Sponsored by

A Note From the Redbud VC Team

February was a packed month of surprises — good and bad. One of the most notable being Techstars decision to downsize their location footprint from 400 to 30 locations, targeting cities with the highest VC density. In addition, they’re pulling out of the highest performing locations like Boulder and Seattle, moving HQ to NYC. Other surprises were OpenAI’s insane text-to-AI generator, Neuralink patient zero success, the release of Apple Vision Pro, Musk losing a $56B comp package, and Bitcoin reaching over $60k. Investors are starting 2024 much more actively in the early stages than in 2023. There was also a slight uptick in global VC funding YoY from 1/23 to 1/24. We are also active at Redbud VC with our latest investment in Trially 🎉 

Missouri Startup Weekend is 1 month away! 🚀

Who’s ready to build a startup in one weekend and win $15,000 while getting mentorship from the founders of Zapier and EquipmentShare?

Missouri Startup Weekend is a weekend-long event that brings together aspiring entrepreneurs, developers, designers, and operators to build a startup in one weekend. The winner of Missouri Startup Weekend receives up to $15k in cash (non-dilutive), office space, legal formation, PR, brand strategy, and a chance to work with Redbud VC, plus a potential investment of up to $150k.

🎟 Get Tickets → Here

🏙 Hotel Accommodations → Here 

🚗 25% off Tesla Rentals for the weekend with code MOSW→ Here 

🦄 Check out the MOSW Website → Here  

Redbud VC invests monetary ($50k-$150k) and social capital in early-stage tech founders. We bring monthly Redbud VC, tech, and economics updates. - We've filtered thousands of sources for our 14k+ readers, so you don't have to. Enjoy🥂

📣 Pitch Us for an investment | 🏆 Redbud Portfolio

🦸🏽 Become a Redbud VC Mentor | 🏉 Meet the Redbud Team 

😎 Join our talent network | 🛩️ Flyover Tech community

The unfortunate truth about fundraising with one caveat that most don’t ever receive a term sheet 😵‍💫

🔥 Burning question of the month 🔥

Endeavor recently did a comprehensive study on 100 US and 100 emerging market $1B+ founders, “Where Do Unicorns Come From,” that displayed evidence for interesting insights of outlier founder life journies.

Bonus Question 🎰 

📈 Macro Trend Report

• LAYOFFS | Tech layoffs have remained in the headlines since 2023, showing no signs of stopping. Most tech layoffs have been in retail, consumer, hardware, and finance in Q1 2024, a quarter similar to Q4 2023. For tech giants like Amazon, Microsoft, Alphabet, and Meta, layoffs have had minimal impact on overall headcounts. This is largely due to ongoing acquisitions, mergers, and rehiring efforts, which help to maintain employee levels. However, the story is different for smaller tech firms, where layoffs are common. After a private equity deal fell through, DocuSign announced plans to lay off 6% of its workforce. Similarly, Snapchat revealed a 10% reduction in its workforce, while Cisco's 5% layoffs will affect approximately 4,000 employees across the organization.

  

  Source: WSJ

• AI | February was a big month in AI as OpenAI unveiled the launch of Sora, its video-to-text platform. Sora can generate intricate scenes with multiple characters, specific movements, and accurate environmental details. The model comprehends user prompts and grasps how these elements manifest in the real world. Sam Altman took to X for users to submit detailed text descriptions for Sora, which he then showcased by sharing their creations. Despite the realness, Sora’s current model has limitations; it has difficulty simulating complex physics scenarios and understanding nuanced cause-and-effect relationships. An example on the Open AI website states, “A person might take a bite out of a cookie, but afterward, the cookie may not have a bite mark.” 🍪

  • The launch of Sora comes with a fair amount of scrutiny as OpenAI has announced additional proactive measures to mitigate risks, with Sora generating misinformation, hateful content, and deepfakes. Open AI released a new handful of restrictions, including restrictions on using its tools for political campaigning.

