VCs should give up on the winner-takes-all approach to investing

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By Walter Thompson

Tuesday, August 22, 2023

Welcome to TechCrunch+ Tuesday

Welcome to TechCrunch+ Tuesday image

Image Credits: Andriy Onufriyenko / Getty Images

Several years ago, I was chatting with a friend who’d become an investor about an idea I had for a startup. It wasn’t a pitch: I just wanted to see what they thought of my premise.

“That sounds like a solid lifestyle startup,” they replied, “but most investors I know are only looking for billion-dollar companies.”

The fundamentals of venture capital explain why investors are on a perpetual unicorn hunt, but “even markets with a seemingly dominant player can support multiple winners,” writes Rebecca Szkutak.

To learn more about the winner-take-all strategy that underpins tech investing, she interviewed:

  • Marco Zappacosta, co-founder and CEO, Thumbtack
  • Lily Shaw, investor, OMERS Ventures
  • Logan Allin, founder/managing partner, Fin Capital
  • Lia Zhang, investor, Makers Fund

Thanks very much for reading,

Walter Thompson
Editorial Manager, TechCrunch+

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How any SaaS company can monetize generative AI

How any SaaS company can monetize generative AI image

Image Credits: Image Source / Getty Images

Generative AI often looks like a magic trick, but complex prompts can consume a great deal of resources.

And that makes usage-based pricing a "natural fit" for SaaS companies adding AI-powered products to their roster, says Puneet Gupta, a former AWS general manager who's now the CEO and co-founder of Amberflo.io.

"Since the back-end costs of providing service are inherently variable, the customer-facing billing should be usage-based as well."

Read More

TechCrunch Disrupt 2023

Sponsored by TechCrunch

Come to San Francisco from September 19 - 21 to learn something new and network with other founders and investors.

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VC Office Hours: Why the sex tech industry could benefit from today's politics

VC Office Hours: Why the sex tech industry could benefit from today's politics image

Image Credits: Bryce Durbin

Tech is set on disrupting nearly every aspect of human existence. Except for one, it seems.

Between 2020 and 2022, sex tech startups raised just a little over $1 billion in venture capital, reports Dominic-Madori Davis. She interviewed Coyote Ventures co-founder Jessica Karr to learn more about the state of the sector.

“Sex tech is an inclusive space — there are also many new products that are innovative for gender inclusivity as well as sexual wellness for men,” said Karr.

“While the new products address the true diversity of all people's personal preferences, the taboo will remain for a long time.”

Read More

How this VC evaluates generative AI startups

How this VC evaluates generative AI startups image

Image Credits: Andriy Onufriyenko / Getty Images

When OpenAI made its Chat Generative Pre-trained Transformer (ChatGPT) commercially available in November 2022, it kicked off a land run in tech. Nine months later, every startup is looking for ways to incorporate generative AI.

“Nearly every pitch deck I've seen since December has had AI on the front two pages,” says Adam B. Struck, founding partner of Struck Capital.

“There are a few areas that we think are especially investable and others that are more challenging for a seed-stage company to compete in.”

In this TC+ column, Struck unpacks his thesis as it relates to each layer of generative AI’s tech stack and includes his “new comprehensive deal evaluation framework specific to AI.”

Read More

IP for startups: When (not) to patent your inventions

IP for startups: When (not) to patent your inventions image

Image Credits: Bryce Durbin / TechCrunch

Acquiring a patent creates a myriad of benefits for a startup: It can open doors with investors, lead to joint partnerships, and even help immigrant founders in the U.S. obtain green cards.

But it’s complicated!

Haje Jan Kamps interviewed Michele Moreland, general partner at venture fund Aventurine, to learn more about the application process, how much to budget, and her tips for hiring effective counsel.

“If you are developing a cutting-edge new technology, the next evolution of X, your counsel should know X very well,” said Moreland.

“They need to know why it is better, why it solves the problems, and what the advantages are.”

