I'm writing this mostly for myself - I'll decide later if I want to make it public, but it's worthwhile to just think about what happened in the last year, and reorient yourself.
The end of the year is a funny marker - it's arbitrary - why not just reset at any other time of the year? March 12 feels as good as January 1 to me. But there is something nice about the week between Christmas and New Year's, when things are quiet, people tend to spend more time with family and have time to think about what is behind, and what's ahead.
Last night, I had a wonderful New Year's Eve dinner where we each talked about our 2023 Year in Review, and then our intentions + manifestations for the year ahead. Here are mine:
I started 2023 pretty intensely. The plan was to launch a new company called NowNow. I had teamed up with one of my best friends, convinced him to move to New York, and started to plot out my next great act. The idea was relatively simple - in an era of 10-minute grocery delivery, why can't you get *anything* in 10 minutes? We spent months dissecting the quick commerce business models, trying to understand how their businesses work, what the margins look like, and if there was a real path to building something enduring that totally changed how consumers shop. We landed on a crazy idea - we'd launch a new retailer that offers the inventory of a Target (30k items) available within 10-20 minutes.
Instead of building enormous dark stores like they did in Web 1.0 (see Webvan, etc), we'd think like Airbnb. We'd use people's homes as warehouses - letting owners and renters trade spare space in their garages or bedrooms for income. The idea is that we could convert massive fixed costs (big warehouses and long leases) into mostly variable costs (people's homes could be spun up and down as needed). We could have thousands of storage points across cities, and build technology to figure out the right place to place each item in our inventory based on who was likely to order it at any given time.
The idea was nuts - we got only two reactions: 'that sounds insane and will never work' or 'woah, go do it!' We studied the top 30 cities in the US to try to figure out where to launch across myriad dimensions: size, availability of housing stock, ratio of rentals to owned units, proximity of college campuses, cost of last-mile delivery labor, friendliness of regulators, etc.
We landed on Austin, TX as our first test city - I'd never spent much time in Austin, but it seemed perfect - lots of houses with garages close to the city center (aka lots of extra space), a young population of people eager to try new services/apps (SXSW culture), and a state generally friendly to businesses. We visited Austin, rented a house in Bouldin Creek, and got to work. We needed to build a small working prototype, and recruit people to help us stand up the business (recruiting storage partners, buying into inventory, building the apps, etc).
Come the end of February, we were ready to go fundraise to bring NowNow to life. I expected this to be relatively easy - we'd raised hundreds of millions for Casper, and I'd helped dozens of companies raise from investors before. We had a beautiful deck, and had practiced the pitch with friends. I set up dozens of meetings with some of the best investors in the world - and the reception was incredibly positive. This was an ambitious idea, that if successful, had the potential to change the way commerce works around the world. While the chances were low, in a risk-on world, it was part of a group of ideas with merit that might have been worth backing.
Fundraising is generally a few-weeks long process (if you're lucky), in which the flow goes something like this: you start with people you know really well, even if they aren't your ideal target investors, because they're the most likely to give you money or at least give you good feedback. The mid stages are with big funds who can write big checks or at least have brand names that you'd like to be associated with--by this point, you've practiced your pitch, ideally have interest, and can use fomo to get someone to launch in and give you a term sheet.
By all accounts, things were going well, until March 10th. If you're in the startup world, this was the day of panic, doom, and what seemed like existential crisis - the collapse of Silicon Valley Bank. Come Friday, investors skipped meetings, tended to portfolio companies to make sure they could make payroll, and perhaps rightfully so, had no interest in thinking about funding new companies. I assumed things would settle down over the next week and return to normal, but in practice, it felt like a near instant regression to a 'risk off' mentality. Investors that had expressed a strong interest in working together just stopped replying to my emails or calls. In a week, we'd gone from $15M "committed" to crickets.
