AI Sale Season, Exit Via the Thrift Shop

TECH IN THE NEWS

ETH ETFs - The SEC has approved Spot Ethereum ETF trading in an abrupt policy about-face after previously considering ETH to be a security.

Limiting Political Deepfakes - The FCC proposed that political ads on radio and TV be required to disclose any AI-generated content they use.

$2.3T Market Cap - Nvidia’s Q2 earnings beat estimates with a $14.9B profit and it forecasts strong growth of 107% more sales than Q3 2023.

Biden vs Crypto - The Administration opposes an industry-backed GOP-driven bill to establish a new legal framework for cryptocurrencies.

AI Acts - As the EU AI Act comes into force, the U.S. Congress prepares to draft its AI Act, with industry players ramping up DC lobbying efforts.

Nearing $6B - Elon Musk’s xAI is reportedly just short of its $6B target after commitments from a16z, Lightspeed, & Sequoia at $18B pre-money.

#BUZZCHALLENGE

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THE HOTTEST THING IN TECH
$4B in AI Startup Sales: Exit Via the Thrift Shop

Four well-funded AI startups are exploring sale options after experiencing low revenue, high costs and competition from tech giants like Google, Microsoft, and OpenAI.

Adept AI Agents

Former OpenAI/Google AI dev-founded AI Agent R&D lab startup Adept is in talks with Meta and others over a sale or strategic partnership. Adept has raised $413.9M to date, most recently a $350M Series B in Feb 2023 at $1B. However, it can’t help that this month OpenAI’s GPT-4o, Microsoft’s Copilot Agents and Google’s Project Astra AI agent/digital assistant apps all landed.

Meta hasn’t yet to announce AI agents, so this deal makes sense. Adept has strong fundamentals and team with a solid tech research base. The founders are credited in the development of the crucial AI transformer architecture, first proposed in 2017. Adept will continue to build on this architecture to build AI agents, and eventually, they hope, AGI.

Humane’s AI Hardware Fail

The AI wearable startup is also seeking a buyer, asking for $750M to $1B. This is just weeks after its much-hyped "Ai Pin" launched to poor  reviews. Humane’s issue is more fundamental, with AI rapidly coming on-device via Google’s Pixel and Samsung Galaxy and OpenAI’s partnership with Apple, and Siri 2.0 on the way. With smartphones becoming AI devices, its unclear what role a $699 AI hardware with poor battery life will serve.

Stability AI Mismanagement

Stability helped fund the AI image generator Stable Diffusion. Stability recently raised over $100M from VCs but is now exploring both sale and a lifeline raise from a group of investors. Stability has faced a number of management issues; Three key researchers who developed the tech quit in March. It doesn’t own the SD software creating challenges monetizing it, and it now owes AWS on bills. Then there are accusations its CEO mis-led investors and even ongoing creator copyright legal issues.

The Takeaway

Times are tough for AI startups and many now appear to be targeting “Inflection-like deals” as the best exit option. The problem, Inflection’s exit was not the outcome investors had hoped for as they only barely got their investment back. We expect to see more of this trend as AI consolidates. The companies with strong fundamentals and teams like Adept and Inflection will likely come out better than many others. For every Inflection, there will be many Rekas. The LLM training startup’s talks with previous backer Snowflake on a $1B sale just broke down, making a deal unlikely.

FOR EMPLOYERS
Job Candidates

Request an intro to candidates -  [email protected].

1. Lockheed Martin Software Engineer, ex-Rutgers Junior Full Stack Developer. Secret clearance. Expertise in C++, PHP, SQL. Rutgers BA in Computer Science.

2. Program Director at U.S. Army PEO Soldier, managing $2B+ budget. Ex-IVAS Program Manager and Asymmetric Warfare Group Logistics Manager. Liberty University MA.

FOR INVESTORS
Open Deals

Request an intro to founders - [email protected]

1. Multilingual Messaging Portal - Sydney, AU - Global, AWS-backed SaaS platform for businesses to communicate with clients without language barriers. $300k secured, seeking $650k for U.S. expansion. (Series A)

2. AI Agent Employees - New York - Sophisticated workflow automation for businesses, by a previously-exited founder. Building towards fully autonomous organizations. Backed by Tribe & Kenetic, rolling out to extensive waitlist.

3. Outbound B2B Campaign AI Co-Pilot - Lexington, MA - Turn any CRM into an AI optimized sales agent for personalized customer campaigns. Founder previous exit to PE. Notable Angel on board. Top Hubspot App. Post revenue. (Seed)

TRENDING TOOLS AND BUZZY TECH
Tools

Microsoft - 1. Partnered with Truecaller AI phone assistant to filter calls in your own voice. 2. Unveiled Copilot Agents, its AI business assistants.

Perplexity - To visualize search answers with shareable graphs & charts.

Amazon - AI-upgraded Alexa to get conversational voice chat abilities.

Spreadsheet Data Analysis - 1. Google unveils Gemini Spreadsheet tool. 2. OpenAI rolls out ChatGPT data analysis tools.

Tech

SpaceX - Demos starlink-powered direct-to-cellular video calling.

IBM - Open-sources Granite LLMs and partners with Saudi Arabia.

BrainBridge - AI-driven robotic head transplants onto a donor body.

B&B - World 1st hybrid boring-blasting machine - 30% efficient tunnelling.

DEALS WE’RE WATCHING
Closed Deals:

AI Data-Labeling - SF AI data startup Scale AI raised a $1B Series F, doubling its valuation to $13.8B, led by Accel, with Amazon, Meta, Nvidia, Intel, AMD, & more top VCs piling on.

AI-Based Translation - German startup DeepL raised a $300M round at $2B pmv & offers translation services for Nikkei and Zendesk. The deal was led by Index Ventures, with Iconiq Growth pitching in.

Foundation Model Leader - French AI startup H, (formerly Holistic AI) raised a $220M seed from Accel, Amazon, Samsung, and others.