How AI and remote work is coming for your job | E1940

David Weisburd intros Jeff Richards, Ryan Denehy, and Jason Calacanis (0s)

• David met with Elon Musk in Miami.
• The Liquidity Summit, a three-day event for General Partners and Limited Partners, will take place in Napa, California, from June 4th to 7th.
• The goal of the Liquidity Summit is to build relationships between GPS and LPS and showcase founders that Founder University has invested in.
• NetSuite, the number one Cloud Financial system, is the sponsor of this week's episode.
• OpenPhone offers business phone numbers that work through an app on your smartphone or desktop, and Twist listeners can get an extra 20% off any plan for their first 6 months.
• Hidden Layer's generative AI detection and response solution secures generative AI and LLMs for malicious attacks, enabling seamless and secure generative AI.
• The Liquidity Podcast discusses various topics related to the business and investment landscape, including down rounds, their implications, and how large corporations like United Airlines are integrating AI.
• The podcast also features insights on recent investments made by Jeff Richards and Jason Calacanis.

Down rounds and cram down rounds in VC deals (5m26s)

• Down rounds, where startups raise capital at a lower valuation than their previous round, have reached 11% of all VC deals, the highest in two decades, due to the challenging fundraising market.
• Companies that raised money in the past two years have generally seen a decline in their stock prices.
• Despite the challenging market conditions, companies that are able to raise capital at a flat round should focus on the long-term outlook and building their business.
• Cram down rounds, also known as pay-to-play rounds, occur when a company is unable to raise money at its current valuation and existing investors agree to reduce their ownership stake to bring in new capital.
• Founders may be forced to accept unfavorable terms, such as significantly diluted ownership, loss of protective provisions, and common shares, when seeking new investment.
• Founders should prioritize profitability and building a substantial cash reserve during favorable times to mitigate the impact of potential downturns.

NetSuite - (13m6s)

• NetSuite is a cloud-based financial system that combines accounting, financial management, inventory, and HR into one platform.
• It reduces IT costs by eliminating the need for multiple systems and improves efficiency by centralizing business processes.
• Over 37,000 companies have already adopted NetSuite.
• AI and remote work are transforming the job market.
• AI is automating tasks that were previously done by humans, leading to job displacement.
• Remote work is making it easier for companies to hire talent from anywhere in the world, increasing competition for jobs.
• To stay relevant in the changing job market, workers need to continuously learn new skills and adapt to new technologies.

The terms of investment and the importance of good business fundamentals (14m22s)

• Founders are attempting to maintain high valuations by taking unnatural actions, which weakens their businesses in the long run.
• Investors prefer clear business fundamentals over complicated deals, and the current economic climate has reduced the number of investors willing to invest in risky assets.
• The US Venture Capital Market has experienced significant growth, but much of this growth was not true Venture Capital, but rather midcap investments.
• Investors are becoming more selective and have higher standards for evaluating businesses.
• Founders need to proactively prepare their businesses for the changing investment landscape by cutting costs, preserving cash, and becoming profitable.
• Founders who fail to adapt may be deemed unfit to lead the next stage of growth.
• Many founders are paralyzed and taking no action during the crisis, hoping for a savior rather than making difficult decisions.
• Founders need to take decisive action and make tough choices to weather the storm and position their companies for success.

Changing operations in response to market shifts (23m24s)

• The market has changed significantly since October 2021, and companies need to adapt their operations accordingly.
• Investors and boards expect founders to be responsible stewards of capital and make tough decisions to ensure the company's success.
• Many companies that raised money at high valuations are now facing challenges and are forced to make layoffs.
• Founders often have to learn the hard way about financial management and may experience difficult decisions such as layoffs.
• Companies need to rewire their business models to adapt to the changing market conditions and focus on efficiency and effectiveness.
• Cutting costs alone won't lead to growth; companies need to commit to product and organizational changes to drive sustainable growth.
• Companies are facing pressure to cut costs while simultaneously innovating, increasing sales, and investing for growth.
• Setting ambitious and seemingly unrealistic goals can inspire people, foster creativity, and lead to unexpected achievements.

Increasing deal flow and setting ambitious goals (30m20s)

• Reframing tasks can make them more manageable and efficient, creating a sense of urgency and accountability that drives teams to achieve more.
• Founders should cultivate relationships with experienced advisors and board members who can offer valuable counsel and support, providing guidance and support during challenging times.
• Companies are making significant changes, such as reducing costs and launching new products, to adapt to the current business environment.
• Founders should ask their people to make big changes rather than focusing on small incremental improvements, building trust in instincts and making decisions faster.

