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<ul class="summary-list"><li>Louis Lehot, a Silicon Valley law-firm partner, specializes in taking companies from startup to IPO.</li><li>Lehot gave his suggestions for how to prepare, like hires to make and risks to consider pre-IPO.</li></ul>The IPO market is expected to pick up later this year, so Business Insider emailed Silicon Valley lawyer Louis Lehot, a partner at Foley &amp; Lardner, for advice on how startups should prepare for life as public companies.Lehot has more than 25 years of experience advising businesses, financial sponsors, venture capitalists, investors, and investment banks on topics including equity offerings, mergers, acquisitions, and spinoffs. His work often involves helping startups prepare for initial public offerings.The following has been edited for brevity.What's the environment like for IPOs?2023 was the toughest year for IPO activity in more than two decades. The IPO outlook for the second half of 2024, or at least the first half of 2025, can only get better.Riskier assets, such as Bitcoin, have rebounded strongly, suggesting risk appetite is a lot higher. The Fed is expected to make at least one rate cut later this year. The after-market performance of some recent IPOs has been stronger. Earnings reports from public companies are improving.There's a substantial backlog of companies preparing to go public as soon as the window opens, and the outcome of important federal and state election races should bring greater clarity.Which sectors are most likely to be successful in an IPO?<ul><li>Healthcare and Biotech: These companies go public as part of their venture financing path, often before they have a product in the market. As a result, they are heavily risk-driven, and the opportunity to make alpha with smaller amounts of capital invested is real. If risk appetite is truly back, we can expect investors to pile into biotech, life sciences, and medical device IPOs. New tech, enabled by CRISPR and AI, should increase the speed and accuracy of clinical trials.</li><li>Green Energy: As the effects of climate change spread, we expect industrial policy to favor renewable energy companies and the ecosystem that they enable, maybe even nuclear energy. Renewables and related technologies are gaining traction with a growing focus on sustainability.</li><li>Enterprise software and fintech: There's a solid backlog of late-stage private companies whose venture capital and private equity investors require a public market exit to return capital to limited partners and raise new funds. As a result, we expect a bumper crop of enterprise software (B2B solutions, cloud services, and cybersecurity) and fintech companies (digital banking, payments, and financial services) to come to market when the window opens later this year or next.</li></ul>Are public market investors generally keen to invest in IPOs, or are they focused elsewhere?Public market investors are selective, focusing on established profitability and sustainable growth over speculative, high-growth stories. Many investors are diverting their attention to safer, more predictable assets due to market volatility and economic concerns.What are IPO investors expecting in the current climate?<ul><li>Profitability, or a clear path to profitability: Unlike previous periods focused solely on growth, profitability is now critically correlated to a successful IPO.</li><li>Sustainable revenue growth: Consistent and predictable growth trajectories</li><li>Robust metrics: Strong KPIs and unit economics</li><li>Valuation discipline: More conservative valuations compared to the frothy markets of past IPO booms</li></ul>Should tech startups want to go public right now?If you have a choice, you stay private.For example, if you're the CEO of a successful startup with more than $100 million in revenue that's growing in excess of 30% at over 40% gross profit margins, every door is open to you.There's ample private capital to finance your company's scaling needs. There is likely a robust secondary market for your personal shares if you need to take some chips off the table. You have no obligation to report your compensation and equity holdings publicly or your company's quarterly results, much less live under the public microscope and the constant glare of Wall Street analysts who are focused on reporting on any short-term event that might drive trading.Fringe benefits include more control over business decisions, fewer regulatory requirements, and the ability to focus on long-term growth.The choice is not even close. Any CEO-founder would want to stay private. Look no further than the example of the <a target="_blank" class="" href="https://www.businessinsider.com/how-collison-brothers-built-stripe-most-valuable-us-startup-2021-3">Collison brothers at Stripe</a>.However, the characteristics that drive a transformational CEO-founder to achieve this level of commercial success are not necessarily driven by the same logic.The vision of a transformational CEO extends far beyond the perceived short-term benefits of a quick exit. I'm surrounded by mission-driven CEO's with the burning ambition to achieve global market ubiquity, which usually means an IPO is a necessary step on their long road.What are the most important hires to make before an IPO?<ul><li>Chief Financial Officer: A CFO with public company experience is crucial for navigating financial reporting and investor relations.The CFO of a public company is the first or second line of communication with Wall Street, key long-term investors, auditors of your financial statements, and financial regulators. In addition, the finance department will quickly need someone who can manage internal controls over financial reporting and write public financial reports. This person is usually a "controller."The CFO will also need someone who can forecast, model, and plan ahead and ensure that the company, when going public and forever thereafter, accurately telegraphs its future performance on a forward-looking, one-quarter, and one-year-ahead basis. This is usually a vice president for forecasting, planning, and analysis, or FP&amp;A. For larger public companies, a chief accounting officer is also on the road map.</li><li>General Counsel: Whereas 20 years ago, a general counsel was not hired until just before an IPO, nowadays, a company with $10 million of revenue or more may consider hiring a head of legal in-house to control costs, particularly for rote, repeatable tasks. But an IPO puts the company under a microscope of regulatory, investor, employee, and public scrutiny where the stakes get large enough that an experienced general counsel is usually hired, and if large enough to support the cost, even a deputy general counsel for securities law compliance to manage the more hours intensive processes of making the company ready for IPO and maintaining compliance thereafter.</li><li>Investor Relations Officer: About a year ahead of the big day, a forward-thinking CFO will try to hire a vice president of investor relations who has been through the process of managing a syndicate of analysts before, during, and after an IPO. Particularly for larger companies who garner analyst coverage from six or more sell-side and buy-side analysts, making sure the analysts are getting adequate information to build quality models will ensure higher quality coverage and greater liquidity for the company once public, which is a critical indicator of success.</li><li>Audit Committee Chair: While a pre-IPO company will seek to hire a majority-independent board of directors, the audit committee chair is one key role to fill on the board.The audit committee chair is usually a former CFO who has deep knowledge of the IPO process and the interplay of a board of directors and its independent registered public accounting firm, which is a critical relationship at every stage of an IPO and beyond.The audit committee's role is to oversee the production and auditing of the financial statements and the financial integrity of the company's public disclosures and compliance with regulatory standards. The audit committee chair will want to make sure there are at least two other directors who can serve independently on the audit committee who are financially literate and expert enough to assist them.