Week Fifteen: Daddy's Home!
Donnie J comin' in with the big bucks!
Housekeeping
Welcome to the fifteenth edition of Venture Vantage. We’ll be exploring topics related to tech and the venture ecosystem.
For the sake of clarity, I am not ‘daddy.’ Daddy will be referenced below. He is only referred to as “daddy” because of the phrase sugar daddy. If you are offended, go away.
It’s always a good week when the weather gets warmer… it’s a warm 30° here in NYC. Supposed to snow later tonight. I hate the snow. All good vibes.
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:
Scheduling tons of coffee chats with other folks in the VC ecosystem — from interns all the way up to partners. If there are any investors in your network who you love, I would appreciate an introduction.
I’ll be in SF from February 25-28. Would love to connect with anyone you know there.
I’ll be at Expo West this year. Coffee on me if you’re there!
We’re continuing to chug along with the Distilled Intelligence website. I really hope it goes live soon, because I am so excited to share.
Fortify is seeing more deal flow than we know what to do with. If you want to join our deal sharing network, click here.
My calendar is PUMPING with in person meetings, and I am loving it. Keep ‘em coming, I love an excuse to consume half a dozen cups of coffee per day.
Rho Platinum goes live
Context:
Rho is basically a business bank, and the best one to ever exist.
They pay an insane rate through their treasury accounts.
With the new Platinum offering, they now pay 2% cash back on card purchases.
Their expense management platform is cracked out and so simple.
They have crazy sign-up bonuses (Fortify portcos have an extra special sign-up bonus).
Sign-up is so easy.
They will invite you to fantastic events and give you access to some pretty crazy partner perks.
No fees, ever. Not for wires, not for cards, nothing.
US-based customer support people and dedicated reps.
Technically, Rho isn’t a bank, and they’re a fintech platform or whatever the structure is, but that actually works in the customer’s favor. Your money isn’t with Rho — it’s with Webster Bank, which has been around a lot longer than Rho. The likelihood of your money disappearing from Webster is, in my opinion, fairly low, which adds to peace of mind when having all your money in a Rho account.
This is NOT sponsored content. I just really love Rho—they take great care of us (my LLC, Fortify’s LP and ManCo, AND all our PortCos) and have an amazing product so the least I could do is give them a shoutout.
Vantage:
Last week, I spent some time with the Rho folks while getting our sauna/cold plunge on. We talked about what this new product could mean for the tech ecosystem as a whole:
Removes founders’ stress about cash management. They so often have to think about what to do while holding investors’ money, and Rho takes a lot out of that equation.
It removes the need for manual expense management. You can lighten a CFOs load pretty intensely with Rho.
The most important: Ten years ago, trading stocks just meant you’d be hit with fees and commissions. Nothing you could do about it. In a post-Robinhood world, no one charges commissions or fees on self-directed trades/transactions. Rho is the Robinhood of the corporate finance world. In 20 years, no bank will charge wire fees, and that will be because of platforms like Rho paving the way.
If you’re interested in Rho for your company, shoot me a message. I’m happy to intro you to the guys at Rho that take such good care of us. I get absolutely nothing for the referral.
X be like: DeepSeek DeepSeek DeepSeek
Context:
Chinese model DeepSeek released DeepSeek-R1 on January 20th. They claimed in their release note that it is “on par with OpenAI-o1.” This immediately caused a panic on the internet, fearing that the Chinese had caught up with US innovation.
The buzz that DeepSeek generated caused AI markets to tank (NVIDIA stock crashed at market open this week). It also set off a ton of buzz on X, where it seems like everyone in the tech ecosystem was opining on what this means for US-based AI.
Announced on Wednesday, OpenAI is claiming that DeepSeek may have improperly harvested its data, leading to a whole slew of issues for the company. This process is called knowledge distillation (click here to learn more), and could give OpenAI a reason to come after DeepSeek aggressively.
Vantage:
I am not an AI expert. I do not work at an AI fund. Quite frankly, I think a lot related to AI is really stupid. All that to say, my opinions here may be fringe.
I think this is a prime example of “America innovates, China replicates, and Europe regulates.” Quite honestly, I believe OpenAI’s claims, even though I very rarely do. There is a near zero chance that Chinese technology and innovation is anywhere near US innovation. They struggle to build functioning military aircraft; that alone is a pretty strong signal that American tech should NOT panic because of bogus Chinese claims of innovation.
OpenAI has released a few new features recently — GPT o3 models, and new features like Deep Research and Operator. Deep Research is the freshest, having been released 3 days ago.
Is Trump America’s new sugar daddy???
Context:
President Trump signed an executive order to establish a sovereign wealth fund for the US.
A sovereign wealth fund is a state-owned investment fund that manages extra cash reserves by investing in global markets. The goal is to diversify a country’s economic exposure to their own economy.
The US has not traditionally had one because our government never has a surplus (money is always “needed” in other places) and there isn’t one big commodity that the government owns (like oil in Saudi). The US government is also so layered and separated (departments, federal/state/local, etc.) that it has never made sense to have one separate managing body.
In the US, we have instead had localized pension funds (the largest ones include the California Public Employees Retirement System, the Federal Retirement Thrift, and the California State Teachers' Retirement System). The benefit of the pension funds goes to the group of people who contribute to it, rather than the actual government.
According to Investco, the average breakdown of how sovereign wealth funds are allocated is as follows:
Exchange-traded equities (public stocks): 32%
Fixed income (bonds): 28%
Illiquid alternatives (PE, VC, real estate, infra): 22%
Liquid alternatives: 4%
Direct investments (typically private companies): 10%
It is unclear today how big the fund would be or who would manage it, but the US federal government owns about $5.7 trillion in assets, including cash, real estate, and natural resources, that could be leveraged for the fund.
