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The F42 brief #009
👋 Hi, I’m Derek, and welcome to the Fusion42 newsletter! This is your go-to source for navigating the startup ecosystem and making things easier for everyone involved. Here, beyond Consensus views for Maverick Founders and Investors to overcome common challenges, so you can build and scale with confidence. No BS , no Fluff, just the TREWS to help you get **it done. Join 3,000+ founders and discover what truly matters for your venture—and how to set yourself up for lasting success.
Here’s your Monday dose of The F42 Brief, where we give you essential updates and innovations that are moving and shaping our startup space.
What’s inside »
📈 Trending Now
The one thing that’s making all the noise …. with a bit of fact checking.
💸 New Funds looking to give you cash
Who has launched a new fund to invest in startups last week.
💡Innovator Spotlight
Founders that are doing suff differently.
🛠️ Tool of the Week
Something useful to up your startups velocity.
📌 Note to Self
Stuff I constantly remind myself about, don’t want make the same mistakes again.
📈 Trending Now
OpenAI’s financial practices have ignited criticism, with its use of “training-adjusted earnings” being compared to WeWork’s infamous “community-adjusted EBITDA” under Adam Neumann. Both approaches creatively exclude significant operating costs to paint an inflated picture of profitability, raising serious questions about transparency and long-term sustainability.
Financial Highlights:
Revenue vs. Cash Burn: OpenAI has a $4 billion revenue run rate against $10 billion burned, a 2.5:1 burn ratio. While not uncommon for SaaS, the scale of losses stands out.
Future Projections: Revenue could hit $11.6 billion by 2025 and $100 billion by 2029, with margins improving as compute costs stabilise. Yet, these forecasts still anticipate $44 billion in cumulative losses by 2029, even as cash burn ratios improve to 1:2.
Gross Margins: Expected growth from 49% (2025) to 67% (2028) hints at better scalability, but only if projections hold true.
"Training-Adjusted Earnings": Déjà Vu
OpenAI’s decision to exclude billions spent on training AI models from profitability calculations echoes WeWork’s use of "community-adjusted EBITDA." Both tactics strategically omit core expenses to inflate valuations and woo investors. It’s a familiar story:
NVIDIA excluding R&D costs for GPUs.
Apple ignoring iPhone manufacturing expenses.
Tesla leaving out Gigafactory and battery costs.
These practices may make the numbers look better on paper but offer little reassurance about the actual financial health of the company.
Industry Backlash:
Massive Training Costs: Training models like GPT-4 costs tens of millions, with estimates of $78 million for GPT-4 and $191 million for Google’s Gemini Ultra.
Expert Criticism: Francine McKenna, an accounting expert, called this “not kosher” and “a bridge too far.” A leading VC labelled it a sign of hubris, noting training costs are integral to AI operations.
Regulatory Risks: The SEC is unlikely to accept such accounting practices if OpenAI attempts an IPO, given their scrutiny of alternative profitability measures.
Lessons from WeWork
Like Adam Neumann’s “community-adjusted EBITDA,” OpenAI’s accounting approach raises red flags. Both strategies inflate profitability by excluding foundational costs, making valuations appear more attractive but less grounded in reality. WeWork’s fallout is a cautionary tale for companies pushing creativity too far in financial disclosures.
The AI Gold Rush: Caveat Emptor
OpenAI’s innovation and growth potential are undeniable, but its “training-adjusted earnings” casts a shadow on its financial credibility. Investors should look beyond the buzzwords to assess the real costs of building and maintaining cutting-edge AI technologies. After all, lofty projections mean little if built on a foundation of creative accounting tricks.
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For the ❤️ of Startups
💸 New Funds looking to give you cash
This week, 23 new venture capital funds were launched, reflecting a global push towards technology innovation and sustainability.
Asia: New funds emphasize climate tech in India, early-stage investments in Indonesia, and deep tech across Central and Southeast Asia.
United States: Investments target AI in consumer tech, defense technology, and early-stage ventures led by underrepresented founders and veterans.
Europe: Strong focus on enterprise software, sustainability in the Nordics, and digital transition technologies in Italy and Switzerland.
Global venture capital trends continue to support transformative ideas across geographies and industries.
Altos Ventures
Altos Ventures offers a $500 million fund focusing on transformative tech startups in AI, cybersecurity, cloud computing, and blockchain, supporting both early and later-stage ventures with strategic capital.
Bek Ventures
Bek Ventures, with a $250 million fund, specializes in high-potential opportunities in Central and Eastern Europe, focusing on early to growth-stage tech companies.
BlueGreen Ventures
BlueGreen Ventures targets early-stage startups in climate and sustainability, fintech, and consumer B2C sectors, with plans for IPO readiness within 4-5 years, offering a $75 million fund.
Cogito Capital Partners
Cogito Capital offers a €125 million fund, Cogito Fund II, investing in European enterprise tech companies at growth and early stages, especially in Central Europe.
Folds Ventures Fund I
Folds Ventures Fund I supports early-stage tech entrepreneurs from the veteran and first responder communities, providing funding and network support, with a unique profit-sharing model aiding educational scholarships.
Forerunner Fund VII
Forerunner Fund VII, led by a women-led team, has raised $500 million focusing on AI in consumer tech, with a significant commitment from MassPRIM, supporting startups from inception to growth stages.
Godspeed Capital Fund III
Godspeed Capital Fund III, sized at $675 million, invests in defense and government tech sectors, targeting companies at strategic growth inflection points.
Green Frontier Capital India Climate Opportunities Fund
Green Frontier Capital focuses on early-stage climate tech startups in India, aiming to foster low-carbon technologies with a Rs 1,500 crore fund.