Read More

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Debate also-rans rage and regroup

Presented by The American Petroleum Institute (API): POLITICO's must-read briefing on what's driving the afternoon in Washington.
Aug 22, 2023 View in browser
 
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CEDAR RAPIDS, IOWA - AUGUST 06: Republican presidential candidate conservative radio talk show host Larry Elder speaks to guests at Ashley's BBQ Bash hosted by Congresswoman Ashley Hinson (R-IA)  on August 06, 2023 in Cedar Rapids, Iowa. Seven of the 14 GOP candidates seeking the party's nomination for president were scheduled to speak at the event. (Photo by Scott Olson/Getty Images)

Larry Elder threatened to sue the RNC to stop the debate. | Scott Olson/Getty Images

UP FOR DEBATE — The RNC released the physical lineup for the GOP presidential debate tomorrow night in Milwaukee. With DONALD TRUMP out of the picture, Florida Gov. RON DeSANTIS and VIVEK RAMASWAMY instead are jointly at the center of the action, Fox News’ Paul Steinhauser reports. Moving out to the left and right, respectively, they’re winged by MIKE PENCE and NIKKI HALEY; CHRIS CHRISTIE and Sen. TIM SCOTT (R-S.C.); and finally ASA HUTCHINSON and North Dakota Gov. DOUG BURGUM.

Meanwhile, the candidates who did not make tomorrow night’s debate stage in Milwaukee are fuming today at the RNC, whose refusal to specify which polls would count toward its requirements left some campaigns in the dark until last night.

  • LARRY ELDER threatened to sue the RNC to stop the debate, arguing that he had qualified and that the committee should have accepted polls from Rasmussen to qualify. “The RNC Committee on Debates meets in Milwaukee today. Are they even aware their leaders are keeping voices off the stage that qualified?” Elder continued. “I’m calling for a discussion and a vote of the full committee on the rigged polling criteria set by the anti-conservative, anti-Trump RNC establishment.”
  • PERRY JOHNSON also threatened legal action against a “corrupt and rigged” process, laying out a lengthy timeline of the RNC’s decision not to count polls that Johnson thought should qualify him.
  • WILL HURD, who also fell short on polling, blasted the RNC not only for opaque qualification metrics but for the requirement to sign a pledge supporting the ultimate GOP nominee. “I have said from day one of my candidacy that I will not sign a blood oath to Donald Trump,” Hurd posted on X, calling the RNC’s approach “antithetical to the democratic process.”

Will any of the excluded candidates drop out over the failure to make the stage? Miami Mayor FRANCIS SUAREZ, who’s one of them, had called on candidates to do just that earlier in the month. His spokeswoman told Bloomberg’s Gregory Korte that “Suarez will have an announcement about the future of his campaign” at some point today.

The debate is a test not just for the candidates, but for Fox News too, which now has its highest-profile opportunity to restore some of its image since the massive Dominion Voting Systems defamation settlement, WaPo’s Jeremy Barr reports. Though moderators BRET BAIER and MARTHA MacCALLUM say they don’t want to be the story, their performance will be a big moment for Fox News’ news division, often overshadowed by its opinion wing.

THE POLICY PRIMARY — While the other GOP candidates dither, Trump is continuing to make radical new plans for a second term — including universal 10% tariffs on all foreign imports, which would risk “a massive escalation of global economic chaos,” WaPo’s Jeff Stein reports. Though his proposals are still a work in progress, Trump’s protectionist ideas are expected to be front and center in his economic pitch against President JOE BIDEN. If implemented, they could spark global trade wars and elevated prices, experts warn: “Economists of both parties say Trump’s tariff proposal is extremely dangerous.”

BIDEN’S THUMBS UP FOR SISKEL — The next White House counsel will be ED SISKEL, an Obama White House alum and former Biden adviser who most recently has been chief legal officer for Grosvenor Holdings, the president announced today. Siskel will succeed STUART DELERY next month. The White House selected him in part because he helped lead the legal response to GOP congressional investigations into Solyndra and Benghazi during the Obama administration, CNN’s Jeremy Diamond reports, experience that could prove relevant amid House Republicans’ ongoing Biden probes. (The Chicagoan is also the nephew of the late film critic GENE SISKEL.)

