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Welcome back to β€˜Tactical Tips’ by Jerel and Shuo at DECODE, the largest founder community co-hosted across Berkeley and Stanford.

We’ll be landing in your inbox twice a month, alternating between one of our founders’ top questions on how to build, sell and operate 10x better, and trends on what’s new and next in startups and tech to keep you ahead of the curve.

Today, we’ll look at how fast top startups are scaling revenue, who is really paying the frontier AI labs, why fundraising now happens in two steps, and two shifts we think are coming next.

And ... we’ve curated a YouTube playlist featuring our best founders, operators and investors.Β 

πŸ”₯ Inside this issue:

βœ… 3 trends in startups/tech/venture
βœ… 2 theses on what’s next
βœ… 1 tool to love

πŸ‘‡Let’s dive in.

Grab 30 mins with Jerel - Need personalized advice on building your startup or just want to talk? Happy to help and make intros if it’s the right fit.

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Nov 14: Unstuck your startup at the DECODE Conference with execs from OpenAI, NVIDIA, NEA, Cisco, and Atlassian

Join the DECODE conference, bring your startup blockers and let’s catch up in-person:

  • It is built for the earliest stage. Every session targets a blocker pre-seed and seed founders are hitting right now.

  • Speakers don’t just speak on a big stage and disappear. They stick around for off-the-record roundtable discussions, giving attendees a chance to actually meet them.

  • Every speaker knows the early stage. Each of them has founded, funded, operated, or advised a pre-seed or seed startup, so the advice fits where you are now.

Past attendees have:

  • Successfully raised pre-seed, seed and series A rounds from top-tier investors (including a16z, Sequoia and Y Combinator), met through DECODE roundtables and dinners.

  • ​Identified advisors and mentors (including experts from Apple, Google and Microsoft) who’ve helped them 10x their startup’s growth.

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πŸ‘‰ Sign up now with promo code DECODE for 30% off.

3 trends in startups/tech/venture

πŸ“ˆ Top startups are seeing 26x YoY revenue growth

  • We all now know that AI enables founders to build in hours what used to take months. However, the latest data shows top startups are scaling revenue exponentially faster, too.

  • According to the Pacesetter Index, the top quartile of startups generating under $10M in revenue is growing ARR by an astounding 26x year-over-year (meaning a startup generating $10M today would hit $260M this time next year).

  • A prime example of this speed: Typesafe AI's Jev β€” an advanced decision-making model that’s great at multiple choice β€” scaled from $0 to $100M in just 7 days.

πŸ€– Frontier AI labs are seeing customer concentration

  • Per the latest data from Ramp, ~80% of OpenAI and Anthropic’s enterprise revenue comes from just 1% of customers with a heavy concentration in tech and AI.

  • Anthropic’s leaked IPO prospectus confirms this datapoint, with ~25% of Anthropic’s revenue coming from just 2 unnamed customers.

  • Bottom line: Yes, enterprise AI spend is surging, but this spend is coming from a small handful of players.

πŸ’° Startup fundraising has become a 2-step process

  • In the past, when startups raised money, they’d approach investors and raise as big of a round as they can in one go. That process is now being split into two steps:

    • Step 1: Raise at a lower valuation from strategic partners who help build the company.

    • Step 2: A few months later, land a big valuation markup from deep-pocketed capital partners.

  • We haven’t just seen this process play out repeatedly across our portfolio. It is also validated by data from Sequoia which suggests that founders are raising at an average post-money valuation of $110M in step 1 and then raising at an average post-money valuation of $3.4B post-money in step 2.

2 theses on what’s next

πŸ€– Intelligence per megawatt will become the new metric to measure

  • With so much money flooding AI startups, the bottleneck to startup growth is no longer monetary but physical: electricity access, permits, and supply chains β€” and how to get access in the most capital- and time-efficient manner possible.

  • Therefore, it will no longer be enough to say that you’ve got the most powerful model; you’ll need to be the most powerful on a per-megawatt basis.

πŸ€” Startups will increasingly pursue value-based pricing

  • When determining how to price their product, startups typically take 1 of 3 paths:

    • 1. Competitor-based pricing: Looking at what the market charges and then charging within the same range.

    • 2. Cost-plus pricing: Looking at how much it costs to serve a customer and then adding a margin.

    • 3. Value-based pricing: Looking at the ROI the product can generate and then asking for a percentage of the spoils.

  • Currently, over 1/3 of AI startups default to competitor-based pricing, whether or not it makes sense.

  • However, as more companies implement AI (and as we have more data to prove the ROI of AI investments), we expect more founders to lean into value-based pricing to fully capture the upside.

  • This was one of the top topics we discussed at the Jeffersonian dinner we recently hosted withΒ Megh Gautam, Head of Product (Apps) at Box and Vinay Seshadri, Senior Director of Product at Chargebee. Find other key takeaways from the session here.

1Β tool we love

πŸŽ“ Wearable AI companion

  • Sophia, a former conference lead at DECODE, just launched Blinkko, a wearable AI companion. She worked at Apple before getting funded by YC China to focus on AI x hardware at Blinkko.

  • Learn more about their recent launch in SF here.

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Continue learning πŸŽ“

How to build

How to sell

  • Framework to nail enterprise sales (Read | Listen)

  • Qualities to choose in design partners (Read | Listen)

  • Questions to define ideal customer profile (Read | Listen)

How to operate:

Other resources πŸ“š

  • Learn more about the latest trends in startups/tech/venture

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