• VENTURE CAPITAL | While we are nearing the end of Q1 2024, EOY 2023 valuation data has been released. In 2023, pre-seed companies saw a notable trend where they had to give up higher stakes to secure funding. Typically, these deals involved selling about 25% of the company at the median. Still, pre-seed and seed rounds were shielded from the broader pricing slowdown that has deeply affected later-stage rounds. According to Pitchbook, the median pre-money valuations for pre-seed and seed in 2023 were $5.7 million and $12.0 million, respectively—both figures were near or above record annual

  highs. SAFE benchmarks from Carta rolled out this month, showcasing variance in caps by the size of the round. Most small rounds> $1M were raised on a $9M post-money cap or less (remember the 2021 days for $20M+ caps on pre-revenue startups?)

  

  • FUND MANAGERS | Times are tough out there for 1st-time fund managers. By the end of 2023, VC fundraising hit its lowest point since 2017. Limited Partners have grown more cautious in deploying capital, gravitating toward established managers. Consequently, capital continues to concentrate within funds led by established managers, leaving first-time fund managers facing reduced demand from LPs for their investment offerings. Since 2017, $58.5B has been committed to 1,381 first-time funds managed by VC investors. This marks a substantial increase of 110.8% in capital raised and a 67.8% increase in the number of funds compared to the preceding decade (2006 to 2016). That said, just 56.7% of first-time managers outside of California, New York, and Massachusetts have gone on to raise a second VC fund. Not to keep adding to the negativity, but seasoned fund managers are struggling too. Distributions have fallen to a 14 year low due to the slow down with IPOs and acquisitions.

  • CYBERSECURITY UNICORNS | Cybersecurity and AI were hot industries for the venture in 2023. The value of cybersecurity unicorns surged by 24.3%, while AI unicorns experienced a growth of 22.9%. According to Pitchbook, the success in cybersecurity can be attributed to notable companies such as Wiz, achieving a remarkable $10B valuation in February, Keyfactor securing a $1.3B valuation in November, and Prove Identity surpassing the $1B valuation mark in October. Additionally, the continuous growth of public cybersecurity firms like Palo Alto Networks and CrowdStrike significantly contributed to the index claiming the top spot.

💰 Micro Trends

• ACCELERATOR SHAKEUPS | Plenty of shake-ups in the accelerator world this month. Y Combinator decided to update its request for startups (RFS), a document that has remained largely unchanged since 2018. Unsurprisingly, AI technology is featured prominently in the new list, spanning areas like machine learning (applied to robotics, simulating the physical world), "explainable AI," finely-tuned models, LLMs for manual back-office processes in legacy enterprises, and AI for enterprise software development. Additionally, they included enhancements for "enterprise glue" and new enterprise resource planning software. There is bad news from Techstars this month as the accelerator plans to cease operations in many Tier II Cities after missing its 2023 revenue goals. Techstars laid off about 7% of its staff this month and rolled out Techstars 2.0, a significant shift in programming and operational locations for Techstars accelerators. This announcement left Techstars in the wake of a PR nightmare both on and off X. Not to say we predicted it, but Brett Calhoun did publish an op-ed in Techcrunch about impending Accelerator adaptations last year. 👀 ⤵

• IPO | Reddit has officially submitted its paperwork to go public under the ticker RDDT. This move positions Reddit to potentially become the first tech IPO of 2024, aiming for a hefty $6.5B valuation. It would also mark the first social media IPO since Pinterest in 2019. Sam Altman's stake in the company could soar above $400M at the upper end of the spectrum. Altman is a self-proclaimed Reddit #poweruser and served on Reddit's board from 2015 until 2022. 🤖

  • We are keeping our eyes open for two big-name fashion brands to follow: Shien and SKIMS. In early December, reports surfaced about Chinese digital fashion brand Shein confidentially filing paperwork with the U.S. Securities and Exchange Commission for a potential IPO in early 2024. However, the SEC's purported scrutiny over Shein's operations in China seems to have halted progress on its IPO. Meanwhile, SKIMS, with a valuation of $4 billion, is gearing up for its own IPO in 2024, although the exact date remains undisclosed. SKIMS presents a compelling IPO case, boasting impressive sales figures, including an estimated $750M in revenues for 2023, up from $500M the previous year.

