Week Seventeen: Bearish on VC...?

Looks like venture is REALLY going bye-bye.

Housekeeping

Welcome to the seventeenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.

Apologies for the late edition. I think it’s worth saying: VV will, unfortunately, not be as weekly as I hoped. Last week was busy with travels to the west coast —?I’m in the Bay for OneMind’s Investor Day and tons of investor meetings. Expo West next week!

As always, please?hit me back?with feedback and comments—I’m constantly seeking ways to make this newsletter a more valuable read.

Diving right in and keeping things brief:

News, Deals, and Pretty Things

Latest & Greatest:

• Please continue introducing me to interesting folks in your network: other venture funds, LPs, cool founders, etc.
• If you have any connections to athletic teams at either the collegiate or pro level, I would absolutely love an intro.
• The Distilled Intelligence page is SO close to being live! Applications will be up in no time. Please start thinking of top-notch early-stage companies to send our way.
• Seeing more deal flow than we know what to do with here at Fortify. If you want to join our deal sharing network, click here.

Perplexity’s new early-stage fund

Context:

• In December of this past year, Perplexity, the AI search platform, raised $500M at a $9B valuation.
• Perplexity is putting some of the capital it raised to anchor a new $50M investment vehicle it launched. The fund’s goal is to write pre-seed and seed stage checks.
• Most of the money in this fund will come from outside LPs.
• Aravind Srinivas (Perplexity CEO) is not going to be leading the fund —?instead they hired Kelly Graziadei and Joanna Lee Shevelenko from F7 Ventures to be the GPs of the new fund.

Vantage:

• Things are getting out of hand. I don’t like this. Again —?this is an example of venture funds breaking outside of the traditional norms. It seems like VCs are leaving to become operators, and operators are becoming fund managers.
• I really wonder what this means for emerging managers. Will this create a more competitive fundraising landscape where traditional managers are at a disadvantage because they don’t make competitive strategic partners? Will more and more founders elect to take dollars from these strategic investors, who will likely be less controlling than traditional VCs?

Humane implodes. Surprised?

Context:

• Humane AI was founded in 2018 by Imran Chaudhri and Bethany Bongiorno. With the ex-Apple background, the founders had a lot of momentum behind them. It took the founders about 6 years to ship a product, which ultimately ended up going out in April 2024.
• The Humane Ai Pin was a screenless personal AI assistant that actually boasted some really cool features. It cost $700 + $24 monthly subscription but had the potential to replace your phone.
• Humane had raised about $241M from some pretty high-profile investors, including Microsoft and Sam Altman.
• One month after launch, Humane went up for sale for somewhere between $750M and $1B. There was virtually no interest at that price.
• Humane will be going dark on February 28th. The company was sold for $116M to HP. It’s unclear what HP intends to do with the assets, besides saying that it will "acquire key AI capabilities from Humane, including their AI-powered platform Cosmos, highly skilled technical talent, and intellectual property with more than 300 patents and patent applications."

Vantage:

• My prediction when Humane launched was that phones are just as much (if not more so) entertainment devices as they are tools. The world is not ready for screenless devices because the world doesn’t want to give up the dopamine-spiking crack pipe we call our phones. This was proven when TikTok went dark — the world descended into panic.
• This is a really unfortunate outcome for such a notable company. I really would be curious to see what their customer discovery looked like. How did they validate that the world was ready for the product? Whatever methods they used should be studied by future innovators in the space as a warning.

Celebrities aren’t pulling their weight

Context:

• We’ve talked about celebrity brands here on VV before. From BERO to the Kardashian popcorn, we’ve explored some of the hype that celebrities can create when “founding” a company.
• The hype of a famous founder isn’t enough to secure funding anymore — especially after high-profile flops in categories like beauty.
• Investors say they’re passing on many new pitches due to a lack of product differentiation, insane valuations, and a lack of long-term brand strategy. Even brands tied to major influencers — like Logan Paul and KSI’s Prime — have seen sales drop after initial hype.
• Some exceptions remain: Kim Kardashian’s Skims and Selena Gomez’s Rare Beauty have scaled past $750 million in revenue, while Gal Gadot’s Goodles is targeting $100 million in sales this year. However, new brands face stiff competition, especially in food and beverage, where dominant startups like Olipop and Poppi are already pulling in hundreds of millions.

Vantage:

• Even with this drop in interest, I feel like there’s been a huge pivot to audience-as-a-strategy in the investor X universe. The founder having a platform and reach has become a piece of baseline criteria for a lot of consumer investors. See the following points for more details.
• This may be a long-winded explanation, but here’s a summary of this argument I remember reading somewhere (I believe it was Molly O’Shea talking about it): in the past, investors have given capital to founders, who then build a product, and pass that capital along to those who have reach/influence to sell the product. Lots of consumer investors are either trying to remove the middle man or change the flow of capital — invest in the content creators and those with an audience, empower them to build products that their audience craves/asks for, and then grow a business. This sounds like the traditional celebrity-founded play that is losing interest.
• Brands that last aren’t just leveraging a celebrity’s audience; they’re building something bigger. Skims worked because it created a new category in shapewear, not just because Kim K was involved. Future winners will follow that blueprint—celebrity as an accelerant, not the entire value proposition.
• It’ll be really interesting to see what happens at Expo West this year in the celebrity department. How many brands will try to flex their celebrity ties? Will BERO be there? Will celebrities take a more active role as founders in their F&B companies?

