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🌟 Top News in Startupland 🌟 

OpenAI’s $6.6 Billion Funding Round Shows How Big Tech Is Making the AI Market Even Smaller

OpenAI closed a record-breaking $6.6 billion funding round on Oct. 2, making the generative AI giant worth an eye-watering $157 billion. The implications of OpenAI’s valuation are far-reaching for the generative AI field.

Competition is fierce in generative AI and not everyone can compete equally. Unless a startup has the means and backing OpenAI does, there will be considerable obstacles to making headway in the sector. An option for AI startups is to be acquired by Big Tech, but this leaves little room for non-acquired AI startups to make names for themselves. And acquisitions are not all that. Many Big Tech firms, under antitrust scrutiny from the U.S. government and EU, have resorted to acqui-hiring talent at up-and-coming AI startups to get around regulatory hurdles, leaving the teams left at these companies without the resources to compete. OpenAI’s dominance and Big Tech’s acquisition spree have left the just two-year-old sector significantly diminished in size.

Sage Lazzaro from Fortune cites Character.AI as an example of this phenomenon: Back in August, Google effectively poached 20% of Character.AI’s staff, including the co-founders, for its AI subsidiary DeepMind for $2.7 billion. The startup, left with 100 employees and 18 months of runway, is saving costs by pivoting to the consumer side and developing its chatbots because it has been priced out of developing new LLMs. In an interview with Financial Times, Character.AI’s interim chief executive stated, “It got insanely expensive to train frontier models...which is extremely difficult to finance on even a very large start-up budget.” The need to compete has never been stronger, but the resources required are too much for a small company to handle.

As Big Tech continues to bolster its generative AI models, more startups will find it harder to compete even though it’s pretty hard right now.

⚡️ Community Poll ⚡️

Last week, 53% of respondents voted that a company can operate longterm with a dual organizational structure like OpenAI.

Even More Headlines

🌱 Early-stage startup funding in Q3 2024 fell 39% from the previous quarter.

🚖 Despite many questions, Tesla is poised to reveal a robotaxi prototype on Oct. 10.

🖨️ Y Combinator is getting heat for defending PearAI for cloning another startup’s code.

💰 Cisco is closing an investment deal in CoreWeave that will value them at $23B.

What You Need for a Great Q4: Video Content

Let’s talk about what everyone’s gearing up for in Q4: video. We’re talking explainers, customer testimonials, product demos. Video content that gets your message out there. Fast.

Marketers and founders are using this stuff everywhere. Websites, social media, sales decks—you name it. It’s a no-brainer if you want to stay ahead.

One agency that’s crushing it with video? Spacebar Visuals. These guys make the whole process easy, especially for startups like yours. They know you’re juggling a million things, so they take care of everything.

Here’s the best part: we’ve teamed up with them, and if you drop the word TechDay, you’ll get an exclusive startup deal. 

Ready to see what Spacebar Visuals can do for you? Let’s make it happen.

📚 Dive A Bit Deeper 📚

Is It Time to Scale Yet? 

Scaling is a huge step many startups look forward to. When a startup scales, it has the potential to increase revenue, boost profitability and establish itself as a dominant player in the market. Plus, it looks good from the VC side.

But startups know this already, so the question, “Should I scale?” is a no-brainer. The more important question, “When should I start scaling?” is a much more important one, anyway.

In startup culture, disruptiveness and lightning-fast growth are celebrated. Uber, Facebook and Airbnb are some of the most well-known platform startups that scaled fast, expanded rapidly and upended entire industries. With examples like these, the attraction of scaling quickly is apparent. 

However, scaling fast may not be the best approach for many platform startups. J. Daniel Kim and Saerom (Ronnie) Lee conducted a study analyzing how timing impacts startups’ scalability. Using 6.3 million job postings from 2010 to 2019 for 38,217 U.S. startups, Kim and Lee found that “early scaling (within the first 12 months of founding) increases the risk of failure by 20 to 40%.” The risk increases for startups that have two-sided platforms. The potential for failure when scaling early decreased when “startups incorporate experimentation through A/B testing.” Platforms require multiple testing stages to find the right product-market fit, understand their customers and, especially nowadays, navigate regulatory requirements.

The conclusion drawn from this study is that for startups to succeed, scaling should be done at a sustainable pace with plenty of room for testing, experimentation and pivoting. Kim and Lee argue that commitment risk causes many startups who scale prematurely to failure, “as they lock themselves into a particular direction before fully developing their concept.” Taking more time to scale allows startups to develop their ideas and gives them the space and time to make improvements or changes where necessary.

Long story short: scaling early is ill-advised more often than not. Startups, especially ones with platforms, should allow themselves to perfect their products before deciding to scale. Experimentation and patience will pay off in the long run over short-term success.

Seven Legal NY Office Hours October Edition

Friend of TechDay Express, Gene Murphy, will be hosting a legal clinic for tech startup founders with Seven Legal Partner Vivek Boray, where you can chat for 30 minutes 1:1 about:

• Cap table equity and stock options

• Investor agreements / issues

• Intellectual property

• Employees and consultants

• Commercial agreements (terms of use, privacy policy, customer agreements)

• Something else!

How it Works

• October 7th, 1pm - 4pm

• October 8th, 1pm - 4pm

Please apply to attend to the date that suits you best and if approved you will receive a separate booking link with full address details and a calendar invite.

Deep Dives Galore

📢 BUILD-A-BRAND — Startups: crack open your notebooks and X feeds now. Building a brand in this day and age requires understanding the trends and people shaping culture. Analyzing what customers are talking about and what captivates people’s attention can boost brand awareness and strengthen customer retention.

🍄‍ IT WORKS UNTIL IT DOESN’T — Founders of sustainable startups are passionate about sustainability, but this can only take them so far if the product is not profitable. VCs can exhibit that same passion but they eventually need to see their investment was worth it. Take a page from the mushroom agriculture startup Smallhold.