Good Tuesday afternoon. Thanks for reading Playbook PM. Drop me a line at eokun@politico.com.

 

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ALL POLITICS

BATTLE FOR THE SENATE — Former Rep. DEBBIE MUCARSEL-POWELL (D-Fla.) today jumped into the race to take on Sen. RICK SCOTT (R-Fla.), Gary Fineout reports from Tallahassee. The reddening state will be an uphill fight for Democrats to flip, but Mucarsel-Powell’s entrance gives national Dems their preferred candidate to make the attempt. Democrats think they see an opening: Mucarsel-Powell is an Ecuadorian immigrant from Miami-Dade, and she plans to hammer the controversial Scott over entitlements and his business record. But Scott has a head start in campaigning, while Mucarsel-Powell will have to get past former Rep. ALAN GRAYSON and PHIL EHR in the primary.

BATTLE FOR THE HOUSE — California state Sen. MELISSA HURTADO today jumped into the Democratic primary to try to flip Rep. DAVID VALADAO’s (R-Calif.) seat, KGET-TV’s Luis Garcia reports from Bakersfield. RUDY SALAS, who narrowly lost to Valadao last year, is also running again. The district is Democratic-leaning, but Valadao keeps winning. Hurtado won her state Senate seat by 13 votes in November.

2028 WATCH — Pennsylvania Gov. JOSH SHAPIRO will be the keynote speaker at the New Hampshire Democratic Party’s convention next month, WMUR-TV’s Adam Sexton reports from Bedford. “His willingness to come to New Hampshire is being viewed as good news for the long-term health of the state’s presidential primary.”

2024 WATCH

AD WARS — The Biden reelect’s big new ad campaign has started to be placed, with the first TV spots going up tomorrow in several swing states.

FLIP-FLOP FILES — The Washington Examiner’s Gabe Kaminsky runs down just how many issues and details on which Ramaswamy has changed his tune, as the surging outsider candidate faces growing scrutiny on the trail. Among them: his voting record; pardons for members of the Biden family; drug decriminalization; Israel; Taiwan; masks; and Juneteenth. “Just because Trump can get away with [changing his position] doesn’t necessarily mean everyone else can,” Kyle Kondik of Sabato’s Crystal Ball tells the Examiner.

Speaking of: After Ramaswamy claimed that he’d been misquoted about Jan. 6 and 9/11 in an Atlantic story yesterday, John Hendrickson has the receipts, posting the full audio and transcript of their interview.

TRYING TO FIND AN OPENING — “Can South Carolina’s Haley and Scott woo the GOP’s white evangelical base away from Trump?” by AP’s Tiffany Stanley in Charleston

THE VOTERS’ VIEWS — The latest NYT opinion focus group with Republican voters offers two very revealing anecdotal conclusions about the state of the primary, as Patrick Healy, Kristen Soltis Anderson and Adrian Rivera write: (1) “In all of the focus groups we’ve done — this is our 41st — Mr. Trump has never come across so well positioned as compared with his rivals as he did in this one.” (2) “All the participants thought that President Biden would lose to the eventual Republican nominee, regardless of who it is. The fear that ‘if we nominate Trump, Biden wins again’ was not present.”

— In Iowa, GOP primary voters have mixed and complicated opinions about abortion policy, CNN’s John King reports. Even though most Republicans support at least some restrictions, they’re divided over where to set the cutoff for a ban and uncertain of how heavily the party should focus on abortion.

 

GROWING IN THE GOLDEN STATE: POLITICO California is growing, reinforcing our role as the indispensable insider source for reporting on politics, policy and power. From the corridors of power in Sacramento and Los Angeles to the players and innovation hubs in Silicon Valley, we're your go-to for navigating the political landscape across the state. Exclusive scoops, essential daily newsletters, unmatched policy reporting and insights — POLITICO California is your key to unlocking Golden State politics. LEARN MORE.

