Published in the San Diego Union-Tribune, February 26, 2024
by Neil Senturia
I recently read an article about chaos vs. complexity in the American socio-economic-political system. Stability moving to instability and order moving to disorder. Then I took a nap. Unfortunately, when I woke up, the mess was still with us.
Ron Weissman, chairman of the Angel Capital Association, recently published a 62-slide deck analyzing the past three years of venture and capital formation and startups and exits. It is great reading.
“Almost 20% of financing rounds in 2023 were down rounds.” What that means is that the guys who wrote the first checks, hoping that the next set of checks would increase their value, were disappointed. Not wiped out yet, but call it a cold shower.
New financing depended greatly on what space you were in and where you were on the growth/profit curve.
Weissman calls it a tale of three markets.
• “Well performing startups, please take more money.”
• “Generative AI — we will wire tonight.”
• “No growth/slow growth” — it’s over Johnny. Good luck and God bless.
With respect to No. 3 above, 2023 saw 3,200 venture-backed companies shut down. The cumulative cost/loss was a mere $27 billion. While I did not analyze all of them, my suspicion is that many were “thinking big” and aiming to change the world. Recent company of note in that position is 23andMe, which offers genetic DNA testing. It raised $1.4 billion, went public and the stock went from $14 to 73 cents. The CEO is Anne Wojcicki, a member of the Silicon Valley elite. Despite having famous investors, it is hard to change the health care industry.
A different fatal flaw is that many of the No. 3 companies were swimming in the same lake. How many software companies does it take to change a light bulb or create an e-commerce site to sell me used stuff or cheaper stuff? Real innovation is hard to find.
A confession. I started a software company in 2021 that was going to change how nonprofits raise money by using NFTs and digital tokens, rather than chicken dinners. The total value of all NFT transactions in that year was $17 billion. How could I miss? The stars were aligned. Timing was perfect. Beeple had sold an NFT for $69 million, and the Bored Apes were selling for multiple millions. Even former President Donald Trump had put out an NFT.
It was obvious to me, create a simple fly wheel effect to engage their donors with essentially a unique swag bag, rather than the usual key, pen, makeup and chocolate bar handed out as you exit the fundraiser.
And let me point out how brilliant we were. We set it up to use a simple credit card. No crypto. Nonprofits might be scared by crypto, but every gala-goer had a credit card. This was a no-brainer.
Oh, by the way, Neil, what’s considered the first U.S. nonprofit? The Peabody Education Fund in 1867. So did you think, at least for a moment, that it might be a challenge to change the way nonprofits have raised money over the last 150 years? The chicken dinner, the paddle raise, the auction of the condo in Cabo. Can you spell arrogant?
My timing was a bit off. Crypto, schmipto, bored apes, Sam Bankman-Fried and who is Satoshi Nakamoto, and more to the point, who cares. The bottom line is that nobody cared. Nobody in the nonprofit world. I was chasing a downward spiral. Bored apes today sell for less than $100 and SBF is in jail.
While I thought the value proposition was compelling, I could not raise any new money, because I had no real sustainable customers.
Trust me, that last sentence is not unique. Consider the 3,200 mentioned above.
We shuttered and returned the remaining money to the trusting angel souls. You always need to know when to call it quits. If you are in a hole, stop digging.
But wait, what about No. 2 above. Another no-brainer? They are throwing money at artificial intelligence. I have a plan. (Be sure to review Mike Tyson’s perspective on plans.)
You can’t just write about AI, you need to experience it. I am launching a personal chatbot.
I will share the tale of the tape with more to follow soon on this next half-baked scheme.
Rule No. 795: This column was not written by ChatGPT.