My Thoughts This Week
Quick thoughts on last week’s Salesforce stock drop, Apple’s upcoming AI event, and the recent scarcity of startup funding rounds for VCs.
In case you missed this week’s podcast, I had Annet Eckert, a seasoned expert with 20 years of experience in product management, consulting, and executive coaching. Watch Episode 24
Last week, I planned to post about Salesforce’s stock drop or do a deep dive, but instead, I decided to skip last week’s content while still working on the format of my weekly post. Here’s what I think drove Salesforce’s share price down by 20%:
The current economy is slow, with many layoffs and companies cutting costs, including software expenses. Salesforce’s subscription costs are not cheap, and its customers want to ensure a significant ROI. At my previous company, we constantly tracked the number of seats being purchased and evaluated each request to ensure it made sense for the company to acquire an additional seat.
Another aspect is that Salesforce, being a large company, is slow to move in markets such as AI. The company’s Sales AI product represents its current extent in AI, while other startups offer similar functionalities at significantly lower costs, potentially eroding Salesforce’s margins over time.
Lastly, the product experience is challenging. Salesforce’s product is difficult to use and can take one to two months to learn and make it work effectively. This is not a new issue, but it remains a significant hurdle.
Apple’s June 10th event is tomorrow, and I have some expectations around AI. Firstly, I’m looking forward to impressive branding for Apple’s AI, which might be called Apple Intelligence. Additionally, with Apple’s push towards AI capabilities, I anticipate they will leverage smaller AI models that can be built into the phone, eliminating the need for an internet connection. This approach would align well with privacy concerns. I also hope Siri won’t just become a ChatGPT wrapper, especially since we are 90% certain that OpenAI will power Apple’s AI. Siri should unlock great use cases that existing iPhone 14, 15, and HomePod devices can leverage.
Startup deals are becoming scarce for venture capitalists. This is because many startups are now raising only what they need to establish self-sufficient businesses, aiming for less dilution to retain control over their company’s destiny. Additionally, they are focusing on raising funds at favorable valuations and with sufficient growth momentum to reach their next milestones.
Broader economic conditions, such as inflation and rising interest rates, also play a role in this trend, making startups more cautious about overfunding. The shift towards profitability over rapid growth is another factor, driven by investor preferences for sustainable business models. Increased due diligence from investors means only the most promising startups with robust business models and clear paths to profitability secure funding.
Furthermore, startups are exploring alternative funding sources, such as revenue-based financing, crowdfunding, and strategic partnerships, which provide necessary capital without the dilution and control loss of traditional venture capital. The venture capital landscape is also becoming more global, with startups outside traditional tech hubs gaining traction due to remote work and global market access.
What I’ve read this week:
What Snowflake isn’t saying about its customer data breaches
GameStop Tumbles 40% as Trading Icon Roaring Kitty Returns to Livestream