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Musk Could Leave Tesla Over $56 billion Package Approval & Hong Kong Launched $8 Billion AI Fund

Musk Could Leave Tesla Over $56 billion Package Approval & Hong Kong Launched $8 Billion AI Fund

Venture Daily Digest - 10/06/2024

Venture Daily Digest
June 10, 2024

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👋 Hey, Sahil here! Welcome to today's quick rundown in the Venture Daily Digest Newsletter. I've got the scoop on startup fundraising, VC funds, and some cool tech – all in just 5 minutes ☕! Today’s major updates include -

Elon Musk could leave Tesla if $56 billion pay package not approved from investors.
ByteDance, parent of TikTok, plans to invest around $2.13 billion to set up an AI hub in Malaysia.
Y-Combinator & Microsoft Ventures led $8 Million funding round in a UK-based startup Unify that automatically finds the best LLM for every prompt.
Gideon Yu, former CFO of YouTube and Facebook, is leading efforts to raise about $500 million for a fund affiliated with Alphabet's moonshot lab, X.
The Hong Kong government plans to sign a cooperation pact between its HK$62 billion ($8 billion) Hong Kong Investment Corp. and a local "unicorn" startup focused on large AI models and intelligent manufacturing.
Featured Article : The Two Laws Of Startup Physics By Eric Paley.

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Startup Funding Updates

Unify, a London, UK-based provider of a platform that automatically finds the best LLM for every prompt, raised $8M in funding. The round was led by Y Combinator, Essence, A Capital, SignalFire, J12 and M12, with participation from angels like Hugging Face CEO Clem Delangue, Weaviate CEO Bob van Luijt, Dropbox co-founder Arash Ferdowsi, ex-Head of Corp Strategy at Microsoft Charlie Songhurt, Instagram Sr Director of Engineering Sanketh Shetty, and DeepMind Staff Research Scientist Lasse Espehalt. More Here

Anterior, a San Francisco-based startup, uses AI to expedite health insurance approval for medical procedures. It has raised $20 million in Series A funding at a $95 million post-money valuation, led by NEA with participation from existing investors Sequoia and Neo. More Here

Torpago, a San Mateo, CA-based commercial credit card and spend management provider, based $10M in Series B funding. The round was led by Priority Tech Ventures, a division of Priority Technology Holdings, Inc., and EJF Ventures, with participation from BankTech Ventures and other existing investors. More Here

Human Native AI, a London-based startup, is building a marketplace to broker deals between companies building LLM projects and those willing to license data to them. The company aims to help AI companies find data to train their models while ensuring rights holders opt in and are compensated. Human Native AI raised a £2.8 million seed round led by LocalGlobe and Mercuri. More Here

Sware, a Boston, MA-based provider of a software validation solution for innovative life sciences companies, raised $6M in Series B funding. The round was led by First Analysis, with participation from existing investors including LRVHealth, New Stack Ventures and Insight Partners. More Here

PharmaCord, a Jeffersonville, IN-based pharma services company, received an undisclosed investment from Permira. More Here

Quorum Cyber, an Edinburgh, Scotland, UK-based global cybersecurity firm, received a strategic Growth investment from Charlesbank Capital Partners. More Here

Bem, a San Francisco, CA-based AI data interface company, raised $3.7M in Seed funding. The round was led by Uncork Capital with participation from Kevin Mahaffey, Roar Ventures, and key angel investors including Garry Tan. More Here

BranchLab, a NYC-based data science company developing advanced AI software that enables healthcare brands to reach the right consumers, raised an undisclosed amount in Seed funding. The round led by newark venture partners with participation from Aperiam. More Here

Tektonic AI, a Seattle, WA-based company developing GenAI agents for enterprise processes, raised $10M in funding. The round was led by Madrona and Point72 Ventures. More Here

Fhenix, a Tel Aviv, Israel-based startup that aims to bring confidentiality to Ethereum, raised $15m in Series A funding. The round was led by Hack VC, with participation from Dao5, Amber Group, Primitive Ventures, GSR, Collider Ventures, and Stake Capital. More Here

Mindset Medical, a Phoenix, AZ-based software as a medical device company, raised an undisclosed amount in Series A funding. The round was led by Grayhawk Capital and Questa Capital with participation from AZ Venture Development Corporation, Amgen Ventures and Nova Prime. More Here

Phonely, a San Francisco, CA-based AI-driven phone answering service startup, raised $500K in funding. Y Combinator made the investment. More Here

Venture Capital Updates

Gideon Yu, former CFO of YouTube and Facebook, is leading efforts to raise about $500 million for a fund affiliated with Alphabet's moonshot lab, X. The independent fund would invest in startups spinning out from X as the lab embraces financial discipline. Alphabet itself is not raising the fund, which aims to complete financing by year-end, though targets could change. X has had notable spin-outs like carbon removal firm 280 Earth, but faces investor skepticism over profitability. More Here

Featured Article

The Two Laws Of Startup Physics By Eric Paley.

With 15 years of experience as a venture capitalist under his belt, Eric Paley, a Partner at Founder Collective, has identified two fundamental and inviolable "laws of startup physics" that all founders must internalize to build a successful, sustainable company.