 
 

TRUMP CARDS

FULTON DEFENDANTS START TO FRACTURE … “Trump attorneys guided false electors in Georgia, GOP chair says,” by Kyle Cheney: “Former Georgia Republican Party Chair DAVID SHAFER said attorneys for former President Donald Trump, his campaign and the local GOP were responsible for urging him to assemble a slate of false presidential electors that are now at the heart of a sprawling racketeering case. … To bolster his proposition, Shafer provided new documents that underscore the Trump campaign’s close involvement.”

… AND TO SURRENDER: Today, SCOTT HALL and JOHN EASTMAN became the first of the 19 defendants in the Fulton County case to turn themselves in for booking. Eastman said in a statement that his charges “should never have been brought … It represents a crossing of the Rubicon for our country.”

BEHIND THE SCENES — NYT’s Jonathan Swan, Alan Feuer, Luke Broadwater and Maggie Haberman have a detailed account of how MARK MEADOWS maneuvered behind the scenes to cooperate with and hold off special counsel JACK SMITH’s team in recent months. Quietly, Meadows “decided to trust Mr. Smith’s team,” and talked to investigators in both the classified documents and election subversion probes. That has angered some Trump allies, though “he also used the law to push back when he considered the requests to be inappropriate or potentially dangerous to his own interests.” Meadows ultimately evaded federal charges, though not state ones.

THE WHITE HOUSE

POTUS ABROAD — Biden will head to India from Sept. 7-10 to take part in the G-20 Leaders’ Summit in New Delhi, the White House announced today. Earlier that week, VP KAMALA HARRIS will travel to Jakarta, Indonesia, for the U.S.-ASEAN Summit and the East Asia Summit.

POLICY CORNER

DRILLING DOWN — “Biden Revived Rules Designed to Prevent Another Deepwater Horizon Disaster,” by NYT’s Lisa Friedman: “The Department of Interior announced on Tuesday that it had reinstated Obama-era safety rules for offshore drilling that were created in the wake of the 2010 Deepwater Horizon catastrophe … The Trump administration weakened those safety measures … Republicans and the oil and gas industry are widely expected to challenge the rule.”

THE LOAN LURCH — As student loan borrowers brace for the restart of the payments after a three-year pandemic break, the Biden administration is launching a new effort to make people aware of their options, CBS’ Bo Erickson reports. “The new repayment plan, called the Saving on a Valuable Education (SAVE) plan, will be available to many borrowers with loans held by the Education Department.”

 

Enter the “room where it happens”, where global power players shape policy and politics, with Power Play. POLITICO’s brand-new podcast will host conversations with the leaders and power players shaping the biggest ideas and driving the global conversations, moderated by award-winning journalist Anne McElvoy. Sign up today to be notified of the first episodes in September – click here.

 
 

BEYOND THE BELTWAY

CLIMATE FILES — “States have big hopes for renewable energy. Get ready to pay for it,” by Marie French in Albany, N.Y.: “In the coming years, people across the state can expect to give up even bigger chunks of their income to the programs — $48 billion in projects is set to be funded by consumers over the next two decades. The scenario is creating a headache for New York Democrats grappling with the practical and political risk of the transition. It’s an early sign of the dangers Democrats across the country will face as they press forward with similar policies at the state and federal level.”

EMPIRE STATE OF MIND — The recent influx of migrants into New York poses a political challenge for the state’s Democratic leaders, per a new Siena poll, Bill Mahoney reports from Albany. This could turn into one of the major issues in the state’s contested House races next year, and the survey finds that New Yorkers want to slow the flow of immigrants by a 58% to 36% margin. Strikingly, in a head-to-head Biden/Trump matchup, the president is below 50% — in New York! — leading Trump 47% to 34%. The survey

BORDER SONG — On the other side of the country, Texas Gov. GREG ABBOTT’s border crackdown is starting to turn off some locals, NYT’s Edgar Sandoval reports from Eagle Pass. Recent escalatory moves, like floating barriers in the Rio Grande, and at least two deaths near the buoys have some residents saying that Abbott has gone too far.

PLAYBOOKERS

BOOK CLUB — Nikhil Goyal, sociologist and former senior policy adviser on the Senate HELP Committee, has released a new book, “Live to See the Day: Coming of Age in American Poverty” ($29.99). The book centers on three Puerto Rican children’s experiences growing up in the poorest neighborhood in Philadelphia.