• MUSK | It was a big month for Elon Musk, with Neuralink having a successful patient zero with moving a mouse with their brain, a bombshell lawsuit filed against OpenAI, a $56B comp package revoked by a Delaware court, and another lawsuit continuing to boil against the Center for Countering Digital Hate.

• APPLE V.S. ZUCKERBERG | Tensions ran high this month between Meta and Apple following the release of Apple's new Vision Pro. The launch stirred up controversy, with videos circulating of individuals donning the Vision Pro in various settings, from New York City subways to their own weddings. Mark Zuckerberg took to Instagram to share his perspective, emphasizing that the Quest 3 offers better value to consumers, priced at seven times less than Apple's $3,500 headset. "I'm not just saying that Quest offers better value. I believe Quest is the superior product, hands down," he remarked. "Different companies made different design choices for their headsets, each with its strengths. However, overall, Quest outperforms the competition for most mixed reality applications." Tim Cook has yet to respond, even though both Cook and Zuckerberg attended Anant Ambani’s wedding celebrations this week, and in our opinion, Zuck was the better-dressed 👔

📰 Middle America Headline of the Month

Pipeline Entrepreneurs welcomed over two dozen high-growth Midwest entrepreneurs to its 2024 Fellowship and Pathfinder Program this month! The cohorts include 13 Fellows and 15 Pathfinders, highlighting founders from minority, women, and rural backgrounds across Kansas, Missouri, and Nebraska, spanning various industries. Executive Director Melissa Vincent noted 2024 as one of the organization's most competitive recruiting years, with a surge in both quality and quantity of applications!

Congrats to our very own Chrystal Graves, Founder of Liquid Hair Institute, for being named to this year’s cohort! Check out Chrystal’s story here 🎉

💰 Flyover Deals

This week was the month of pre-seed and seed rounds! We love seeing all the early-stage companies built and raising funding in flyover places.

• Check out the 232 flyover deals for over $2.3B in funding we tracked here: a 19% decrease in deals but only a 1.5% decrease in funding MoM, indicating more significant deals.

• Fargo-based Benchmark AI closed $1.1M in Seed Funding

• Flaunt, an Indianapolis-based consumer loyalty platform closed a $1.8M Seed Round

• St. Louis-based Boat Planet wrapped up $1.2M in Pre-Seed Funding 

• Celadyne, a Chicago-based startup, closed an oversubscribed $4.5M Seed Round

• Chicago-based Cake completed a $1.1M Seed Round 

• Chicago-based credit recovery platform Cambio closed $3M in Seed Funding 

• Minneapolis-based Tavolo closed a $1M Seed Round led by O’Leary Ventures

• Ad-tech and streaming company Vibe raised $22.5M Series A 

• Ohio had some big wins this month! 🥳

  • ActionStreamer, an Ohio-based media and streaming platform, closed a $2.4M Series A Round 

  • Ohio-based Fair Math raised $1.4M in Pre-Seed Funding 

  • Redi Health closed a $14M Series B 

• A few funds closed this month 🔥

  • NVNG closed a $50M Fund I

  • Bluestein Ventures closed a $45M Fund II

🐄 Middle America vs. National Macro Trends

• Unemployment in Missouri rose slightly this month to 3.3%, but still well below the steady national average of 3.7% and marginally above the steady Midwestern average of 3.1% ✅

• The Midwest Consumer Price Index was at 3.1% this month, holding strong below the national rate of 3.9% ✅ 

