Even Elon needs to borrow a few dollars🫰

This is The Startup Breakdown, the newsletter where we learn, laugh, and love startups. By joining this growing community of hundreds of future startup aficionados (think i spelled that right?), you're getting a beachside view of the ocean that is the startup and VC scene. This ain’t your grandpa’s newsletter, so prepare yourself for an inbox full of 4/20 jokes and Succession references.

Happy Tuesday, folks.

Babysat a bearded dragon this weekend.

Didn’t know how quickly one could fall in love with a cold-blooded animal, but miss you already, Sigmund 🦎 

Not even Elon will bootstrap in this economy

Many aspiring founders claim that after one successful venture-enabled exit, they’d bootstrap their future companies.

Then, they find themselves sitting in front of the “confirm payment” button for some $50,000 API management service coming out of their own piggy bank.

Not even the world’s richest man is immune to this, as Elon Musk has been approaching some of his many very willing friends to invest in his next venture, xAI.

He filed with the SEC last month, revealing that he was seeking $1 billion for this new AI company, targeting a valuation of $20 billion. The supervillain entrepreneur reportedly has secured half of this, though he has since disputed Bloomberg’s reports, though for what it’s worth, Musk also stated that the company was not raising funds when the first document was filed with the SEC, and documents showed that the company had already raised ~$134 million, so this might be a case of having his fingers crossed behind his back…

Elsewhere in wealthy founders raising billions of dollars, Sam Altman is back to begging his own network to fund the construction of a network of chip fabs to compete with the likes of Nvidia to supply the various AI companies fighting for bigger, faster, scarier LLMs.

This was first reported around the time that he was fired and rehired in November, and it was clear even then that he was serious about raising billions of dollars to compete with the bigger players in the semiconductor space. Investors linked to the funding efforts include SoftBank and G42, an Abu Dhabi-based AI investor.

While Nvidia is not planning to sit on its laurels, the competition is heating up, and Sama’s might be the only startup to feasibly raise enough to compete in the space.

In less-documented news, Baiju Bhatt, cofounder of Robinhood, might also be in the early stages of a new venture, his being a solar startup aiming to collect the juice of Helios in space.

That almost makes 3 billionaire entrepreneurs (Sama is technically only worth $500 million) seeking funding for new ventures. This pool of competition is part of the reason it has been challenging for your seed deck to gain attention from serious investors.

Despite the great year for the stock market, 2023 was tough for startups looking for capital. High interest rates, inflation, and few exit opportunities contributed to the year’s 37% drop in venture funding.

Capital dried up, and investors got pickier with their bets, creating higher valuations for the 1% of promising (or proven) teams and founders.

Musk, Altman, and Bhatt will never fight to raise capital. If anything, the risk-averse market makes it easier for the top talent to find blank checks.

The stock market masks a much more complicated picture of the state of the economy, one which is still not particularly friendly for founders looking for cash.

How to position yourself? Stay lean. Hunker down, close the hatches, and keep building with the expectation that you will not be able to raise for the next 12 months.

Seeing the number in your Mercury account slowly dwindle will make it easy to get nervous, and unfortunately, many companies won’t survive. However, putting teams in “back against the wall” mode will force many to make it work, causing them to simplify things and focus on building a great product.

Control what you can control. Good things tend to happen to those who work hard, fast, and efficiently.

I’m here for all of you 🫡 

In the current economic climate, even billionaire entrepreneurs like Elon Musk and Sam Altman are facing challenges securing funding for new ventures, underscoring the universal tightness in venture capital. Founders should focus on staying lean and prioritizing product development, preparing to navigate a market that's become increasingly selective and risk-averse.

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Cheers to another day,

Trey