MEDIA MOVES — WaPo is adding Shadi Hamid as a columnist and editorial board member and Alexi McCammond as an opinions editor. Hamid previously has been at Brookings, Fuller Seminary and The Atlantic. McCammond previously was a national political reporter at Axios. … John Hewitt Jones is now policy team leader at BGov. He previously was managing editor at FedScoop.

WHITE HOUSE ARRIVAL LOUNGE — Brenna Olrich is now associate director of finance at the White House. She most recently was an operations associate at Protect Democracy. … Keenan Skelly is now senior policy adviser for the White House’s Office of the National Cyber Director.. She most recently was CEO of Spark Security Solutions and founder of the XRVillage.

TRANSITION — Former U.S. ambassador to Tunisia Gordon Gray is now the Kuwait Professor of Gulf and Arabian Peninsula Affairs at the Elliott School of International Affairs at George Washington University. He previously was a faculty member at Penn State’s School of International Affairs.

WELCOME TO THE WORLD — Jocelyn Francis, a senior legislative assistant for Sen. Jim Risch (R-Idaho), and Austin Francis, senior contract specialist at the Federal Aviation Administration, welcomed Amelia Beatrice Francis on Friday. Pic

BIRTHWEEK (was Thursday): Berkeley Mashburn 

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California Today: A bumpy ride for San Francisco’s driverless taxis

Autonomous vehicles scored a victory this month when state regulators approved their expansion in the city, but then the mishaps kept coming.

It's Tuesday. Debate over driverless taxis in San Francisco continues. Plus, California is free of extreme drought conditions.

A Cruise driverless vehicle drove into a paving project last week in San Francisco. The incident happened after California expanded the use of autonomous vehicles in the city.Paul Harvey

After California regulators approved the expansion of driverless taxi services in San Francisco earlier this month, it took only a little more than 24 hours for a series of events to begin that seemed to justify the taxis' detractors.

The day after the vote, 10 autonomous vehicles operated by Cruise, a subsidiary of General Motors, abruptly stopped functioning in the middle of a busy street in the North Beach neighborhood of San Francisco. Posts to social media showed the cars jammed up, their hazard lights flashing, blocking traffic for 15 minutes.

A few days later, another Cruise vehicle drove into a paving project in the Western Addition and got stuck in freshly poured concrete.

And then last week, a Cruise car collided with a fire truck in the city, injuring a passenger in the car.

So it was that last Friday Cruise agreed to a request from the California Department of Motor Vehicles to cut in half the number of vehicles it operated in San Francisco, even though regulatory approval for more remained in place. The company, which has had 400 driverless vehicles operating in the city, will now have no more than 50 cars running during the day and 150 at night.

Cruise is one of two companies — the other is Waymo, owned by Alphabet, Google's parent company — that can now charge for rides in their autonomous vehicles 24 hours a day in San Francisco. Before the approval, which came by way of a 3-to-1 vote of the California Public Utilities Commission, Cruise offered its paid services only at night, and only in parts of the city; Waymo offered only free rides.

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Drew Pusateri, a spokesman for Cruise, said in a statement over the weekend that Cruise "positively impacts overall road safety" compared with other vehicles on the roads and their injury and fatality rates. He said the company would provide state officials with "any data they need to reinforce the safety and efficiency of our fleet."

But to many San Francisco officials, activists and residents, the recent episodes made clear that the cars can be a danger.

When Cruise and Waymo pitched their cars to regulators in December, road safety was a crucial component of their argument. Unlike some human drivers, the artificial intelligence running the vehicles abides by speed limits and doesn't get distracted, the companies maintained. The two companies have said that in their first million miles of fully autonomous driving, there were no fatalities or life-threatening injuries.

City agencies, however, have repeatedly raised concerns about the potential for the vehicles to impede emergency responders. Officials have documented dozens of incidents in which a driverless car interfered with emergency vehicles, including one instance when firefighters were battling a house fire.