Intudo Ventures IV
Intudo Ventures IV, totaling $125 million, invests in Indonesian startups across diverse sectors, with a strategic focus on natural resources and renewable energy.
The Techshop
The Techshop's debut fund of €53 million supports early-stage startups in digital transition technologies, backed by significant European investors.
Maki.vc Fund III
Maki.vc's third fund, at €100 million, targets Pre-Seed and Seed-stage startups in the Nordics and Northern Europe, focusing on environmental and social impacts.
Pender Ventures' Technology Inflection Fund II LP
Pender Ventures focuses on Canadian B2B and health tech startups poised for scale-up, with over $100 million in available funds.
Porsche Automobil Holding SE
Porsche's venture fund invests €100 million in software firms enhancing connected mobility, aiming to drive forward technological integration in the automotive sector.
Portal Ventures
Portal Ventures introduces a $75 million fund dedicated to pre-seed investments in crypto startups, emphasizing early, foundational funding.
Portfolia Rising America III
Rising America Fund by Portfolia aims to empower underserved entrepreneurs, with a focus on diverse founders, targeting early-stage investments across the US.
Founderful Fund II
Founderful's second fund at $140 million invests in Swiss early-stage tech ventures aiming to scale globally, backed by seasoned investors.
TDK Ventures Inc.
TDK Ventures backs startups innovating in materials science, energy, and tech sectors, providing not just capital but also technical and market access support.
The 33N Cybersecurity and Infrastructure Software Fund
The 33N Fund, aiming for €150 million, specializes in cybersecurity and infrastructure software, focusing on global growth-stage companies.
The British Growth Partnership
The British Growth Partnership is dedicated to scaling UK-based innovative companies, with a focus on supporting businesses through various growth stages.
CION Grosvenor Infrastructure Fund (CGIF)
CION Grosvenor Fund focuses on traditional infrastructure with a modern twist, investing across stages with a $300 million fund to capitalize on global trends.
Rosberg Ventures
Rosberg Ventures manages $75 million, deploying capital primarily through top U.S. venture capital firms in a fund-of-funds model.
Uni.Fund
Uni.Fund supports deep tech startups in Europe, focusing on early-stage companies with the potential to disrupt traditional industries.
VOX Capital
VOX Capital invests in climate finance solutions in Brazil, managing funds targeting energy transition, early-stage ventures, and low-carbon agriculture.
What’s on at F42 this week,
Join our online sessions:
Go-to-Market for Startups
Pitch Kung Fu
💡Innovator Spotlight
Google DeepMind Releases AlphaFold 3 as Open Source
On 11 November 2024, Google DeepMind took a groundbreaking step by releasing AlphaFold 3, their advanced AI model for protein structure prediction, as open-source software. This bold move provides unprecedented access to both the code and model parameters, significantly widening the technology's reach.
Key Highlights:
Open Access: The code is freely available on GitHub, enabling global researchers to use and adapt the technology.
Non-Commercial Use: Model parameters are restricted to non-commercial purposes, particularly in academic and research settings, addressing earlier criticisms of limited accessibility.
Academic Focus: While the code is universally accessible, training weights are only available upon request to researchers with academic affiliations.
Enhanced Capabilities: AlphaFold 3 introduces modeling of protein interactions with DNA, RNA, ligands, and chemical modifications, extending its applications beyond predecessors.
Improved Accuracy: The model boasts a 50% improvement in predicting protein-ligand interactions, offering revolutionary potential for drug discovery.
Ease of Use: A new AlphaFold Server simplifies usage, allowing researchers without machine learning expertise to benefit from its capabilities.
This release is expected to accelerate innovation in fields like biotechnology and medicine, fostering advancements in drug discovery, understanding biological processes, and more. By balancing open science with commercial considerations, DeepMind sets a precedent for the responsible dissemination of transformative AI technologies.
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🛠️ Tool of the Week
SuperPodcast.ai
If you’re a fan of podcasts and love innovative tools, SuperPodcast.ai is definitely worth a look. This clever AI platform is reshaping the way we create and consume podcast-style content, turning written documents into interactive audio experiences. Here’s why it’s caught our attention this week:
What is SuperPodcast.ai?
SuperPodcast.ai takes any written content—whether it’s an article, a report, study material, or even your personal notes—and transforms it into a podcast-like format. But this isn’t just your standard text-to-speech. It’s far more engaging, creating an interactive and dynamic way to explore information. Think of it as your own personal podcast production studio, powered by AI.
What Makes It Stand Out?
SuperPodcast.ai isn’t just about converting text into audio. Its game-changing features include:
AI-Generated Hosts: The platform crafts virtual hosts with distinct personalities to present your content. You can even tailor their tone and style with a simple prompt.
Interactive Podcasts: The real magic lies in its interactivity. While listening, you can ask the AI hosts questions or request clarifications, transforming a passive experience into an engaging dialogue.
Personalized Learning: The AI adjusts the discussion based on your input, making the experience feel tailored to your needs.
Why Should You Care?
SuperPodcast.ai is perfect for anyone who consumes or creates content. Whether you’re a student digging into coursework, a researcher tackling complex topics, or a professional wanting a fresh way to stay on top of industry trends, this tool is a game-changer. It’s not just about listening—it’s about participating in the conversation.
Currently in development and planned to launch for free, SuperPodcast.ai has the potential to revolutionize the way we interact with audio content. Whether you’re looking for a smarter way to study, work, or explore new ideas, this tool is definitely one to watch.
📌 Note to Self
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For the ❤️ of startups
✌🏼 & 💙
Derek