a16z’s AI portfolio

Disruption à la AI. Retail tech rollercoaster. Horn loss. View in browser

May 2, 2023

During a gold rush, sell shovels

Hi there,   Here’s this week’s hot or not.

Hot or not

Hot: a16z in AI a16z is simultaneously leaning into and propelling AI-fueled disruption across industries.   Since the start of 2022, the investor has backed 20+ AI-focused companies across healthcare, enterprise tech, and other industries.   Within these categories, a16z has focused on a wide range of use cases, including: Video & audio editing Autonomous drones Drug R&D  Physical security software One of its investments even catapulted a 16-month-old GenAI company into the global unicorn club. Learn more about this deal and discover the other AI-focused companies in a16z’s portfolio in this report.

Not: Retail tech funding   Retail tech funding took off during the pandemic.   As brands and retailers adapted to lockdowns, store closures, and social distancing protocols, funding skyrocketed to reach new heights.   But retail tech’s wild ride has hit a wall.   Startups in the space secured just $5.3B in Q1’23, an 83% drop from Q3’21’s record-high $31.3B.    One of the downturn’s worst casualties? Late-stage deals — median deal size at this stage is down 80% from 2021.  Dive deeper into retail tech’s fall from grace in our State of Retail Tech in 5 charts report.

Hot: Vector databases   “During a gold rush, sell shovels.”   In the generative AI race, it's not all about applications.   The race to win the infrastructure layer is already underway.   In fact, vector databases — which are built to deal with unstructured data — have already raised over $350M.   And most of this year's deals occurred in the last 30 days.   Big dog investors like Andreessen Horowitz, Index Ventures, New Enterprise Associates (NEA), and Battery Ventures have jumped into the fray.   We dig into the now exploding world of vector databases here.   Generally speaking, watch the infrastructure layer of generative AI. It's less discussed, but there is a lot going on there.

Not: Cybereason's valuation Cybereason has dropped out of the unicorn ranks.    The cybersecurity company raised a down round earlier last month that reportedly shaved more than 90% of its ~$3B valuation from 2021.    It had been reducing its headcount well ahead of this, going from a peak of 1,351 to 865 today, as we can see on its CBI profile below.   Get more details on Cybereason and its competition with yesterday’s edition of The Transcript.  Employee headcount data is coming to the CB Insights platform this month. See what it can do for you here.

Hot: Efficient unicorns Last week, we covered the rise of overfed unicorns.    In case you missed it, many unicorns have proven inefficient in translating high funding rounds into value (i.e., they have a low valuation:funding ratio).   However, there are some notable exceptions to this rule.   Unicorns with larger valuations (like SpaceX and Shein) are generally more efficient at creating value, with better valuation:funding ratios.   And some smaller unicorns (like Boba and Nexii) actually have valuation:funding ratios that rival the biggest unicorns. CB Insights customers can uncover the full list of efficient mini-corns in this report.

Not: Connected fitness equipment   The post-Covid comedown has been hard on connected fitness equipment players.   Peloton’s current market cap of $3.3B is 59% below even its pre-Covid IPO valuation of $8.1B.   Tonal, which offers connected strength training equipment, saw its valuation drop from $1.6B to $600M during a recent fundraising round.   Now, Lululemon is rumored to be exploring the sale of its connected fitness hardware business MIRROR. Could Lululemon still recoup its investment in MIRROR? We use CB Insights revenue, valuation, and earnings call data to explore this question here.

I love you.    Anand  @asanwal  P.S. Our analysts are going to dive into key digital health tech trends on June 1. Register for the briefing today to save your spot.

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