</li></ul>What are the biggest changes startups must go through to be IPO-ready?To consider a successful IPO, a tech company will need to have line of sight to $100 million in revenue with eight quarters of historical growth and line of sight to eight quarters in the future of predictable growth. For a tech business, annual growth in GAAP revenue will need to be in excess of 20% (and ideally double this amount) at gross margins of 40% or more. These are herculean feats that few businesses will ever achieve.There also has to be some other ingredient, which some call the "sizzle," to inspire long-term fundamental investors to believe that growth can be significantly greater than what the models show over the next eight quarters.Historically, that sizzle could be explained by exposure to international markets that would be enabled by the scaling capital provided by the IPO.Today, revenue from a US tech business may well be evenly split between US and international markets from the outset, so the "sizzle" will need to come from planned advances in technology, new product releases, and new product enhancements that will unlock new and significant branches of growth.What are the key process changes companies need to make ahead of an IPO?<ul><li>Leveling up the company's financial reporting function: Enhanced accuracy and transparency in financial statements is an absolute necessity, both historically and forward-looking for eight quarters in both directions.</li><li>Corporate governance: Companies need to recruit an experienced, independent, and supportive board that can provide wisdom to management during the IPO process and beyond.</li><li>Operational scalability: Ensuring systems and processes can support growth and compliance requirements. Have you installed a world-class ERP software system? Do you have a contract management system and CRM software? Do they all work together?</li><li>Compliance and risk management: Implementing robust controls to meet regulatory standards is a playbook that a new CFO and new General Counsel can implement with the help of outside advisors.</li></ul>

How startups can get in top shape for an IPO, according to Silicon Valley lawyer Louis Lehot

<ul class="summary-list"><li>This post originally appeared in the Insider Today newsletter.</li></ul>Happy Veterans Day, and thanks to all those who have served! Diet starts Monday, as they say, so why not take some advice from Super Bowl-winning quarterback Drew Brees. He spoke to Business Insider about <a target="_blank" rel="noopener" href="https://www.businessinsider.com/drew-brees-simple-wellness-rules-2024-11">five simple wellness rules he lives by</a>.In today's big story, Silicon Valley is getting excited about what Donald Trump's second term <a target="_blank" href="https://www.businessinsider.com/elon-musk-could-help-deregulate-tech-amid-a-trump-victory-2024-11">could mean for its businesses</a>.What's on deck:<ul><li>Markets: The Wall Streeters advising Trump's transition team <a target="_blank" href="https://www.businessinsider.com/wall-street-advisor-trump-lutnick-schwarzman-warsh-federal-reserve-2024-11">on key economic appointments</a>.</li><li>Tech: Check out our Tesla salary database that shows how Elon Musk courts 'hardcore' workers <a target="_blank" href="https://www.businessinsider.com/tesla-salary-database-elon-musk-pay-strategy-2024-11">with potentially lucrative stock grants</a>.</li><li>Business: The anxiety over high prices has <a target="_blank" href="https://www.businessinsider.com/retirement-saving-inflation-cost-of-living-crisis-investing-401k-pensions-2024-11">some Americans oversaving</a>.</li></ul>But first, time to get things going again.If this was forwarded to you, <a target="_blank" href="https://www.businessinsider.com/subscription/newsletter/insider-today">sign up here.</a><h3 id="7fa5f018-5b05-4a37-a8dc-d3f89138bcb3">The big story</h3><h2 id="5fd547b9-ec52-41fc-8e08-4f4b27dd8097">United States of Startups</h2><div type="image" title="Photo illustration of laptop, stacks of coins, stars and stripes" height="960" width="1920" msid="115186105" hostid="261" sizebytes="101980"></div>The startup community is ready to be let off its leash.VCs and founders are hopeful about what they anticipate to be a much looser environment for building and dealmaking under President-elect Donald Trump.Tech was always viewed as a beneficiary of the deregulation expected in Trump's second term. But Elon Musk potentially playing a role in the Trump administration means <a target="_blank" href="https://www.businessinsider.com/elon-musk-could-help-deregulate-tech-amid-a-trump-victory-2024-11">Silicon Valley could benefit even more</a>, writes Business Insider's Samantha Stokes, Riddhi Kanetkar, and Helen Li.One VC compared Musk streamlining the government to a "chainsaw through calcified butter."Even those who weren't rooting for Trump <a target="_blank" href="https://www.businessinsider.com/silicon-valley-trump-return-startups-venture-capital-2024-11">see benefits to a potential hands-off approach to their space</a>, which has faced turmoil in recent years.After years of big funding rounds, high-profile deals, and flashy IPOs, the startup environment has been much more rocky recently. There are many reasons for that — high interest rates, an uncertain economy, the market being somewhat overvalued — but a Biden administration that took a hard line on M&amp;A played a key role.FTC commissioner Lina Khan's attempt to block multiple deals has chilled the industry. Acquisitions are startups' most viable exit opportunity with the IPO window largely closed.The industry became somewhat stuck in place. Money tied up in startups couldn't be reinvested, and employees working at young companies waited for a liquidity event.<div type="image" title="Trump in shadow" height="1279" width="1920" msid="115186097" hostid="261" sizebytes="20896"></div>Trump's impact on the industry's hottest segment — artificial intelligence — isn't as clear.The space is already evolving as some of the biggest companies in the world are picking sides and consolidating power with partnerships and investments in high-profile startups. That was evident last week with a report that Amazon <a target="_blank" rel="noopener" href="https://www.businessinsider.com/anthropic-gaining-on-openai-ai-market-2024-11">was considering investing in Anthropic again</a>.The US is already investigating Microsoft and Nvidia over their AI dealings. Trump's deregulation approach could free up the space.But regulators launched investigations and filed lawsuits against Big Tech during Trump's first term. The president-elect also has a <a target="_blank" href="https://www.businessinsider.com/donald-trump-presidency-affect-big-tech-2024-11">complicated relationship with tech giants</a>, even threatening to <a target="_blank" href="https://www.businessinsider.com/donald-trump-mark-zuckerberg-sent-prison-elected-truth-social-2024-7">send Meta's Mark Zuckerberg to jail</a>. And Vice President-elect JD Vance previously said Khan is "doing a pretty good job" in her antitrust enforcement.Musk has also had run-ins with Zuckerberg, Amazon's Jeff Bezos, and OpenAI's Sam Altman, and his AI startup, xAI, is looking to compete in the space.And then there's Trump's immigration policy. The president-elect pledged to conduct mass deportations of undocumented immigrants. It's unclear if and how he might reshape the legal immigration system <a target="_blank" href="https://www.businessinsider.com/trump-immigration-policy-ai-tech-worker-shortage-2024-11">that places high-skilled workers from outside the US in tech jobs</a>, including those in AI.<h3 id="77f31a4c-8462-4e3d-a71f-838cb79493fb">News brief</h3><h2 id="1fcd294b-3f53-425f-9f20-4093e8623b59">Top headlines</h2><ul><li>The coming <a target="_blank" href="https://www.businessinsider.com/coming-reign-only-child-americans-fewer-babies-siblings-costs-2024-11">reign of the only child</a>.