June '23: Pulse Points

Hello and welcome to the June newsletter.

Thank you to everyone who braved the London heat to join us at Moonfire Pulse 2023 earlier this month. It was great to meet and catch up with so many of you, and your enthusiasm for what we are trying to do here at Moonfire is inspiring.

And a special thank you to our moderators and panellists. You made the day with your deep engagement, nuanced perspective, and strong opinions. I hope you enjoyed it as much as we did. Here’s looking to Pulse ‘24!

Read our key takeaways from part one of the event below (part two to follow soon!), as well as our usual podcast recommendation and good read of the month.

Enjoy.

Mattias and the Moonfire team

🌓🔥

Key insights from Moonfire Pulse 2023: Part I

Earlier this month, we gathered together tech experts, entrepreneurs, and investors in London for Moonfire Pulse 2023, our signature event exploring the technologies and founders shaping tomorrow.

The panels and firesides covered the European opportunity for founders and LPs, Silicon Valley Bank UK’s future as HSBC Innovation Banking UK, why now is the time to build in fintech, and the importance of data for startups. And AI was never far away from the discussion, from ushering in a new era of software to disrupting gaming and its potential impact on healthcare.

Here are our key takeaways from part one of the day.

Buried giants: The European opportunity for founders

The main difference between Europe and the US? ‘There’s a higher degree of taste in Europe,’ said Soleio, designer, investor, and early employee at Facebook. ‘Taste affords you the ability to shortcut bad decisions. […] It’s being able to get something to market faster by virtue of knowing when it sings.’

But ‘The double edged sword of taste is this propensity to not ship. If there’s one thing I hope all of you take away from this conversation, it’s that shipping is all that matters. […] People hide behind taste to excuse slipping the launch date or not getting things out the door. It’s a matter of finding a good balance.’

Europe has another edge. ‘In Silicon Valley we tend to build software for startups,’ said Soleio. ‘It’s a little bit incestuous.’ In contrast, European founders have proximity to huge markets, and ‘That proximity can provide a unique edge to not just understanding your end customer, but being able to identify opportunities that might be in the blind spot of entrepreneurs in other parts of the world.’

In addition, remote work has reduced the magnetic pull of Silicon Valley on talent. ‘The quality of a city, where you wake up, is a key factor in your ability to do great work, to be able to thrive […] It’s going to be a way in which cities like London can be hyper-competitive with environments like San Francisco, where there isn’t quite the same degree of infrastructure, safety or, at the very least, quality of culture. This is something European founders need to lean in to.’

For once, being a museum plays into Europe’s favour. There are more buried giants on whose shoulders we can stand.

Ready player one: Gaming and the AI, Web3 convergence

‘We don’t talk in millions in the gaming industry. We only use Bs.’

Board director and investor Megan Quinn reminded everyone why gaming’s worth talking about. A $200bn industry value, $200bn invested in gaming over the last two or three years, and the largest transaction of 2022 being a $69bn deal between Microsoft and Activision. Not to mention that gamers aged between 13-17 spend 40% more time gaming than any other form of media, including social, music, and TV.

But how will this opportunity be monetised? Alexis Bonte, Group COO of Stillfront Group, sees free-to-play as key to gaming’s growth, particularly given the global mobile device market size. Gunnar Holmsteinn, CEO and Co-founder of Quest Portal, was more sceptical, suggesting that gamers have a pretty high tolerance for upfront payments – but also encouraged continued experimentation with different payment models.

When talk turned to the power of AI in games, Nihal Tharoor, Founder and CEO of Scriptic, envisioned the technology’s importance for an accessible creator economy. Suddenly creators have powerful tools in their hands, allowing them to develop and distribute their own narrative – and other – games.

Web3 has yet to gain traction and, as Alexis noted, gamers don’t want the speculation of crypto and complication of Web3 in their gaming experience. But if the infrastructure can be built in such a way that it enables ownership and trade in a seamless way, Web3 could become an integral part of gaming. ‘I think that part will grow and will be meaningful, and will allow for new business models,’ said Alexis.