🧠 This Month's Recommendations

📚 What We’re Reading

• Letter #1 from “Letters to a Young Investor” by Reid Hoffman ✍️

• KC Business Journal’s Highlight on our newest portfolio company, Trailly! (More below)

• Marc Andreessen and Parker Conrad’s best advice for raising venture capital

• 🤖 Mercury’s interview with Emmett Shear on AI's culture wars

• How Do early-stage investors Underwrite People? Some of our favorite insights from Alpaca VC

🎧 What We’re Listening To

• Michael Dempsey, Managing Partner at Compound, as a guest on the Turpentine VC podcast. Michael discusses thesis-driven vs founder-driven investing company-building opportunities and shares his advice for emerging managers. [1 hr]

• Building in her garage → $845M Exit in just 6 years. Listen to Tiffany Masterson, Founder of Drunk Elephant, talk about building a beauty powerhouse with no industry knowledge. [1hr 36 min]

• Listen to Ali Hamed on Invest Like the Best Podcast, where he chats about managing CoVenture with $2.5B AUM and the kindest things people have done for him [1 hr 29 min]

• Watching 👀: Spotify CEO Daniel Ek on the Acquired podcast. Daniel shares his thoughts on the genesis of Spotify and the move from music to audio company. [1 hr 38 min]

📆 What We’re Doing

• The team is counting down until Missouri Startup Weekend, April 5-7, 2024! Ticket sales are now live, and here’s the link in case you missed the one above 🔥

  • We’ve got a hotel block right across from Equipment Share here 🏙

  • We’re partnering with Relsa to offer Tesla rentals for the weekend. Use code MOSW for 25% off 🚗

• The judging for InvestMidwst has begun, looking forward to attending April 17-18.

• Judging for the Render Capital Competition starts in 2 weeks! ✨

  • If you’re an early-stage company looking for a $100k investment, apply here 

• Our tickets are secured for Camp Hustle — excited to meet fund managers from all over 🏕️ 

• Planning something cool for contech/proptech founders in June 👀 

🪝 Middle America Picks of the Month

🚀 Redbud Portfolio Company Highlights

Introducing our latest investment - Trially 🩺 Trially is revolutionizing the pharma clinical trial space with its Clinical Trials AI platform for clinical trial recruitment and site discovery. Discover why we believe Trially is poised to revolutionize the pharmaceutical clinical trial landscape 🚀 ⤵️

(Ohh yeah…Trially is our first Kansas City, MO, investment 🥳)

🛠️ Resources

• Founders - Here are links to 20 free investor lists & databases, all curated in one spot ✨

• Ever wish you knew what type of investors you were working with? Check out VC Guide, an anonymous fund & investor partner review by founders for founders.

• 🚨Jobs Jobs Jobs 🚨

  • Check out The Early VC Job Board here

  • 33 Job boards that aren’t on LinkedIn or Glassdoor

• Lessons from our first fundraise (and our $60M Series A pitch deck)

• A quick review on what VC’s are evaluating at the pre-seed and seed

• Always be shipping 📦 the importance of a technical co-founder and how that impacts iteration and winning in a crowded landscape

• How to run a tight Series A fundraising process 

• First-time founders → check out this list of essential pre-seed funding resources, info, and need-to-knows 💰

• How to do cold outreach…the right way

• 100 Incredible Resources For Tech Entrepreneurs And Startups 💫

• DocSend data on 100k+ pitch decks and the must-have slides!

• Resource page for founders we made here 📒

Stay up-to-date with AI.

The Rundown is the world’s fastest-growing AI newsletter, with over 500,000+ readers staying up-to-date with the latest AI news and learning how to apply it.

Our research team spends all day learning what’s new in AI, then distills the most important developments into one free email every morning.

Sign up with one click.

Follow our Medium and Latest 🔖

The information provided in this newsletter is intended for general understanding and educational purposes only, not as a guide to investment decisions. The authors, publishers, and distributors of this newsletter are not licensed financial advisors and are not providing financial advice or investment advisory services.