HiddenLayer’s AI Detection & Response Solution (35m32s)

• HiddenLayer’s AI Detection & Response Solution secures Generative AI & LLMs from malicious attacks.
• It provides security teams with the necessary visibility and tools to detect and prevent threats like:
  • Leaking of confidential information
  • Malicious prompt injection
  • Model theft
• Trusted by leaders in finance, tech, healthcare, and even the US Department of Defense.
• Enables companies to harness the power of AI securely and confidently.
• AI is revolutionizing every industry.
• Companies slow to leverage AI risk falling behind competitors.
• New innovations bring new threats.
• Need to safely accelerate AI adoption while managing risks.
• United Airlines is using AI for various tasks, including chatbots and pilot announcements.
• Plans to pilot AI applications across the entire company.
• Electric.ai helps small businesses integrate IT solutions, including AI.
• Seeing increased AI adoption across thousands of SMBs.

AI adoption in startups and businesses (37m26s)

• AI is a buzzword that attracts early adopter small businesses, but for them, the focus is on getting the job done rather than the underlying technology.
• AI can speed up the delivery of solutions to customers but doesn't fundamentally change product management principles.
• Vertical SaaS companies and existing companies with a head start in data, solutions, and customers are well-positioned to benefit from AI.
• AI-powered tools can significantly increase the productivity of small businesses by automating tasks and boosting US GDP by 5-10%.
• AI adoption in small businesses is unlikely to negatively impact labor but rather make workers more efficient, potentially doubling their productivity every 35 months.
• AI and remote work are revolutionizing industries, leading to increased efficiency and productivity, especially in sales, marketing, finance, and accounting operations, resulting in a potential 10% cash flow boost for small businesses.
• The shift towards AI and remote work builds on previous technological advancements and challenges traditional fundraising models for startups.
• AI has the potential to act as a stimulus for the average American worker, driving productivity gains and economic growth, unlike previous technological disruptions that led to job displacement.
• Cloud computing platforms like Amazon Web Services (AWS) and significant cloud computing credits offered by large tech companies have reduced the cost of setting up a startup's infrastructure, allowing them to focus more on product development and growth.
• Investments in AI infrastructure by companies like OpenAI and Anthropic will positively impact startups by providing access to advanced AI tools and reducing the need for significant upfront capital.
• AI and remote work have the potential to significantly impact the job market, with effective product distribution becoming a key battleground as products scale quickly and cost-effectively.
• Businesses that bet on the AI trend early are now reaping the benefits, and the application layer of AI will benefit from the infrastructure investments being made in the field.
• Businesses that solve specific vertical business problems using AI are poised to be big winners, and the growth of AI and remote work is interconnected with the broader economy.

The role of remote work in shaping the global economy and the potential of offshore hiring (1h2m33s)

• Remote work and AI are significantly impacting the job market, allowing companies to hire talent from different parts of the world at lower costs.
• Virtual assistants are gaining popularity as cost-effective alternatives to traditional employees, leading to concerns about job security as many jobs can be replaced by remote workers.
• The restaurant and corporate sectors are embracing remote work by hiring virtual assistants and remote executives, reducing the need for in-person staff.
• The tech industry has faced criticism for overpaying employees who do not contribute meaningful work.
• Founders and companies are leveraging remote work, AI, and offshore talent to enhance productivity, efficiency, and profitability.

Comparing the fundraising process pre and post COVID (1h9m34s)

• Electric is a platform that helps small businesses manage their devices, software, and security without the need for in-house IT staff.
• Remote employee monitoring is becoming more common, especially in customer support roles.
• A study by Marissa Mayer at Yahoo found that many employees who were working from home were not actually working as they were not logging into the VPN.
• AI and remote work can potentially replace certain jobs.
• For engineering teams, the amount of code committed can be tracked to measure productivity, while sales teams can be monitored through Salesforce reports to track call activity.
• Tools exist to help managers understand who is busy and who is not among their employees.

Wrap up: Jeff's latest 3 investments and Ryan's company (1h14m30s)

• Jeff invested in Homebase, an operating system for small businesses with 200,000 merchants and 2 million workers in the US.
• Homebase is valued in the hundreds of millions of dollars with over $50 million in ARR.
• Jeff also invested in Arterial, an AI company that extracts information from contracts and agreements in the banking, insurance, healthcare, and energy industries.
• Arterial helps companies make better decisions and understand risk exposure.
• Jeff's third investment is Forel, a modern developer platform with over a million developers building new projects every month.
• Forel is well-positioned to take advantage of the growth in AI.