Startups increasingly embrace fractional culture

3 trends in startups/tech/venture

🚀 Startups (and tech) increasingly embrace fractional culture

• Fractional roles and time splits are becoming increasingly widely accepted, particularly among senior ranks, across startups and big tech alike.

• Google's 20% time famously allowed employees to spend up to 20% of their work time on any projects they are passionate about, which led to some of Google's most successful products, including Gmail and AdSense.

• Recently, Michael Lopp (led engineering at Apple, Slack, Pinterest and Palantir) suggested that the ideal time split for an engineer is 71/29: 71% of time spent on building what’s needed, while 29% of time spent on exploring what’s inspiring. I call the 29% “fractional founder time.”

🤖 AI is 81.7% more likely to change someone’s mind (compared to humans)

• Per the latest research, OpenAI’s GPT-4 was even better than a human at changing a person’s mind during a conversational debate when it is given access to personal information about the person it is debating. That because AI was far more effective than humans at personalizing which facts and evidence to present for each individual based on their personal information.

• This is one of many examples of AI’s power to hyper-personalize. I had the opportunity to discuss this trend with Sophia who is the former Chief AI Officer at Microsoft (full video here and detailed notes here).

💰 VCs are diversifying beyond startups and becoming registered investment advisors

• Lightspeed is the latest, among other venture funds like a16z, Sequoia, General Catalyst and Thrive, to become RIAs (registered investment advisors). RIA status permits funds to invest in public shares, secondary shares, and cryptocurrencies, whereas VC firms without RIA status could allocate at most 20% of their capital into non-startup investments.

• As their AUM (assets under management) grows, many VCs are shifting their focus away from early stage startup investments. This leaves an opportunity for emerging managers to win great deals at pre-seed and seed.

2 theses on what’s next

💰 Renewal is the new revenue

• AI makes it easier to build and grow, but harder to win. While more startups are reaching billions in revenue, it’s not yet clear if this growth is sustainable. In fact, investors are increasingly seeing that what startups are claiming to be ARR (annual recurring revenue) should really be called ERR (experimental recurring revenue).

• Going forward, the best startups are those that excel not only at growth, but also at retention (keeping customers) and renewals (monetizing customers).

📈 Founders can vibe every function

• Vibe coding, or leveraging AI to write code, is old news. Founders have been dropping a new term: “vibe growth,” where they leverage AI to analyze customer insights, conduct competitive research, test product messaging, optimize sales funnels and scale their businesses.

• We anticipate the best founders will effectively leverage the newest tools to optimize every critical function in their startups.

1 tool I love

🎓 Assessing vibe coding

• AI agents can write code, but how do we know if it’s any good? Imbue has launched Sculptor to assess the quality of AI-generated codebases.

• Learn more about how to catch issues, write tests and improve code here.