Rapid Fire

• Context: Elon Musk’s xAI has introduced a “spicy mode” to Grok, allowing premium X users to engage in explicit text and voice conversations with Grok. The new feature is VERY NSFW. The feature is still in beta, but it has sparked a mix of shock, fascination, and discomfort online, with some calling it impressive while others find it gross. | Vantage:?This signals a growing market for AI companionship and adult-oriented chatbots, possibly driving new investments in the AI-driven intimacy space. We’ve been seeing more un-traditional apps gaining traction, like polygamous dating apps, but the question remains: will venture funding allow these lucrative businesses to come to life, or will they keep their hands clean of it by calling on their vice clause?

• Context: Chegg is suing Google over its AI Overviews feature, claiming it unfairly uses Chegg’s content without compensation, hurting its traffic and revenue. This marks the first antitrust lawsuit from a single company over AI-generated search summaries, as Chegg considers going private amid declining business. | Vantage: This lawsuit underscores the increasing friction between AI and content-driven industries, hinting at possible regulatory oversight of AI-powered search tools. For startups in edtech, publishing, and content creation, Google’s AI evolution could lead to lower organic traffic, necessitating a fresh approach to distribution and monetization.
• Context: Microsoft is reportedly canceling data center leases totaling a few hundred megawatts, despite maintaining that its $80 billion annual data center spend is still on track. The reason for the pullback is unclear, but it contrasts with broader industry trends, where companies like OpenAI, Oracle, and SoftBank are ramping up data center investments. | Vantage: I feel like this could be a nice gap for startups to solve —?if the annual spend is still on track but they’re canceling leases, that means the cost per data center was probably higher than expected. Startups: this is your chance to provide some real cost savings with innovative pop-up data center tech! Make data centers pre-fab for super cheap, please!

Deals that caught my eye

I honestly haven’t had the time to keep track of recent funding, given the travels. Next week’s venture vantage also probably won’t have a hot deals, but to make up for it, I’ll try to share some of my favorite companies from OneMind and Expo West in Week Nineteen.

A hot take

The prep before a company is almost more important than the company itself.

Let me start by saying this is especially true in B2B businesses, and even more true when you have a few really high-ticket customers. But this goes for all areas in the startup lifecycle —?from fundraising to sales to hiring, you want to have all the pieces lined up so that when you officially incorporate and the race starts, you’re already ahead. Trying to build investor relationships while you’re building a company is a) hard as hell and b) really ineffective because investors LOVE to say, “Come talk to me for your next round.” Build the relationship early, get them to fall in love with you as a person, build trust, and then finally make them feel like they’re getting in on something special when the time comes. This applies to sales and hiring just as much as it does for fundraising.

Some cool stuff on my radar

• Tactile Turn has released its new Switch Pen. I am a huge fan of the bolt action pen, which lives in either my backpack or in my pocket at all times. It’s missing the deep carry clip I love so much, but instead has TT’s more premium machined clip.

• I’ve been on the hunt for a nice leather portfolio for a while. While this isn’t that, the lundi MAYA laptop sleeve seems pretty awesome. It’s a bit out of my price range, but it has definitely made it onto my wish list. No more walking into meetings with an ugly laptop sleeve from Amazon!

• More important than a laptop sleeve, though, is a nice briefcase. I don’t have one, but have been on the hunt for one. I am so tired of lugging my backpack around, and would love something that’s slim enough to carry single-handed, but large enough to fit all my work things. The best option I have found is this Rimowa Briefcase, but it’s ??????.

Icing on the Cake

Continued Reads

This week’s continued read is House of Huawei. Unfortunately, I can’t provide a snippet this week (I got the audiobook and didn’t highlight in the book like I normally do), but you should really check it out! Interesting story about the Chinese mega company.

Read it here.

Word of the Week

This week’s word is:

Convexity: The property of an investment where the upside potential far outweighs the downside risk. In VC, convex bets are those where small investments can yield massive returns, while losses are capped at the initial check size.

The best venture investments exhibit convexity—low probability, high-magnitude wins that skew return distributions. A founder pitching a truly convex opportunity can justify high risk with asymmetric upside. In IC meetings, VCs debate whether a deal has real convexity or just optionality without a clear path to scale.

Closing

Thanks for taking time out of your Wednesday to read.

As always, you can find me on?X?and?LinkedIn, and I’d love to hear from you via?email. Whether it’s talking startups or just shooting the shit, I’m always happy to connect.

Onto the next!

//Eli