Valentine’s Day, dating app downloads are slowing down [TechCrunch]
Within the US, the dating app market is beginning to present a mixed bag of results, with global downloads showing a modest year-over-year growth of 1.9% to 128 million installs, signaling a deceleration from the previous year's 29% increase. Match Group, the powerhouse behind Tinder, Hinge, and others, reported a decline in paying customers, underscoring challenges within the industry despite a revenue uptick driven by aggressive monetization strategies, such as the launch of the premium-priced Tinder Select. Amidst these market dynamics, the introduction of AI enhancements and the emergence of new players hint at potential shifts, suggesting an industry at a crossroads, grappling with evolving consumer preferences and the quest for sustainable growth.
Top 5 Deals of the Week:
Closinglock, an Austin based fraud prevention platform for real estate transactions, raised $12 million in Series A funding led by Headline VC.
Upstash, a Bay Area company providing serverless data platform, raised $10 million in Series A funding led by a16z.
Vocode, an SF-based company that has built a library of open-source LLMs for developers to create voice applications, has raised $3 million in seed funding from Base10 Partners, Google Ventures, Accel and others.
Unlearn, an SF based company using AI to develop digital twins of clinical trial participants, raised $50 million in Series C funding led by Altimeter Capital.
Meter, an SF based company offering internet infrastructure for the enterprise, raised $35 million led by Sam Altman and Lachy Groom, with participation by Sequoia Capital.
Venture Jobs of the Week
Associate, WndrCo [Bay Area]
Build Associate, WndrCo [NYC]
Finance/Operations Associate, Haystack [Bay Area]
Healthcare IT & Services Summer Intern, F-Prime [Boston]
Life Sciences Summer Intern, F-Prime [Boston]
Principal, Roivant Health [NYC]
Head of Product, Seven Seven Six [Remote]
Chief of Staff - Growth, a16z [Bay Area]
Summer Associate, Origin Ventures [Remote]
Deal Operations Associate, OMERS Ventures [Bay Area/NYC]
Investment Associate, Munich RE [SF]
Investment Associate, Giant Ventures [London]
Thank you for joining us for another edition of Glenn’s Weekly Digest! We hope you found valuable insights into the dynamic world of venture capital and startups. If you have any feedback or suggestions, feel free to reach out. Stay tuned for more exciting updates next week!
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The material presented on Glenn Borok’s website and blog are my opinions only and are provided for informational purposes and should not be construed as investment advice. It is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy, or investment product. Any analysis or discussion of investments, sectors or the market generally are based on current information, including from public sources, that I consider reliable, but I do not represent that any research or the information provided is accurate or complete, and it should not be relied on as such. My views and opinions expressed in any website content are current at the time of publication and are subject to change. Past performance is not indicative of future results.