</li><li>Elon Musk has named his <a target="_blank" rel="noopener" href="https://www.businessinsider.com/elon-musk-pushes-rick-scott-for-senate-majority-leader-2024-11">top choice for Senate majority leader</a>.</li><li>Forget swing states. Here's how the generations <a target="_blank" rel="noopener" href="https://www.businessinsider.com/how-generations-voted-trump-harris-gen-z-gen-x-boomers-2024-11">flipped on Election Day</a>.</li><li>What needs to go right for Intel, <a target="_blank" rel="noopener" href="https://www.businessinsider.com/intel-dow-jones-ai-chip-lag-2024-11">and what happens if it doesn't</a>.</li><li>Trump's plan for Social Security will help baby boomers in the short run and <a target="_blank" href="https://www.businessinsider.com/trump-tax-cuts-social-security-boomers-benefit-fund-depletion-2024-11">cut benefits for anyone younger</a>.</li></ul><h2 id="8120060b-ae66-48dc-b149-f0489a30ffa2">3 things in markets</h2><div type="image" title="Donald Trump and the Wall St. sign" height="1500" width="2000" msid="115186103" hostid="261" sizebytes="227372"></div><ol><li>Who Trump is turning to on Wall Street for advice. Cantor Fitzgerald CEO Howard Lutnick is co-chair of Donald Trump's transition team, and he's looking to his Wall Street peers for help. Apollo CEO Marc Rowan, Blackstone CEO Steve Schwarzman, and Charles Schwab are reportedly <a target="_blank" href="https://www.businessinsider.com/wall-street-advisor-trump-lutnick-schwarzman-warsh-federal-reserve-2024-11">some of the people lending their expertise to Lutnick</a>.</li><li>Citadel Securities just poached a 20-year Microsoft vet. Herb Sutter is joining Ken Griffin's market maker <a target="_blank" rel="noopener" href="https://www.businessinsider.com/why-citadel-securities-hired-coding-expert-microsoft-herb-sutter-2024-11">in a new tech leadership role</a>. Sutter is an expert in C++, the coding language that underpins most of Citadel Securities' technology.</li><li>Bitcoin's big hopes for Trump 2.0. The self-described "crypto president" flipped from cynic to cheerleader during his campaign. Now that he's headed back to the White House, crypto supporters hope for <a target="_blank" href="https://markets.businessinsider.com/news/currencies/bitcoin-price-crypto-industry-donald-trump-election-reserve-regulation-sec-2024-11">regulatory overhaul and an expanded mainstream role</a> for the digital currency.</li></ol><h2 id="f4b54806-7f81-450c-ba32-92560d4fae9b">3 things in tech</h2><div type="image" title="Elon Musk" height="1500" width="2000" msid="115186106" hostid="261" sizebytes="652194"></div><ol><li>Inside Tesla's high-risk, high-reward compensation strategy. BI secured access to an internal Tesla salary database covering nearly 100,000 employees as of December 2021. The data reveals Elon Musk's pay strategy: <a target="_blank" href="https://www.businessinsider.com/tesla-salary-database-elon-musk-pay-strategy-2024-11">Lower salaries, bigger stock grants</a>.</li><li>How Reddit went mainstream. Not long ago, Reddit wasn't for everyone. It was a dark, weird little corner that prided itself on free speech but could quickly get ugly for users. Today, Reddit's community-driven content attracts users who would rather rely on human input than AI. <a target="_blank" href="https://www.businessinsider.com/reddit-mainstream-google-traffic-stock-revenue-human-users-2024-11">In that sense, it's a bit like the new Google</a>.</li><li>Behind Nvidia's plans to build robot brains. Nvidia robotics executive Rev Lebaredian told BI about the chipmaker's plans to tackle its newest frontier, bridging generative AI and physical robotics. The secret? <a target="_blank" href="https://www.businessinsider.com/rev-lebaredian-spearheads-nvidias-omniverse-push-in-ai-and-robotics-2024-11">Visualize the future, then build it</a>.</li></ol><h2 id="9260fa45-d397-4b3c-b4f8-4bb193976216">3 things in business</h2><div type="image" title="woman anxious in a pile of money with a house on top." height="846" width="1128" msid="115186104" hostid="261" sizebytes="133984"></div><ol><li>The high cost-of-living has some Americans going overboard with saving. Plenty of people in the US live paycheck to paycheck, but a growing cohort is doing the opposite. Despite having solid finances, anxiety about high prices has them <a target="_blank" href="https://www.businessinsider.com/retirement-saving-inflation-cost-of-living-crisis-investing-401k-pensions-2024-11">saving more than is recommended</a>. Stockpiling cash could ultimately cost them as they miss out on investment gains.</li><li>Don't poll the election; bet on it. In the weeks leading up to his victory, polls showed a virtual tie between Donald Trump and Kamala Harris. Yet prediction markets showed a solid Trump lead, proving what proponents have long argued: they can be more accurate than traditional polling. <a target="_blank" href="https://www.businessinsider.com/betting-markets-polls-trump-election-win-polymarket-kalshi-2024-11">Prediction markets' biggest cheerleaders explained why</a>.</li><li>Economists say Trump will give Americans the very thing they voted against. High prices helped Trump get elected. Experts say his proposals of <a target="_blank" href="https://www.businessinsider.com/donald-trump-election-win-high-inflation-risk-tariffs-deportations-taxes-2024-11">lower taxes, higher tariffs, and mass deportations will be inflationary</a>. It could also make the Fed's recent rate-cut relief painfully short-lived if it's forced to hike rates again in response.</li></ol><h2 id="9f5d80ac-3466-429f-a50a-2ffbb70c65ff">What's happening today</h2><ul><li>It's Veterans Day. The nation's largest commemorative parade takes place in New York City.</li><li>The World Meteorological Organization releases the "State of the Climate" update at the UN's climate-change summit in Azerbaijan.</li></ul>The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Grace Lett, editor, in Chicago. Hallam Bullock, senior editor, in London. Ella Hopkins, associate editor, in London. Amanda Yen, fellow, in New York. Milan Sehmbi, fellow, in London.

Startups are ready to thrive under Trump, but some uncertainty remains in a key corner of the space

<ul class="summary-list"><li>The tech industry is anticipating an upswing thanks to Trump's election this week.</li><li>VCs expect possible deregulation to boost innovation, with Musk potentially influencing government policies.</li></ul>Some venture capitalists <a target="_blank" class="" href="https://www.businessinsider.com/silicon-valley-trump-return-startups-venture-capital-2024-11">expect US President Donald Trump</a> to dial back regulation, potentially making it easier to develop new technologies and do business in Silicon Valley. Many of these hopes are pinned on Elon Musk's involvement in the new administration."The most exciting thing of all will be putting Elon in charge of government efficiency," Ben Narasin, founder and general partner of Tenacity Venture Capital, told BI of the election outcome. "He's going to take a chainsaw through calcified butter, and it's going to be awesome to attack the bloat and overreach that we've had in the government."Trump is <a target="_blank" class="" href="https://www.businessinsider.com/elon-musk-could-be-donald-trump-advisor-wsj-reports-2024-5">reportedly considering Musk</a> for White House roles, including ones that would audit various federal programs and organizations.Musk, in turn, has proposed creating a "Department of Government Efficiency" — cheekily nicknamed DOGE, <a target="_blank" class="" href="https://www.businessinsider.com/history-elon-musk-love-affair-dogecoin-2022-7">a nod to the cryptocurrency Dogecoin</a> — that he said would remove dealmaking regulations that have slowed M&amp;A in the tech sector in recent years.While many in Silicon Valley dislike Trump, many VCs and startup founders crave more freedom to pursue riskier new technologies unburdened by regulation. In short, tech is stoked about this."Trump-Vance ticket is the first unabashedly pro-tech presidency in our Nation's history," said Augustus Doricko, CEO and founder of cloud seeding startup Rainmaker. He expects an onslaught of tech innovation during the Trump administration.In conversations with more than a dozen VCs and Silicon Valley executives following the election, many have echoed this sentiment — including those who supported Kamala Harris in the election."With a major push to remove unnecessary red tape and over-regulation in key areas, we could really have a century of crazy building, innovation, and acceleration," Aaron Levie, the CEO of cloud company Box and a Harris supporter, <a target="_blank" class="" href="https://twitter.com/levie/status/1854237056287060266">posted on X Wednesday. </a>"Excited for Elon's efforts here."Mark Pincus, an early Facebook investor and the founder of Zynga, responded on X, "Effective accelerationism! E-acc," referring to the recent Silicon Valley movement that wants <a target="_blank" class="" href="https://www.businessinsider.com/effective-accelerationism-humans-replaced-by-ai-2023-12">technological advancements in AI</a> to move as fast as possible, without any guardrails.