It’s still unclear what new gaming and storytelling experiences AR/VR will enable. As Gunnar noted, it will be interesting to see how it plays out with Meta’s Quest betting on home use and Apple’s Vision Pro betting on companies. Also ‘It depends on how you define gaming,’ said Akshat. ‘I think spatial computing and Vision Pro will make non-gaming sectors more gamified, whether it be healthcare, education, etc.’

However it plays out, remember ‘Ready Player One was a warning, not a roadmap,’ said Megan.

World of pure hallucination: LLMs & transformers, a new era for software

‘If we had GPT-4 ten or fifteen years ago, would we have built all the software we built today?’ asked Namit Chadha, Founder and CEO of Shape. ‘The answer is no. I think we need to rethink all of this from the ground up.’

So it’s not enough to just build or apply a model. ‘I don’t think a foundational model is a moat,’ said Steve Crossan, Founder of Dayhoff Labs. ‘The product and platform you build with it is the only moat, and you can do that on the basis of much smaller, cheaper models.’ Mike echoed the sentiment: ‘So much perceived competence comes from the competence of the model itself, but an extraordinary amount of untapped perceived competence will continue to come from exposing access to unique proprietary data and allowing those models to take interesting actions.’

What about the problem of trust and hallucination? ‘Trust in AI is actually much more a user interface exercise than it is a “oh, we’re just going to tweak these transformer models until they don’t hallucinate”, because the point they don’t hallucinate they’re also not powerful any more,’ said Christian Lanng, Chairman at Beyond Work. ‘Anyone who thinks we’re going to get to hallucination-free models is hallucinating.’

And this latest wave of AI will also bring about a sea change to productivity in science. ‘I keep saying to scientists, “what would you do if you could do 1000 times as many experiments as you can do now?”,’ said Steve. The state of the art in science is a long way behind enterprise software, but AI has the potential to create a more intuitive way for scientists to collaborate and interact with their data.

Locally won: Why is it time to build in Fintech?

‘We still very much view fintech as a market that’s locally won,’ said Nick Brito, Managing Director of DST. ‘It’s such a vast market that you actually don’t need to expand globally necessarily to build a big business.’

But if you do choose to expand, it’s not simply copy and paste. You can’t just assume that because it works in one market it will just as easily work in the next. ‘You really need to nail local product market fit,’ said Lasse Kalkar, Founder and CEO of Liveflow.

And there’s a lot of low-hanging out there for fintech startups. ‘There’s still a huge amount of opportunity for unbundling products and services, because the big banks […] aren’t very good at delivering modern product experiences,’ said Seth Phillips, Founder and CEO of Bound. It’s about making ‘really f——— easy to do what used to be really f——— hard.’

Odd Lots: Steve Eisman on Banks, AI and His Next Big Bet

Neuberger Berman portfolio manager Steve Eisman is famous for his bet – immortalised in The Big Short – against the housing market prior to the 2008 financial crisis. In this episode of Bloomberg’s Odd Lots podcast, he goes into what he’s betting on now.

He discusses the recent banking turmoil (‘We’re not having a banking crisis. We’re having a crisis of certain banks.’), crypto, the AI boom, and his current bets on US manufacturing and the electrical grid.

Mistral AI’s strategic memo

Mistral AI is the five-week-old, pre-product French AI startup that just raised €105m – the largest ever European seed round (at the time of writing, at least). This is the memo that secured it.

Taking a leaf out of Bezos’s book, it’s not a pitch deck but a seven-page, narratively structured memo.

The thrust is that the team believes that most of the value in the emerging generative AI market will be located in the hard-to-make technology – the models themselves. With all the major actors currently in the US, Mistral wants to tip the balance towards Europe. They’re betting on an open-source strategy, which they believe will attract top researchers and accelerate development downstream.

It’s a talented team, and it’ll be exciting to see where they take it.

That’s all for this month. Look out for our key insights from part two of Pulse coming soon, and more post-event content in the coming weeks as we dive deeper into the conversations. If you haven’t already, subscribe here so you don’t miss anything.

Until next time, all the best,

Mattias and the Moonfire team

🌓🔥