At this point, trying to keep ourselves sane, we had to stand back and assess the situation at hand. The facts were: US immigration had kicked my co-founder out of the US (and subsequently denied his O1), raising the money we needed to get NowNow going was going to be difficult if nearly impossible, and my family was moving to Austin from New York and I needed to figure out if that would be permanent. We tried revising our plans to see what we could build with much smaller amounts of cash ("let's just build a v1 pilot with a few $M and then go back out and raise in a few months") but figured a subatomic pilot wouldn't answer the questions people had about how margins would work long term, and how much cash we would need to keep going.
We decided to call it quits.
This was one of the most painful decisions in a long time. I remember not sleeping for days when shutting down our last company before Casper. Giving up on something you've poured your heart and soul into for a while is painful. In the next 3 months, the markets got worse, especially for companies with high capex + opex (nearly all of the fast delivery companies went bust), as investors decided to stop funding growth, and founders were left catching a falling knife.
I spent the summer picking up the pieces and trying to figure out what to work on next. I worked daily with two brilliant friends on trying to launch a new business in healthcare, but couldn't come to consensus on where to start. I traveled to a few friend's weddings but mostly agonized about what to do next. I had a coach help me think about all the things one is supposed to consider (how to connect purpose, meaning, profit, etc etc etc), but the most helpful thing was actually around helping me sit with the discomfort for longer. Great ideas and projects don't just appear overnight (or, do they?)
Come the end of the year, I was seeing two completely different situations with companies:
- companies whose business models had fallen out of favor or who could not pivot to profitability before investor capital ran out were going bankrupt. I'm talking $50M+ revenue companies that I assumed "had made it" across the threshold of inevitability of existence. I was getting frantic calls nearly daily from entrepreneurs I'd invested in or knew asking for help negotiating their debt payments, trying to raise bridge rounds, or deal with the fact that their company recently valued at hundreds of millions or more, was now bankrupt.
- in the world of AI, there seemed to be boundless optimism on the business side. LLMs were getting more powerful, more performant, and easier to run. Companies had open sourced big models like LLaMA, Mistral, etc, and it felt like we were at the beginning of a new chapter for the internet (and for the world). Of course there was doomerism about the potential of AI killing us all, power coups in bigco leadership, and a lack of clarity on regulation - but all in all, for those observing the world of AI from the outside, things felt completely different than the rest of the world.
All of this leads me to believe, 2024 is going to be a wild year ahead. Here's what I predict will be ahead:
- Many more startups are about to go bankrupt. The worst of it is yet to come. As founders, we are eternal optimists and experts of pulling rabbits out of hats, but I don't think we've had a situation in recent memory where we've had a rabbit shortage. Founders will need to get creative if they want to see the companies they created live on (in any way)
- Many more VCs are about to go out of business (or hand in the keys). LPs are tight on cash, and are not looking to double down on unproven managers. For some with bigger funds, they might be so out of the carry that they have to consider if it's worth continuing to put their life savings as GP commits into funds that may never return capital.
- In the shift towards profitability over growth, a different kind of founder or executive is succeeding. We need to rewire our existence to make hard decisions early and often. If you can't, give the keys to someone who can.
- AI is going to start to have pretty profound effects on our daily lives. It may start small (ChatGPT used for writing emails), but soon we are going to have very powerful models that can be run on device (see Apple + Google's new work on this), meaning latency will go down (and we may have more tools that are always-on like 'Her')
- We are going to discover lots of new use cases for AI that we never imagined before. Imagine an AI therapist who can use all of the world's knowledge to help you feel better and be more emotionally resilient - but can talk to you 24/7 - in any language - and with full knowledge of what's happening in your life. Imagine AI assistants that take the pain out of daily chores (but can also do things that humans simply cannot - eg. calling 20 neighborhood pharmacies to see if your medications are in stock and reporting back in 60 seconds).
- In the spirit of Lord of the Rings, the AI battle is not lost. This year, we might still see people starting new companies that have a chance at developing different kinds of AGI, and with many fewer resources than we expected. Sometimes standing on the shoulders of giants gives you a great view onto what to try next. We need this - in the spirit of "arming the rebels", we need more companies building tools for people to distribute the balance of power widely.
2024 is going to be wild.