<h2 id="04af9d99-2642-43c3-875c-92cb63b01ca9">Regulation has held Silicon Valley back in recent years</h2>VCs during Biden's presidency have complained about how tough it's been to get deals done. The outgoing administration was an antitrust enforcer and put many tech mergers and acquisitions on hold that it deemed anti-competitive. This is particularly galling for VCs because they rely on selling startups in M&amp;A deals for many of their exits and returns.Limits on tech M&amp;A have "caused the rate of venture capital return of distributed proceeds to fall drastically, making new capital formation near impossible," said Louis Lehot, a top tech lawyer at law firm Foley &amp; Lardner. Silicon Valley is looking for a relaxation in the government's stance here "to enable exits and new capital formation, which is the cycle of innovation," he added.For example, regulatory pressure had <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-07-23/google-s-aborted-deals-for-wiz-hubspot-show-antitrust-s-shadow-over-tech">dampened deal-making at Google</a>, with the tech giant abandoning two potential purchases this year, including cybersecurity startup Wiz, which would have been one of the tech giant's biggest-ever acquisitions.The US also opened antitrust investigations into <a target="_blank" href="https://www.businessinsider.com/microsoft-acquihire-deal-inflection-ai-antitrust-probe-us-regulators-competition-2024-6">Microsoft</a> and <a target="_blank" href="https://www.businessinsider.com/elizabeth-warren-backs-justice-department-nvidia-antitrust-investigation-2024-9">Nvidia</a> earlier this year over their dominance in the hot AI space. The Federal Trade Commission is probing Microsoft's aqui-hire of <a target="_blank" href="https://www.businessinsider.com/microsoft-hired-inflection-team-amid-board-concerns-about-openai-2024-3">Inflection AI,</a> and the Department of Justice is investigating Nvidia's acquisition of Israeli AI startup Run:ai.While some lawmakers say that allowing a few companies to influence the majority of AI research, development, and monetization poses an economic risk, <a target="_blank" class="" href="https://www.businessinsider.com/donald-trump-vcs-in-silicon-valley-2024-7">many VCs have cried foul and accused FTC commissioner Lina Khan</a> — who has frequently sued to block mergers — of an anti-business bent and say it's tricked down to closing fewer startups deals, too.Investors were also critical of what they call <a target="_blank" href="https://www.businessinsider.com/cryptocurrency-bitcoin-influence-election-trump-harris-2024-10">unclear rules for cryptocurrency under the Biden regulation</a>. Many VCs and founders in the space donated to Trump and other Republican candidates, which they consider more favorable toward crypto technologies and markets.VCs are now hopeful that Trump <a target="_blank" href="https://www.businessinsider.com/donald-trump-presidency-affect-big-tech-2024-11">could roll back</a> some antitrust and crypto policies that a Harris administration may have continued, although nothing is certain about the new administration's approach.Trump's running mate and former VC JD Vance has <a target="_blank" rel=" nofollow" href="https://thehill.com/policy/technology/4491363-vance-biden-ftc-chief-is-doing-a-pretty-good-job/">publicly said</a> that Khan is "doing a pretty good job," referring to her antitrust enforcement for Big Tech companies. At the end of Trump's first term, regulators under his administration launched antitrust investigations into Big Tech companies, including Amazon; and filed antitrust lawsuits against Google and Meta."At a high level, we expect Trump to cut corporate taxes and regulations, helping startup M&amp;A and investment," said Mason Angel, general partner at Industrious Ventures. "We may see new acquisition efforts by big tech with a new FTC director."Musk's influence could also help slim down the government's involvement in tech deals, these VCs told BI."Elon is a positive force who's had to run multiple companies that are heavily regulated, so he has a realistic view; since he's lived it, he can be influential," Narasin said of Musk's track record of building Tesla, SpaceX, and xAI. "He's pro-startup, pro-business, pro-everything that will help the US population. A good, healthy economy is good for everybody."<h2 id="a31623cb-2e54-4906-802e-37c294e98064">VCs anticipate an innovation boom</h2>America is a country of entrepreneurs, and that's especially true in Silicon Valley. Some VCs and founders say that having an entrepreneur like Musk influencing the Trump administration and potentially wiping away regulations will bring prosperity to the industry.Indeed, <a target="_blank" href="https://markets.businessinsider.com/news/stocks/trump-trade-us-presidential-election-dollar-treasuries-stocks-crypto-djt-2024-11">the stock market responded exuberantly</a> to Trump's decisive win on Tuesday night, which could eventually be a boon to venture firms seeking investments. Limited partners such as pensions and endowments have been choosier recently thanks to high interest rates and few exit options for startups. But their return to funding venture firms would, in turn, mean that more founders are building and getting funded."I would like to see the President given the power to unilaterally remove, or at least streamline, regulations around major projects or economic areas that will make it possible to actually build new things," tech blogger Ben Thompson <a target="_blank" class="" href="https://stratechery.com/2024/president-trump-take-two-big-tech-little-tech-chips-and-hardware-elon-musks-triumph/">wrote after the election.</a> "There needs to be a way to cut through all of the red tape that has accumulated.""I think the next four years will be imbued with aspirational mega-projects and visionary initiatives without precedent," Rainmaker's Doricko said. "New cities. Lunar and Martian colonization. Free electricity. Weather control."Angel, whose VC firm invests in the space, industrial, and defense sectors, says that those industries will experience strong growth."Trump created the Space Force in 2019, and his close relationship with Elon Musk will bring renewed attention and government investment into the field," Industrious Ventures' Angel said. "Same goes for the US industrial and defense bases."As various sectors within the tech industry ebb and flow, VCs say they're optimistic about the idea of having one of their own helping to call the shots at the federal level."Elon's going to be an enormously positive monster who delivers a cleaned up, slimmed down, pro-business government, and there will be prosperity for everybody," Narasin said.

Silicon Valley is betting a Musk-inspired Trump could unleash a startup boom