Vantage:
Holy shit, this could be game changing for US-based venture firms and startups. The US retirement system as a whole (all the pension funds in the country) have a value of about $42.4 trillion. This $1-5 trillion that might end up in the pension fund doesn’t sound like a lot, but let me tell you why it is:
Pension funds are, by nature, risk averse. They can only invest so much in early stage ventures because of the risk that VC and startups carry. They have no vested interest in innovation growth in the country, and are strictly chasing returns.
A US sovereign wealth fund would, however, have a much larger incentive to fuel and fund American innovation with investments into all stages of the startup lifecycle: early-stage companies through venture funds and growth rounds through direct investment & venture funds. While the goal remains to make money, sovereign wealth is a little bit more selfishly “impact investing” than pensions.
Trump has gone as far as to talk about using this sovereign wealth fund to acquire TikTok from its Chinese parent company. Most experts in the space say this is super unlikely to happen, though. I also don’t know how I would feel about a state-owned media platform in the US…
Rapid Fire
Context: 8VC is raising $998M for its Fund VI. 8VC is a fund with investments in star companies like Ramp and Anduril, and their 2023-vintage Fund V was $880M. | Vantage: The hypothesis that venture funding is being consolidated to the top and bottom seems like its proving to be accurate. The small niche (sub-$100M) and large generalist (over $500M) funds seem to be the ones capturing most of LPs’ dollars and attention. It’ll be interesting to see what happens to those midsize funds, and where those fund managers land if they fizzle out.
Context: Google axed its DEI targets and requirements for hiring, moving to a more merit-based system. | Vantage: It seems like wokeism is starting to disappear in tech. Everyone is based now!
Context: a16z hired Daniel Penny (yes, the subway choking guy) to become an investing partner in its American Dynamism fund. No, I am not kidding. The fund invests in defense tech and other things tied to US national security, making the ex-Marine a perfect fit. | Vantage: The growing red/blue split in VC is going to be interesting to watch. I am curious to see what happens (over the next year or two) to the quality and volume of deal flow that these publicly political funds receive. a16z was the first fund to publicly support Trump’s re-election.
Deals that caught my eye
Here’s the latest and greatest:
Systole raised a $2M pre-seed round to provide digital care for women’s heart health. The round was led by Benchstrength, and also included January Ventures, J Ventures, and Tom X. Lee (Founder @ One Medical).
Plot, a platform to help creators analyze social content, raised $4.1M from Seven Seven Six, XYZ Capital, and Trust Fund.
Indigo, a platform for home negotiations, raised an $8M seed round led by NFX, Era Ventures, and GTM Fund, with participation from 1Sharpe Ventures and Jake Seid.
Allara Health, a virtual care platform for women battling chronic hormonal conditions, raised $26M in Series B funding from Index Ventures and GV.
Ivo, a legal document review platform, raised $16M in its Series A from Fika Ventures, Uncork Capital, NFDG, Blackbird VC, GD1, and Phase One Ventures.c
A hot take
I have decided to switch the White Hot section to a hot take about the world of venture & the startup ecosystem. Feedback on this would be appreciated, let me know if you miss White Hot.
AI is not something startups should be flexing; it should be the lowest common denominator for success.
I see AI as a perfect parallel to cloud. The same way cloud was seen in the late 2000s is how AI is seen now. Really, we should be seeing AI the way we see cloud today. It’s a great background technology, and startups should be using it wherever they can because they should always aim to use the best technology available to them. There are very few true AI companies, and any that do exist are mostly infrastructure plays. Selling “AI for x” is kitschy and unhelpful — consumers just want the best experience, and the best value. OpenAI is not selling AI — it’s selling knowledge & creativity. Startups need to start thinking about AI differently.
Some cool stuff on my radar
I’ve had my eye on The Pool Tray by Illfound. I am a big palo santo fan, and never know what to do with it. I put it in a bowl, but it’s an ugly solution. This functional art solves that problem.
I have recently worn my big fat Canada Goose less, and have instead opted for the Marmot Novus Hoody. I can wear this with just a t-shirt underneath in 30° weather and be totally fine. Kind of insane.
I for some reason thought that making coffee at home would be cheaper. It’s not. I did, however, get 2 exciting tools to help me make overpriced coffee at home:
Yeti makes this great pour over maker that isn’t any more expensive than a generic ceramic one on Amazon.
This Timemore C2 coffee grinder is so high quality for the price. The price jumps around (I got it for $56) so keep an open eye.
I got this SKLZ travel massage bar for my gym bag and it’s a game changer, I must say. My calf really loves to act up after an indoor ride, so it’s nice to be able to get it to release a bit with this. It’s the perfect size and really high quality.
Icing on the Cake
Continued Reads
This week’s continued read is Talking to Humans. A snippet:
You are looking for clues that help confirm or deny your assumptions. Whether you are a tiny startup or an intrapreneurial team within a big company, your goal is not to compile statistically significant answers. Instead you want to look for patterns that will help you make better decisions.
Read it here.
Word of the Week
This week’s word is:
Ratchet: No, we are not talking about someone being trashy. A ratchet is a VC protection clause that adjusts investor ownership if the company raises at a lower valuation (a down round).
Imagine you’re splitting a pizza with an investor. Initially, you each get half. Later, the pizza shop makes the pizza smaller (a down round). With a ratchet, the investor’s slice stays the same size, meaning your slice shrinks to make up the difference.
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