This Is The Way

This is The Startup Breakdown, the newsletter where we breakDOWN startUPs (just had to make sure you appreciated the word play). By joining this growing community of hundreds of curious individuals, you're getting firsthand access to my observations and opinions on the current state of the startups and venture scene. If you'd like to receive these newsletters directly in your inbox once a week, go ahead and subscribe to never miss an email!

Before we get started, plugging a side project I’ve been working on. Released the MVP and below is a quick demo of what it looks like but planning on building out a much more comprehensive product that I truly believe every single one of you will benefit from. As such, any feedback is extremely appreciated. Might even name my first born after you.

Happy Monday, folks.

It turns out that Cava, Panera, and Fogo de Chão AREN’T completely comprehensive, totally reflective benchmarks for the health of the broader market. Particularly for the last of that group, I’d venture to assume stuffing your face with your body weight’s worth of beef and parmesan bread rolls isn’t great for your own health either.

While reports of the aforementioned companies, along with several tech 🦄s, planning 2023 IPOs led many to assume that the public offering market was heating up. Such beliefs might have been earlier than a dad getting to the airport.

Through the first quarter (1/4 of the year has already passed???), a mere $19.7 billion was raised through IPOs, down from $65.3B last year and even further down the mountain from the $199.3B peak the year before.

Despite the slow start, though, several private companies might be channelling their “had us in the first half” guys. Companies such as Klaviyo, Remote, and a handful of others have recently provided the necessary Hancocks to go NASDAQ official.

Quick peek at a few industries’ performance through the first quarter of the year, the results are mixed.

Over in the world of digital health, the up and to the right trend seen in fundraising over the prior two quarters kept on keepin’ on, hitting $3.4 billion. This topped the $2.2B and $2.7B marks for the latter two quarters of ‘22. This keeps pace with the general upward annual trend in the industry after excluding the fever dream that was 2021 and shows how in demand being told you have cancer and polio after a quick search of “headache causes” is.

Despite big rounds like Boston Metal, climate tech wasn’t so lucky. Deal value and count seem to be tanking for Victor as each have extended their losses. Deal value failed to hit the $6B milestone for the first time since 2020, and it’s down 50% overall from its 2021 peak. It was prolly 5’11 all along anyways.

Crypto.

For the 5% of you who didn’t immediately skip this section at the mention of the word, the web3 space saw a whopping $9.5B in investments in March alone. This was the first time that a month saw MORE than $6 billion in over a year and was almost 10x the ~$1 billion seen last month.

Slightly less impressive when you see that deal count was actually down from the month prior, the result of some massive rounds like Ledger and Stripe, but not bad for some fake internet money anyways 🤷 

I distinctly remember spending my entire high school senior year winter break frantically filling out college applications. Luckily, it was made much simpler with the Common App which allows 95% of the information to be shared with all of the schools you apply to.

Frankly, there are many industries which could learn a thing or two from this method, including job applications, government program applications, and food delivery services to order the same thing from a dozen places for those influencers making “comparing chicken sandwiches from every fast food restaurant” videos.

Now, there’s a version for investors looking for VC money. Last month marked Seed Checks’ first month in business, and it was a busy one with more than 2K fundraising applications submitted to the 16 solo investors on the platform.

Most of the investors are well-known figures in the professional Twitter universe, including Codie Sanchez, Sahil Bloom, and Sarah Guo. When an investor submits an application, it’s reviewed by the Seed Checks team where an approval will result in its being circulated to the investors to review individually for follow ups if desired.

Companies must be valued at less than $20M with the average being even smaller at between $5M-$10M. Check size ranges from $100K to $3M, and the only industries which are off limits are DTC and CPG. Even better, unlike when you refreshed the application portal for your dream school five times a day every single day for 4 months straight, you’ll get a decision within two weeks.

For investors, this offers some unique benefits. Particularly for investors who don’t have Sequoia or YC in their LinkedIn profile, deal flow can be hard to come by, and it requires far more active sourcing to find promising companies. Combining exposure like this is appealing to founders looking to get in front of as many eyes as possible, and each investor on Seed Checks brings his or her own active audience to the platform to expand the pool of potential deals for all.

This is also a big pro for founders. Copying and pasting “Hey! Thanks for connecting. Would love to hop on a call and tell you more about what we’re building with [insert AI company here]” on LinkedIn 429752984 times. This increases the chance that at least one investor will take a chance and allows them to pitch to investors they might not have ever otherwise known about.

Now, hear me out. Let’s take this a step further and go full Tinder for VCs/Founders. I feel the tension in the air already.

We all have that friend that’s a secret Pokémon card millionaire. While it’s possible he just got lucky because his parents got him hooked with a Pikachu backpack on his 8th birthday, chances are that he put in the effort to learn about the market as a side hustle and rode the wave when it took off. Channel your inner Logan Roy and get ahead of these trends as you build your very own lemonade stand empire with What The Hype.

If you’ve watched the first two seasons of The Mandalorian, underpinning the compelling story and lovable characters were some truly stunning visual locations. If you’re watching season 3, I’m sorry.

Traditionally, getting these cool settings and backgrounds required physically going to those locations, an expensive process involving flying and housing the cast and crew (often 60+ people) to some far off locale, then paying fees to shut down a street or site and for local police protection. Worse, the effort is often for a shot which might last 30 seconds and relies on cooperative natural conditions like a perfect sunset lighting to capture a shadow in a certain way.