<ul class="summary-list"><li>This post originally appeared in the Insider Today newsletter.</li></ul>Welcome back! You've probably heard about universal basic income. But instead of giving people cash, what if you <a target="_blank" href="https://www.businessinsider.com/federal-jobs-guarantee-universal-basic-income-ubi-employment-economy-2024-8">guaranteed them a job</a>?In today's big story, we're looking at how the startup landscape is drastically changing thanks to <a target="_blank" href="https://www.businessinsider.com/more-startups-get-bought-up-by-private-equity-vc-2024-8">the entrance of private-equity firms</a> and <a target="_blank" href="https://www.businessinsider.com/dealmaking-for-ai-startups-silicon-valley-2024-8">the rise of acquihires</a>.What's on deck<ul><li>Markets: An under-the-radar risk is a <a target="_blank" rel="noopener" href="https://markets.businessinsider.com/news/stocks/ai-stocks-risk-nvidia-gpus-blackwell-tech-outlook-depreciation-accounting-2024-8">ticking time bomb for AI stocks</a>.</li><li>Tech: Elon Musk keeps coming up on the losing end of <a target="_blank" href="https://www.businessinsider.com/elon-musk-x-battle-mark-zuckerberg-meta-lost-cause-2024-8">his battle with Mark Zuckerberg</a>.</li><li>Business: The job market is frozen because <a target="_blank" href="https://www.businessinsider.com/us-job-market-recession-outlook-workers-quitting-hiring-trends-2024-8">everyone's afraid of a recession</a>.But first, let's make a (new kind of) deal.</li></ul>If this was forwarded to you, <a target="_blank" href="https://www.businessinsider.com/subscription/newsletter/insider-today">sign up here.</a><h3 id="7fa5f018-5b05-4a37-a8dc-d3f89138bcb3">The big story</h3><h2 id="5fd547b9-ec52-41fc-8e08-4f4b27dd8097">PE meets SV</h2><div type="image" title="Venture Capitalist Businessman walking quickly towards a bright opening, money falling from briefcase" height="500" width="1000" msid="112471541" hostid="261" sizebytes="42250"></div>With startups' exit opportunities becoming few and far between, a new hero is coming to the rescue.<a target="_blank" href="https://www.businessinsider.com/more-startups-get-bought-up-by-private-equity-vc-2024-8">Private equity is filling the gap</a> left by a frozen IPO market and corporates unwilling or unable to cut deals, writes Business Insider's Melia Russell.Hearing "private equity" might send shivers down your spine with visions of cost cutting and headcount reductions. But the PE-startup marriage seems to be working out well thus far.For startups, PE represents a deep-pocketed buyer willing to move quickly, pay a premium, and potentially help the business by tapping into complementary companies in their portfolio.Perhaps most importantly, a PE deal means equity holders get cash immediately, unlike an IPO that has some holding periods.As for PE, the industry has been sitting on a record amount of cash — <a target="_blank" href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/private-equity-firms-face-pressure-as-dry-powder-hits-record-2-59-trillion-79762227">$2.59 trillion at the end of 2023</a> — as it waits out an uncertain economy. And with multiple startups often competing in similar fields, there is plenty of opportunity for consolidation, a PE specialty.The PE-startup relationship has <a target="_blank" href="https://www.businessinsider.com/private-equity-funds-targeting-buyouts-investments-rollups-european-tech-2023-10">already taken hold in Europe</a>.Startups turning to PE comes with risks. Private equity's push for efficiency, and eventual profit, can sometimes get ugly.But any port in a storm, and right now the startup waters are extra choppy.<div type="image" title="digital wall street virtual remote work 3 4x3" height="1501" width="2001" msid="112471535" hostid="261" sizebytes="139168"></div>PE isn't the only exit opportunity for startups that's trending.Acquihires where the <a target="_blank" href="https://www.businessinsider.com/dealmaking-for-ai-startups-silicon-valley-2024-8">brains behind buzzy AI startups sell themselves</a> (instead of the entire company) to bigger players are in vogue, writes BI's Ben Bergman and Sri Muppidi.On paper, deals like this make a lot of sense. Big Tech has to tread lightly when it comes to acquisitions, lest it draw the attention of regulators. And the usefulness of certain AI tools remains up for debate.But no one doubts the value of the people who know how to build and work with AI.Still, acquihires <a target="_blank" href="https://www.businessinsider.com/ai-startups-acquihires-deals-talent-risks-recruiting-2025-5">can get messy</a>. You can't expect the same results when going from a free-wheeling startup to a big corporation with guardrails. Google's deal for <a target="_blank" href="http://Character.AI">Character.AI</a> meant its two cofounders are returning to a place they previously left due to frustrations over bureaucracy.Of course, they'll be a lot richer this time around, which will ease the pain. The same can't be said for their investors, who won't get the same type of return they'd expect through a traditional deal or IPO.But not unlike startups courting private equity, VCs don't necessarily <a target="_blank" href="https://www.businessinsider.com/vcs-reality-check-ton-of-people-looking-get-out-2024-8">have the benefit of being picky</a>.<h3 id="77f31a4c-8462-4e3d-a71f-838cb79493fb">News brief</h3><h2 id="1fcd294b-3f53-425f-9f20-4093e8623b59">Top headlines</h2><ul><li><a target="_blank" href="https://www.businessinsider.com/ice-immigration-customs-enforcement-training-deescalation-use-of-force-2024-8">ICE agents 'don't fire warning shots.'</a></li><li><a target="_blank" rel="noopener" href="https://www.businessinsider.com/jpmorgan-pe-recruiting-crackdown-conflicts-interest-junior-bankers-2024-8">How JPMorgan's crackdown on private-equity recruiting could play out for junior bankers, PE firms, and more</a>.</li><li><a target="_blank" rel="noopener" href="https://www.businessinsider.com/susan-wojcicki-dead-2024-8">Susan Wojcicki, former YouTube CEO, has died at 56</a>.</li><li><a target="_blank" rel="noopener" href="https://www.businessinsider.com/why-ukraine-is-striking-deep-inside-russian-territory-experts-2024-8">Ukraine is striking targets hundreds of miles inside Russia for 3 key reasons, experts say</a>.</li></ul><h2 id="8120060b-ae66-48dc-b149-f0489a30ffa2">3 things in markets</h2><div type="image" title="Photo illustration of a speedboat creating waves that look like a volatile stock market graph" height="1500" width="2000" msid="112471536" hostid="261" sizebytes="589344"></div><ol><li>I hope you like market volatility, because it's not going anywhere. Regardless of what happens to the economy, the recent stock-market chaos might be the new norm. The winners and losers of this new environment aren't evident, just that there will be <a target="_blank" href="https://www.businessinsider.com/recession-fears-fueling-stock-market-crash-wall-street-chaos-positive-2024-8">plenty of ups and downs along the way</a>.</li><li>The clock is ticking on AI stocks. There's a lot of chatter about tech companies' investment in AI, but some of that hardware won't stay valuable forever. Depreciation costs to massive GPU chip investments <a target="_blank" rel="noopener" href="https://markets.businessinsider.com/news/stocks/ai-stocks-risk-nvidia-gpus-blackwell-tech-outlook-depreciation-accounting-2024-8">pose a huge risk for AI companies</a>.</li><li>Taylor Swift + Olympics = inflation? They could cause a fresh surge in global inflation, according to UBS. Mega-events like the international sports competition or the Eras Tour could <a target="_blank" href="https://www.businessinsider.com/inflation-outlook-olympics-taylor-swift-us-economy-fed-rate-cuts-2024-8">create sudden shock demand</a>, the European bank said.</li></ol><h2 id="f4b54806-7f81-450c-ba32-92560d4fae9b">3 things in tech</h2><div type="image" title="A flat tire with a Fisker logo" height="1500" width="2000" msid="112471532" hostid="261" sizebytes="192128"></div><ol><li>Fisker owners struggle to keep cars on the road after the company's collapse. Weeks after Fisker declared bankruptcy, some owners who paid up to $70,000 for electric cars have found themselves with <a target="_blank" href="https://www.businessinsider.com/fisker-owners-describe-chaos-to-keep-cars-running-after-bankruptcy-2024-7">falling-apart vehicles</a>. One compared his car to a "lawn ornament."