Capital compounds both positive and negative formulas. All positive formulas compound at diminishing rates of return.

Capital compounds positive and negative formulas

We are fond of saying, “Capital has no insights.” It doesn’t have the answers to your problems and can only fund two things for a startup:

A) Experimentation - which rarely is expensive.

B) Scale - which compounds whatever is already happening at the startup, whether compounding toward greater intrinsic value or compounding the startup’s value to zero.

Capital can scale intrinsic value rapidly if you have an engine that allows it to turn $1 into $5 of value. If it has an engine that turns $5 into $1 (or even $1 into $0.99), capital will ultimately compound the negative value formula to zero.

All positive systems compound at diminishing rates of return

Sooner or later, the return on each dollar invested will shift to negative. If you’re unaware of the point at which compounding goes into the red, you start compounding negative value.

Paradoxically, the desire for growth often prematurely drives startups into negative compounding, ultimately leading to failure.

In my experience, startups that internalize these rules have done incredibly well.

Failure to respect the rules of startup physics - capital compounds good and bad, and all positive compounding eventually diminishes - has been the cause of just about every startup failure I’ve seen that can’t, simplistically, be written off as “no one wanted the product.”

Other things to consider from this tweet

Startups should experiment with small amounts of capital until they find a formula that generates positive intrinsic value on each dollar invested, before attempting to scale.
Many startups skip this crucial experimentation phase and attempt to scale prematurely, leading to compounding losses over time.
As startups attempt to grow, various levers like adding features, pursuing low-quality customers, and scaling sales/marketing become subject to diminishing rates of return.
Venture capitalists often prioritize short-term growth over long-term intrinsic value creation, incentivizing startups to spend poorly on vanity metrics.
Founders should resist this pressure and focus on low-cost experiments until they discover how to create positive value formulas that justify increased spending.
Discipline is critical – when something stops working, startups must immediately stop scaling that area.
Successful approaches include not skipping the experimentation stage, keeping experiments small, running only a few at a time, and asking better questions about ROI versus growth.

Read detailed article in our Venture Curator Newsletter….

Startup’s Latest Buzz

Acquisition & Going Public

SoftBank Group Corp.-backed South Korean travel app Yanolja Co. is aiming for $400 million in a US initial public offering. More Here

Nemetschek Group (NEM.DE), a Munich, Germany-based global provider of software solutions for the AEC/O and media industries, is to acquire all shares in GoCanvas Holdings, Inc., a Reston, VA-based provider of field worker collaboration software for undisclosed amount. More Here

Layoffs & Bankruptcy

Revel, a New York-based startup, is pivoting yet again by laying off its over 1,000 drivers and embracing a gig worker model like Uber and Lyft after a successful pilot. The move comes as Revel struggles to recruit drivers who desire more flexibility, despite originally being attracted by Revel's employment model. More Here

Startups & People

Tesla's board chair Robyn Denholm is calling on shareholders to approve Elon Musk's $56 billion pay package, claiming it is needed to keep the billionaire CEO motivated and prevent him from leaving Tesla for "other places." Denholm argues Musk is not a typical executive, so standard compensation won't suffice, despite him being one of the wealthiest people on the planet, implying he could decamp from Tesla if not properly incentivized. Early voting indicates Musk may get his way, with over 80% of shares voted so far in favor of the massive pay plan that proxy firms have advised against. More Here

Former Autonomy CEO Mike Lynch was acquitted of fraud charges related to the company's $11 billion sale to HP in 2011. Lynch maintained his innocence, claiming HP mismanaged Autonomy after the acquisition. The verdict marks a notable victory for Lynch after a 13-year legal battle with HP. More Here

Rippling banned former employees working for certain competitors from participating in its $590 million tender offer. This decision was made due to concerns about sensitive financial information being shared with competitors. Employees at companies like Workday, Gusto, and Deel were excluded. Some former employees wrote a letter urging Rippling to change this decision, but the company refused. More Here

Latest In Emerging Tech

GameStop reported a drop in sales and announced a $3 billion stock offer, sending its shares down sharply. The company published its results early, ahead of a livestream from meme stock influencer Keith Gill. Despite the hype, GameStop's business model remains fragile due to the shift towards online gaming and ecommerce. More Here

ByteDance, parent of TikTok, plans to invest around $2.13 billion to set up an AI hub in Malaysia. The company will also invest an additional $320 million to expand its data center facilities in Johor, Malaysia. This investment aligns with Malaysia's target to grow its digital economy to 22.6% of GDP by 2025. More Here

The Hong Kong government plans to sign a cooperation pact between its HK$62 billion ($8 billion) Hong Kong Investment Corp. and a local "unicorn" startup focused on large AI models and intelligent manufacturing. This move aims to boost R&D and talent development in Hong Kong while accelerating digitalization across the Greater Bay Area. More Here

A US federal judge dealt a blow to the Biden administration's antitrust case against Google's advertising technology practices. The judge ruled the case will proceed as a bench trial after Google paid $2.3 million, the full monetary damages sought by the government. This deprives the Justice Department of its preferred jury trial. The case alleges Google stifled competition through anticompetitive mergers and forcing industry players to use its ad tech products. More Here

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