This adds up. When you’re a project like Star Wars, a franchise which has shot at locations spanning Iceland, Tunisia, Abu Dhabi, the Maldives, and a handful of other far-off sites, the budget spent on these shoots could have prolly bought the Millennium Falcon.

One project in this cinematic universe that didn’t spend a Hailey Bieber Erewhon smoothie on these costs was The Mandalorian which made waves by instead using a shiny new technology called virtual production studios.

These studios take a physical stage and transform it to create fully immersive, realistic visual environments around the actors, recreating the experience of traveling to a real place to shoot.

These environments are also fully customizable, much like a video game. Within minutes, any number of visual features, from mountains to skyscrapers to rainforests, can be completely produced and altered. Even minor details like shadows and sun positioning can be changed to get that perfect shot.

The underlying technology is incredible. It involves the use of motion capture (think those funny lookin’ ping pong balls on the actors), VR (not Zuck’s thankfully 🙏), and real-time rendering.

As for the experience for the actors, imagine that you’re an NBA star. You stand in the center, surrounded by hundreds of bright lights and screaming fans. That’s pretty much what this is, except instead of fans, it’s just the director yelling “More passion!” and instead of arm sleeves and headbands, you’re wearing those ping pong balls.

The feeling of full immersion holds, though. The surroundings are made of LED lights and green screens which allow for ultra-realistic display of the rendered environment, combining the visuals of on-site shooting with an improved traditional green screen experience and giving the actors something to respond to and interact with.

Plus, it’s a whole lot cheaper than traditional methods.

Enter Cuebric from Seyhan Lee.

The company’s technology appears poised to take over the world of FX in Hollywood, allowing moviemakers to take their shoots from La La Land to places where the weather isn’t sunny and 75 without ever leaving the studio. I’m talking places like Ohio.

The process goes as follows:

1. Create an image of the ideal landscape. Because it’s 2023, that means using text-to-image AI.

2. Make this plain ol’ image a 2.5D landscape using built-in depth rotoscoping.

3. Fill in any gaps using the same AI tools to ensure the landscape is complete.

4. Edit what you see in real time to add, subtract, multiply, and whatever other member of PEMDAS you wanna perform on the visual.

5. Call in the computer makeup team to go to work making the landscape a shiny, powdered 4K.

6. Export the final product to the stage server to display it in the surrounding stage and get to shootin’.

This might seem complex, but for the left-brained among us who aren’t completely inept at the #artsy stuff, it takes mere minutes.

The company has launched its solution through a partnership with XR Studios, a production studio known for its use of immersive tech like AR in the past. This partnership allows each to further embrace this reputation and extend this industry-changing technology to the brightest minds in LA.

If you have five minutes to spare, highly recommend these two short clips for a demo, the first from Cuebric and the next detailing The Mandalorian’s production process.

The company is a pandemic baby, born in 2020 as the brain child of Pinar Seyhan Demirdag and Gary Lee Koepke. Combined, they bring tons of experience in both the entertainment and ML spaces. More importantly, they’re passionate about the potential to reshape the entertainment space by incorporating exciting new technologies for more immersive experiences than ever before.

Even prior to this venture, the team was regarded as experts in the space, having consulted big brands like META, Adobe, and Netflix on ways to incorporate AI into their work since 2017. Maybe Netflix should have had them consult on content, too, and we could have avoided The Ridiculous 6.

In addition to developing the tech that is Cuebric, the team has been involved with dozens of creative projects spanning immersive art installations such as Ribbon Flowers to NFT projects with artists like Lil Pump. Kinda a shame they had to taint the name of high art with the likes of some plants with petals…

Given the low cost of producing these amazing visuals, the biggest challenge won’t be how to attract customers; it will be how much to charge the lines of studios hoping to make use of the tech.

The market is already worth more than $3 billion, and it’s expected to hit $7.2 billion by 2027, a 14.5% CAGR. The industry is still in its very early stages, and with an entertainment industry with demand being about as resilient as that for water and Mickey ears, the market for these cost-saving and experience-improving technologies aren’t going anywere.

It’s still too early for a 4K, generated image of the competition, but there are a few companies working on similar products.

The closest competitor is Digital Domains, the group behind The Mandalorian and Avengers: Endgame (no spoilers!). Getting to boast about these big-name projects has allowed the company to attract $31 million in outside capital.

However, there are other startups adopting the underlying tech for other use cases like Pixotape (immersive sets for broadcasters) and Mova (real-time facial and body capture for movies like Avatar). Clearly, this is a tech with disruptive capabilities across the world of content.

The tech is also already there. It’s still very early for widespread adoption by the film industry, nearly exclusively used by the big studios with the resources to shell out on experimenting with it, but it seems that going forward, the quality of film settings will be limitless. The only thing constraining what you see on screen will be the imagination of the directors behind the scenes.

TLDR: Cuebric from Seyhan Lee is a virtual production studio which creates immersive, cost-effective visual settings in a controlled environment for the film industry. The technology has the potential to reshape the world of film production by removing the need to physically shoot on a site and allows for full creative control for filmmakers as they design their ideal visuals. With growing adoption among big studios, it’s likely that this tech will be as central a part of the production process as the actors themselves.

Cheers to another day,

Trey