</li><li>Behold, the "Mythical Reel Pull." Instagram Reels may seem pretty weird lately. Users are stumbling across odd videos, often posted by creators who had no intention of going viral. The strange videos are referred to as "mythical reel pulls," and there may be <a target="_blank" href="https://www.businessinsider.com/instagram-reels-mythical-reel-pull-tiktok-algorithim-account-why-explained-2024-8">a reason for their sudden ubiquity.</a></li><li>Sorry, Musk. Looks like Zuck won this round. Elon Musk's eternal goal of one-upping his rival Mark Zuckerberg is looking <a target="_blank" href="https://www.businessinsider.com/elon-musk-x-battle-mark-zuckerberg-meta-lost-cause-2024-8">more and more like a lost cause</a>. His ongoing fights with advertisers and controversies over false information threaten to set X further behind Zuck's social-media empire.</li></ol><h2 id="9260fa45-d397-4b3c-b4f8-4bb193976216">3 things in business</h2><div type="image" title="Photo collage of a plane and cash." height="1500" width="3000" msid="112471539" hostid="261" sizebytes="146608"></div><ol><li>Flying might get better. Airplane travel is the worst it's ever been, but <a target="_blank" href="https://www.businessinsider.com/flying-delays-cancellations-passenger-airlines-air-travel-rights-refunds-fees-2024-8">the Biden administration wants to make it less disastrous for passengers</a>. The message they're sending to the airline industry: You've had too many screwups to be left to your own devices.</li><li>American workers are stuck in their jobs. It's tough to find a job in the US right now — and it's causing workers to feel trapped in their current gigs. <a target="_blank" href="https://www.businessinsider.com/us-job-market-recession-outlook-workers-quitting-hiring-trends-2024-8">This is likely due to a looming fear of a recession</a>, which has historically caused workers to hunker down.</li><li>PE firms &lt;3 public healthcare companies. Revenue cycle management company R1 RCM announced its acquisition by two PE firms for a whopping $8.9 billion, making it the third of its kind to take a buyout this summer. It could be <a target="_blank" href="https://www.businessinsider.com/big-deals-coming-healthcare-startups-take-privates-private-equity-2024">a good sign for startups</a>.</li></ol><h2 id="1ad7b482-3f4b-44b4-81b6-a864aa386478">In other news</h2><ul><li>How Gen Z women are <a target="_blank" href="https://www.businessinsider.com/gen-z-women-personal-finance-investing-stocks-wealth-savings-retirement-2024-8">investing their way to the good life</a>.</li><li>Why Apple should buy Warner Bros. Discovery. <a target="_blank" href="https://www.businessinsider.com/apple-should-buy-warner-bros-discovery-hbo-peter-kafka-2024-8">No, seriously</a>.</li><li>What Maya Rudolph's impression <a target="_blank" href="https://www.businessinsider.com/maya-rudolph-snl-impression-kamala-harris-race-linguistic-trump-2024">reveals about Kamala Harris</a>.</li><li>Two former bankers turned their experience into HBO's most underrated show. <a target="_blank" href="https://www.businessinsider.com/industry-season-3-bankers-true-story-mickey-down-konrad-kay">Now, it's finally getting the attention it deserves</a>.</li><li>A dietitian who researches ultra-processed foods mostly avoids them. <a target="_blank" href="https://www.businessinsider.com/dietitian-avoids-ultra-processed-foods-shares-3-healthy-snacks-2024-8">Here are her 3 favorite healthy, quick snacks</a>.</li></ul><h2 id="9f5d80ac-3466-429f-a50a-2ffbb70c65ff">What's happening today</h2><ul><li>Donald Trump is interviewed by Elon Musk.</li><li>Buzzfeed and <a target="_blank" href="https://markets.businessinsider.com/earnings-calendar">other companies</a> report earnings.</li></ul>The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, in London. Amanda Yen, fellow, in New York.

The startup landscape for deals is drastically changing 

<ul class="summary-list"><li>Greg Brockman returns to OpenAI after a three-month sabbatical, taking on a new role.</li><li>His return follows recent executive departures, including Mira Murati and Ilya Sutskever.</li></ul>OpenAI's cofounder Greg Brockman has returned to the startup after taking a three-month sabbatical.Brockman, who was formerly OpenAI's president and is a key ally of CEO Sam Altman, previously <a target="_blank" class="" href="https://x.com/gdb/status/1820644694264791459">confirmed</a> that he would take a leave of absence in August "through the end of the year."On Tuesday, he sent staffers a memo announcing his return, <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-11-12/openai-co-founder-returns-to-startup-after-monthslong-leave">Bloomberg first reported</a>. He said that he had been working with Altman to develop a new role for him that would allow him to work on significant technical challenges."Longest vacation of my life complete. Back to building @OpenAI," Brockman said in a <a target="_blank" class="" href="https://x.com/gdb/status/1856441156281753908">post</a> on X, confirming his return. The news comes after an <a target="_blank" class="" href="https://www.businessinsider.com/openai-leaders-who-left-since-2023-sam-altman-leadership-struggle-2024-9">exodus</a> of top executives at the ChatGPT maker this year, including former CTO Mira Murati and cofounder Ilya Sutskever.Brockman's return would see him bucking the trend of C-suite heavyweights <a target="_blank" class="" href="https://www.businessinsider.com/openai-leadership-changes-brockman-deng-schulman-anthropic-departures-2024-8">leaving the company</a> to join rival ventures or launch their own startups.Ilya Sutskever, who left the startup in June, had a complex relationship with Altman — and was <a target="_blank" class="" href="https://www.theguardian.com/technology/article/2024/may/15/open-ai-cofounder-ilya-sutskever">heavily involved</a> in his firing and rehiring in November 2023. After his exit from OpenAI, he <a target="_blank" class="" href="https://www.businessinsider.com/ai-labs-fragmenting-ego-clashes-new-startups-openai-2024-10">founded Safe SuperIntelligence</a>, an AI startup that has already <a target="_blank" class="" href="https://www.reuters.com/technology/artificial-intelligence/openai-co-founder-sutskevers-new-safety-focused-ai-startup-ssi-raises-1-billion-2024-09-04/">raked in $1 billion</a> in funding from the likes of Andreessen Horowitz and Sequoia.Murati, who left in September 2024, was in talks to raise funding for her own startup — which is said to be building AI products based on proprietary models, <a target="_blank" class="" href="https://www.reuters.com/technology/artificial-intelligence/former-openai-technology-chief-mira-murati-raise-capital-new-ai-startup-sources-2024-10-18/">Reuters first reported</a>.Meanwhile, cofounder and research scientist John Schulman joined rival AI juggernaut Anthropic <a target="_blank" class="" href="https://www.businessinsider.com/openai-leadership-changes-brockman-deng-schulman-anthropic-departures-2024-8">in August</a>.As of November 2024, only <a target="_blank" class="" href="https://www.businessinsider.com/where-openai-cofounders-are-now-sam-altman-2024-10">three out of 11</a> Open AI cofounders remain at the company.Brockman is a close ally of Altman. When Altman was temporarily ousted from the company in November 2023, Brockman resigned to protest the decision. He rejoined the company once Altman was re-instated.In October, OpenAI announced it had hired two C-suite executives in a bid to backfill the exodus: former Uber executive <a target="_blank" rel="" class="" href="https://www.businessinsider.com/uber-hired-first-compliance-ethics-officer-2018-7">Scott Schools</a>, who will be OpenAI's first chief compliance officer, and <a target="_blank" rel="" class="" href="https://www.businessinsider.com/most-important-business-case-studies-2012-10">Aaron Chatterji</a>, a former Biden administration official and business professor, to take the mantle of chief economist.

