AI is like a fairy godmother for entrepreneurs.

“You want to start a business? Bibbidi-bobbidi-boo, here’s a niche market!”

How AI Will Create More Successful Founders

• Why Read:

  • This article encourages startup founders to actively seek out and capitalize on emerging technological shifts, outlining strategies to identify new business opportunities across a broad spectrum.

• Featuring:

  • Dalton Caldwell (@daltonc), Managing Director at Y Combinator interviews Michael Seibel (@mwseibel), Group Partner at Y Combinator

• Link: 

  • “How AI will create more successful founders”

Key Concepts and Tactics:

1. Recognize Disruptive Technology Shifts as Opportunities for New Businesses:

   • "We might be on the cost of the next one of these and that means there are maybe a whole bunch of new opportunities for successful businesses to be created."

   • "When brand new technologies come out that are that are powerful the the people that are on the cusp of understanding them yeah and that quickly build businesses or build useful things using those tools have in a very unique view of creating businesses and wealth."

2. Focus on Identifying and Capitalizing on Emerging Technological Trends:

   • "If you're watching this and you're interested in being a Founder maybe not working at a company yeah and you just pay attention to every new thing that comes out and try to find these opportunities or I don't know Arbitrage is the right word but no just New Opportunities New Opportunities using these Cutting Edge tools."

   • "Anytime one of these Technologies shifts happens the cost of starting a business some set of businesses reduces by up to like 10x yep and so suddenly businesses that either wouldn't have made sense or certainly a normal person couldn't just stand up and do right like can you imagine just oh it's pre- online selling in eBay all you have to do is rent a storefront run a store right like that's that's cheap right like absolutely not."

3. Leverage Emerging Platforms and Communities to Identify Opportunities:

   • "The only way to find these opportunities and learn about them is to find weirdos on the internet that are also into this thing yes and they're figuring it out too and you can kind of compare notes."

   • "This is how new Industries are created literally by weirdos on the internet like like literally literally there's like some subreddit with a bunch of weirdos and like someday from now you know 10 years from now there'll be an entire industry of people that learned about this thing in some subred somewhere there."

4. Embrace the Entrepreneurial Mindset and Willingness to Take Action:

   • "If you're ambitious and you're paying attention you might not ever need to work at a big company you might not ever need to have a boss like you can be in control of your own destiny."

   • "These moments don't happen every week no like we wish we did it but like when they do the people who move I mean this is a very specific example yeah but what not the online live shopping thing I still talk to the founders a lot and they have I think like high school aged kids selling stuff on there money and making just again I don't want to say the numbers but they figured out the format they understand how to use whatnot they built a user base there and they're basically they're killing it."

5. Understand that Emerging Opportunities Span the Entire Spectrum:

   • "We're also talking about things that can just set you up so that you can pay your rent and live a good life yep the opportunities are across the entire spectrum and I think that's what's really cool about new technology like when there's a real technology shift it affects businesses across the board."

   • "It's we're not just talking about companies that YC would even fund I think that the last point I'd want to make on this front is that you don't get this opportunity if you're just thinking you got to actually do well and they won't teach you this in schools schools teach you stuff for 10 or 20 years ago."

The State of Seed Rounds

Why Read: 

• This article provides a nuanced framework for understanding and navigating the rapidly evolving seed funding landscape, empowering founders to build sustainable, high-growth businesses.

Featuring:

• Mattias Ljungman (@Ljungman), Founder at Moonfire

Link: 

• “Seed is broken. Here’s how to fix it.”

Key Concepts and Tactics:

• The Changing Landscape of Seed Funding:

  • "Between 2006 and 2010, fewer than 3,200 startups received Seed funding; a decade later, 23,000."

  • "Seed funding used to serve as a relatively modest financial springboard, enabling typically pre-revenue startups to lay their foundations. That's all changed."

  • "Between 2010 and 2020, the average seed deal grew from $1.7m to $4.6m – some upwards of $22m. Last year, 1,500 angel, pre-seed, or seed rounds were $5m or more, with some stretching into the tens or hundreds of millions."

• The Maturation of Seed-Stage Companies:

  • "The median age of companies funded at Pre-Seed is now 1.2 years old, according to Pitchbook. And startups are on average 23 months old when they raise a Seed round, according to data from Cendana Capital's portfolio. A decade ago they were less than a year old."

  • "In 2010, 19% of Seed-stage companies were generating revenue. In 2022, it was 73%. And it's the same story for A (31% to 91%) and B (54% to 96%)."

• The Ambiguity of the "Seed" Label:

  • "This is not just an observation of the larger amounts of capital raised, or the velocity of early-stage traction, but a recognition that often these startups are led by experienced third-time founders who have a head start with deep learnings, a strong network, and a powerful team behind them."

  • "This means that startups, especially those led by first-time founders, now have to demonstrate significant traction to attract the same level of investment they might have achieved before."

• The Challenges of Scaling from Seed to Series A:

  • "The perceived 'step up' from Seed to Series A is now equivalent to scaling a sheer cliff face. It's no wonder the percentage of Seed stage startups able to advance to Series A within two years has dropped – from 23% for the 2020 cohort to just 5% in 2022."

  • "The median time from a $1m+ seed round to Series A has increased from 14 months in 2014 to 28 months in 2023."

• Redefining the "Seed" Stage:

  • "I propose categorising Seed into two distinct groups: Seed Inception, which Ed Sim describes well as initial ticket going in, and Seed Expansion, which describes rounds where founders have already achieved some milestones and metrics."

  • "Seed Inception 🛠️: The very beginning of the journey, perhaps before the founders have formally established the company. They're rapidly iterating the product and making the first critical hires."

  • "Seed Expansion 💥: At this point, the founders have raised a previous pre-seed (Seed Inception) round to start building and get their first customers. The focus is now on iteration and go-to-market testing."

• Benefits of the Proposed Framework:

  • "Founders can use the above framework as both diagnostic and roadmap. Orient yourself and set your operational priorities; know where you are and where you're going."

  • "For investors, it provides a more granular understanding of where a Seed-stage startup is at so they can tailor funding and support, align on priorities and expectations, and help founders navigate their early stages of growth more effectively."

  • "By recognising the various paths of Seed-stage startups, we can offer more meaningful support and help founders not only reach but excel to Series A and beyond."

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