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That kind of obstruction could be a matter of life and death, according to the chief of the San Francisco Fire Department, Jeanine Nicholson. The president of the city's board of supervisors, Aaron Peskin, said the North Beach incident had sent "chills down our first responders' collective spines."

At the same time, many advocates bristle at the idea that it is up to state regulators to decide part of the city's cultural and economic future. Public transportation and bicycle proponents have protested adding more vehicles to the city's streets. And San Francisco taxi drivers are concerned that the technology will replace their jobs, while passengers will no longer be able to rely on a driver for help with luggage and groceries, or getting in and out of the car.

Last week, before the D.M.V. asked Cruise to reduce the number of its vehicles operating in the city, San Francisco's city attorney, David Chiu, filed motions asking the utilities commission to halt the expansion altogether until agencies in San Francisco could apply for the commission to rehear the expansion proposal. According to state law, the commission must respond to the city's motions within 15 days.

Cruise will operate at reduced capacity at least until the D.M.V. completes an investigation of the vehicles' safety. In a statement last week, the department said it reserved the right "to suspend or revoke testing and/or deployment permits if there is determined to be an unreasonable risk to public safety."

In the meantime, the debate will go on.

Yiwen Lu is a technology reporter in the San Francisco bureau.

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Cachuma Lake in Santa Barbara County was nearly full in January for the first time in 12 years.Tanveer Badal for The New York Times

The rest of the news

  • Much of California is now free of drought conditions, a big change following three of the driest years in the state's history.
  • The board of trustees of the California State University system will vote in September on a potential annual 6 percent increase in tuition, The Mercury News reports.

Southern California

  • Very few people in Southern California have flood insurance, a fact that will probably impede the region's recovery from Tropical Storm Hilary.
  • Los Angeles school officials began an expansive review of about 1,000 campuses for damage after the storm, The Los Angeles Times reports.
  • A power outage overnight forced the evacuation of patients, some of them receiving critical care, from a building at Adventist Health White Memorial, a hospital in East Los Angeles.

Central California

Northern California

Gualala Point Regional ParkSonoma County Regional Parks

Where we're traveling

Today's tip comes from Todd Hayes, who lives in the Bay Area. Todd recommends a visit to the Mendocino coast, which he calls "a nice break from the urban life of the Bay Area":

"Gualala Point Regional Park — Love walking the trails there. Plenty of native plants and great views of the Gualala River and the Pacific Ocean.

Four-Eyed Frog Books in Gualala — A rare independent bookstore where I can usually find a book that I won't find easily online or at a big-box bookstore.

Small independent restaurants and coffee shops from Gualala, Anchor Bay, Point Arena and up the coast to Mendocino: They are each unique in their own way, making them a treat to explore.

Bowling Ball Beach — Virtually unused except by some of the locals. Difficult to access but worth the trouble. Large, round boulders have rolled from the cliffs onto some amazing tide pools that extend as far as you can see. The beach isn't terribly wide, but it's long and isolated. Come at low tide. Don't get caught at high tide.

Tell us about your favorite places to visit in California. Email your suggestions to CAtoday@nytimes.com. We'll be sharing more in upcoming editions of the newsletter.

Vin Scully will be inducted into the 16th class of honorees into the California Hall of Fame.Andrew Gombert for The New York Times

And before you go, some good news

Today, Gov. Gavin Newsom and his wife, Jennifer Siebel Newsom, will induct the 16th class of honorees into the California Hall of Fame. The class includes the actress Carrie Fisher, the singer Etta James, the L.A. Dodgers broadcaster Vin Scully and others.

"Each one of these pioneers has uniquely impacted California through their boundless creativity, perseverance and courage — encapsulating the California dream through their lives and legacies," Siebel Newsom said in a statement.

You can watch the ceremony at 6 p.m. on the governor's account on X, formerly known as Twitter, or on the California Museum's YouTube page.

Thanks for reading. We'll be back tomorrow.

Briana Scalia, Johnna Margalotti and Brandon Thorp contributed to California Today. You can reach the team at CAtoday@nytimes.com.

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