Greg Brockman, a key Sam Altman ally, returns to OpenAI following an exodus of top executives

<ul class="summary-list"><li>The tech company Sea.AI is helping boats avoid collisions and unseen dangers at sea.</li><li>Its software uses thermal cameras and AI to identify objects in the ocean and alert sailors.</li></ul>Will Harris has been a professional ocean racer for over 10 years. The skipper, or boat captain, sails with <a target="_blank" href="https://www.team-malizia.com/">Team Malizia</a> and has spent more time away from land than the average person."The thing about being at sea, or one thing that's very challenging, is when you are in the middle of the ocean, you really are some of the most isolated humans at those moments," he said.Safety is a top priority for sailors. For decades, boats have relied on technology such as radar to detect major obstructions. But objects like garbage, debris, fishing boats, and buoys often aren't seen until <a target="_blank" href="https://www.businessinsider.com/two-boats-competing-the-ocean-race-rammed-by-orcas-2023-6">a collision is imminent</a>.To avoid these obstacles during a race, Harris uses software from <a target="_blank" href="http://Sea.AI">Sea.AI</a>, a startup that <a target="_blank" href="https://www.businessinsider.com/top-artificial-intelligence-customer-experience-business-applications-2024-5">employs artificial-intelligence</a> detection and proprietary thermal cameras to give boats a better view of the ocean. Founded in 2019, the French company has been collecting data on over 10 million objects that radars cannot detect. Solenn Gouerou, the head of marketing communication at Sea.AI, told Business Insider that 500 vessels used its AI tech.Sea.AI's widest adoption has been in boat racing to evade collisions. "These are multimillion-pound boats," Harris said. If a collision occurs, he added, the race has to stop because it's "obviously very dangerous."<div type="image" title="Will Harris adjusting the sail of the J2 during a boat delivery." height="2384" width="4240" msid="111691318" hostid="261" sizebytes="304330"></div>Harris started using Sea.AI the same year it launched and has sailed over 100,000 miles with the tech. "We're really trying to use data to our advantage now because <a target="_blank" href="https://www.businessinsider.com/how-ai-extended-reality-disrupting-changing-technology-industry-2023-8">it's a technology race</a> for us," Harris said, adding that boats have several sensors that measure metrics like speed, depth, fuel, and the boat's infrastructure.The Malizia-Seaexplorer, the boat he cocaptains with Boris Herrmann, uses Sea.AI, which helped Team Malizia place second on May 6 during the first leg of the Transat CIC race from France to New York.<h2 id="a39fdd57-fd8b-4b02-83fb-54f5a00e9159">How the technology works</h2>Sea.AI's founder, Raphael Biancale, previously worked in the autonomous-car industry. When he got his first boat, he noticed that <a target="_blank" href="https://www.businessinsider.com/us-navy-looking-for-drones-ai-tools-to-help-shipyards-2023-10">watercraft technology was lacking</a>. When he sailed at night, "he didn't have a proper system to help him see in front of the boat," Gouerou said.Sea.AI uses a large thermal camera that can attach to the front of a boat or on a mast to scan the water. Using thermal imaging and night vision, the software detects items that the naked eye would struggle to see.The camera's imaging can be accessed through an app or connected to a boat's multifunction-display system. When objects are detected, the software automatically sounds an alarm to give the skipper enough time to divert the ship's course.<div type="image" title="Boris Herrmann looks at the screens in the boat's cockpit." height="2384" width="4240" msid="111691316" hostid="261" sizebytes="609338"></div>Sea.AI's system then logs the object to help train the software to detect more types of obstructions. Harris said because sailors aren't always looking at the camera — "we're looking at the sails, we're sleeping, we're resting" — Sea.AI's alarm is a "really important" feature.Harris recalled avoiding a collision while his team was sailing "25 to 30 knots," or about 29 to 35 mph, near Gibraltar. He said they weren't monitoring the camera but heard an alert from Sea.AI notifying them of a fishing boat about 100 meters away: "We were probably 10 or 15 seconds away from crashing into it."<h2 id="dd41d159-9208-40a4-9447-07023d1e73be">Building a more well-rounded navigation system</h2>Sea.AI was developed to be used in conjunction with radar tech and an automatic identification system, a tracking system that allows boats to see each other's geographic position.The company's partnership with Garmin, a manufacturer of multifunction displays, has allowed Sea.AI to integrate more seamlessly into Garmin's software. The MFDs centralize information for sailors who are surveilling multiple systems that help a vessel operate."I was interested by the innovation that they put into the market because looking for floating objects was always a critical area," Andrea D'Amato, the business-development manager of the marine subset at Garmin International, said."Our display can be divided into two windows," D'Amato told BI. "For example, in one window you can be focused on the radar, and in the other window you can be focused on the Sea.AI features."<div type="image" title="Sea.AI screen detection" height="1365" width="2048" msid="111691323" hostid="261" sizebytes="77806"></div>Harris said he had the displays for Sea.AI, the automatic identification system, and the radar next to each other on his MFD. The radar and AIS displays <a target="_blank" href="https://www.businessinsider.com/how-artificial-intelligence-autonomous-systems-help-shipping-sustainability-goals-2023-11">help with navigation</a>, and the Sea.AI display indicates where objects are relative to the boat's position. "It's telling us straight away which direction we need to look to see the object," he added.Romain Attanasio, a skipper for Fortinet-Best Western, recently used Sea.AI while transporting the boat across the Atlantic. He told BI that avoiding fishing boats, which are heavily present near shores, was one of his biggest navigational challenges, especially when entering and exiting ports.<div type="image" title="Romain Attanasio stands on the Fortinet-Best Western boat as he sails past the Statue of Liberty in New York City." height="2260" width="4024" msid="111691324" hostid="261" sizebytes="480012"></div>Attanasio said many fishermen don't use an AIS because "they don't want the other fishermen to know where the fish are," which makes it harder to see fishing boats' locations. Fishermen's nets, he added, are also invisible dangers since they create large concentrations of fish and rope just below the surface of the water — an area that is mostly invisible to AIS and radar tech but easier to monitor with Sea.AI's imaging.Sea.AI, automatic identification systems, and radar each have their benefits and disadvantages, Gouerou said. "Each sensor has its own capabilities," she said. "We are an optical sensor. So, for example, if there's really, really heavy rain, it's tricky for us."<h2 id="43a9fb36-8aaf-4a78-a8b2-dc7ed70e2df2">Expanding AI in the maritime industry</h2>Gouerou told BI that Sea.AI was expanding with the launch of Brain, its software-only machine-vision product that can identify objects in the ocean. Unlike Sea.AI's preceding software, which worked exclusively with the company's camera units, Brain is compatible with third-party thermal cameras. The goal, Gouerou said, is to reduce the cost of using Sea.AI's system by eliminating the need to purchase both the software and the cameras from Sea.AI.<div type="image" title="Malizia-Seaexplorer captain Boris Herrmann and his team leave Brooklyn marina to join the start of the New York Vendee sailing race, in Brooklyn, New York, on May 28, 2024." height="2095" width="4190" msid="111691321" hostid="261" sizebytes="403776"></div>The company also plans to enter other markets, such as cruising, commercial vessels, and ferries. Gouerou said Sea.AI recently conducted trials with search-and-rescue boats in France, the UK, and Germany.The future of Sea.AI will be building technology with an "automatic avoidance" capability to reduce the need for human intervention, Gouerou said. Harris' boat uses a prototype of this feature; it connects to the ship's steering system to help automatically avert collisions with small nearby objects. "It's still a work in progress, but it's definitely something that's going to be developed more and more in the future," he said.

An AI startup focused on maritime safety is helping sailors navigate the ocean and avoid collisions

<ul class="summary-list"><li>The venture capital industry could face a big contraction in the near future.</li><li>Thats's according to Scott Stanford, cofounder and partner at ACME Capital, an early-stage VC firm.</li></ul>It's no secret: Venture capitalists are <a target="_blank" href="https://www.businessinsider.com/lps-are-defaulting-firm-buying-up-their-stakes-2024">hurting</a>.A slowdown in VC deal <a target="_blank" href="https://www.businessinsider.com/venture-capital-funding-crunch-will-continue-2024-2023-12">activity</a>, which started in late 2022, has continued into the first quarter of this year, accounting and advisory firm EisnerAmper <a target="_blank" href="https://www.eisneramper.com/insights/financial-services/venture-capital-q1-vc-blog-2024/#:~:text=The%20slowdown%20in%20VC%20deal,was%20invested%20across%2015%2C580%20deals.">wrote</a> in an analysis published on June 16.You've heard this story before: inflation, interest rate uncertainty, and low M&amp;A volume are having <a target="_blank" href="https://www.inc.com/sam-blum/the-state-of-venture-funding-in-2024-so-far-anemic.html">chilling effects</a> on the investing environment.Venture capital has cyclical fluctuations, but Scott Stanford, a cofounder and partner at ACME Capital, an early-stage VC firm, thinks something more meaningful is underway."It's not crazy to think half the VC firms that were actively investing in the last decade will be sidelined and eventually collapse," he wrote in an email to BI.The first wave will die off in the next five years. Ten years from now, the damage will be evident, he said.Some simple back-of-the-napkin math paints a grim picture.In a chart compiled by Stanford and shared with BI, by 1990, there were 300 VC firms overseeing $17 billion in assets. Over the last two decades, those numbers went through the roof. Now, there are 3,000 VC firms overseeing $1.2 trillion.By contrast, the increase in exits is modest at best. By 1990, VC-backed IPOs totaled $12.7 billion. By 2021, that increased to $60.1 billion. And it's a similar story with VC-backed M&amp;A deals.The venture industry got ahead of itself, in other words: The proliferation of firms and the money they're managing is not supported by the financial value they're creating."As the venture capital industry matured over the past several decades, euphoric momentum investors, not technologists, drove the creation of funds and the deployment of capital, blind to the nuances and challenges of timing innovation cycles," Stanford and ACME cofounder Hany Nada told investors in a recent letter shared with BI."Just as investors mistime specific investments or funds, the venture industry as a whole got as much as a decade or two ahead of reality, leading to an overcrowded, overcapitalized, and overvalued market," they added.<h2 id="03af2507-6311-43f3-ae85-0c2bb24e15b1">VC backers have other options</h2>Other factors will serve to cull the herd in VC, per Stanford.Limited partners (LPs), or investors who put money into venture firms, have other options thanks to higher interest rates, Stanford added. Low-risk investments like investing in Treasury bonds, for one example, are commanding a decent return.Tech, meanwhile, is "no longer an elusive sprite commanding irrational M&amp;A premiums or IPO exuberance," Stanford said.Once upon a time, a startup claiming they were a tech company somewhere in their pitch deck might command a billion-dollar valuation. That era is long gone.Finally, AI isn't necessarily the next panacea, Stanford said.The jury is out on whether it spawns the next generation of unicorns — when leaders like OpenAI are providing the tech openly, and anyone can use it to spin up decent products.All told, in this environment, investors without deep expertise, powerful networks, or mega-funds to deploy will be hard-pressed to raise money and build enduring franchises, Stanford said."A VC without capital is like a tennis player without a racquet," he said. "They can give interviews and make headlines but they aren't invited on the court."<div type="image" title="The ACME Capital team." height="4002" width="6000" msid="111124353" hostid="261" sizebytes="1317914"></div><h2 id="73f0b2e9-ab0b-4b58-a988-7c2cd0c879b8">VCs will have to take risks again</h2>Stanford believes today's challenges will give way to a new — or, rather, an old — era of VC investing.Tons of startups that went to market in the last handful of years had a similar strategy: Backed with millions in funding, they launched an app that was slightly better than someone else's.In the past, you could get away with making social features, apps, and incrementally better software in this fashion, Stanford said.Nowadays, incumbents can do all that themselves.So, investors that survive the contraction will have to back companies that are actually inventing things and therefore come with a sizable risk profile.When those companies get it right, they generate outsized returns. When they get it wrong, they go to zero.Maybe these VCs can be part of what Stanford describes as a renaissance of technology, "where systems work for us versus us working for them," he and Nada wrote to LPs.

A top VC predicts the industry is heading for a massive and enduring contraction

<a href="https://www.businessinsider.com/barbie-history-mattel-ruth-handler-ken-doll-toy-fashion-movie?r=US&amp;IR=T"></a><ul class="summary-list"><li>This post originally appeared in the Insider Today newsletter.</li></ul>Happy Friday! If you're figuring out New Year's plans in New York City, I've got a deal for you. For a mere $450 you can ring in the new year in the heart of culture: the Times Square Olive Garden. That's a steal compared to <a href="https://www.businessinsider.com/people-spending-hundreds-dollars-new-year-ball-drop-chain-restaurants-2023-12">how much tickets cost at Applebee's and Bubba Gump Shrimp Co</a>.In today's big story, we're looking at some of the top business stories from the past year.What's on deck: <ul><li>Markets: Why everyone is panicking about <a href="https://www.businessinsider.com/commercial-real-estate-crash-debt-interest-rates-property-prices-outlook-2023-12">the state of US commercial real estate</a>.</li><li>Tech: Where is <a href="https://www.businessinsider.com/experts-ai-in-2024-could-be-bad-news-for-openai-2023-12">AI headed in 2024</a>?</li><li>Business: The future of the American economy is <a href="https://www.businessinsider.com/best-economy-us-south-texas-florida-houston-dallas-nashville-miami-2023-12">below the Mason-Dixon line</a>.</li></ul>But first, back to business.If this was forwarded to you, <a href="https://www.businessinsider.com/subscription/newsletter/insider-today">sign up here.</a><h3>Story of the day</h3><h2>Best of biz<a href="https://www.businessinsider.com/subscription/newsletter/insider-today"></a></h2><a href="https://www.businessinsider.com/barbie-history-mattel-ruth-handler-ken-doll-toy-fashion-movie?r=US&amp;IR=T"></a><div type="image" title="Barbies" height="1000" width="2000" msid="106385010" hostid="261" sizebytes="359356"></div>2023 wasn't exactly business as usual. An economy grappling with high interest rates and inflation meant plenty of businesses had to buckle down. Several major US companies <a href="https://www.businessinsider.com/layoffs-sweeping-the-us-these-are-the-companies-making-cuts-2023">made deep job cuts</a> in the first half of the year. Employee-employer relations took center stage, as unions for auto workers, UPS drivers, and Hollywood writers and actors <a href="https://www.businessinsider.com/uaw-sagaftra-union-strikes-impact-pay-benefits-economy-healthcare-teachers-2023-11">went on strike</a>. A broader conversation about the <a href="https://www.businessinsider.com/news-today-november-7-workplace-trends-gen-z-2023-11">efficacy of the 40-hour workweek</a> — and ways to upend it to <a href="https://www.businessinsider.com/happiness-at-work-employee-engagement-fulfillment-flexibility-four-days-2023-12">improve workers' happiness</a> — also took place. The ties between universities and businesses garnered attention in 2023 following Hamas' attacks on Israel. Some executives' <a href="https://www.businessinsider.com/news-today-october-13-harvard-hamas-israel-war-backlash-2023-9">anger over universities' responses to the war</a> highlighted <a href="https://www.businessinsider.com/news-today-december-8-upenn-elizabeth-magill-wall-street-donations-2023-12">the tension between Wall Street and the elite institutions</a>. I asked Shona Ghosh, Business Insider's deputy executive editor for business in the UK, for five of the top stories from her team. Check them out below, along with some thoughts from Shona about what made them stand out.<a href="https://www.businessinsider.com/mediamath-adtech-unicorn-startup-rise-and-fall-2023-02"></a><div type="image" title="MediaMath Chairman and CEO Joe Zawadzki on dark blue background surrounded by glitchy graphic elements" height="600" width="1200" msid="106385011" hostid="261" sizebytes="40260"></div><a href="https://www.businessinsider.com/mediamath-adtech-unicorn-startup-rise-and-fall-2023-02">MediaMath seemed destined for a $1B fairy-tale exit. Instead, most early investors got nothing.</a>Lara O'Reilly reported deeply on the decline of MediaMath, an adtech giant that seemed destined to make its investors, employees, and founders rich with a $1 billion exit. Instead, the company sold to private equity, leaving almost nothing on the table. It's a business fairy-tale gone wrong.<a href="https://www.businessinsider.com/barbie-history-mattel-ruth-handler-ken-doll-toy-fashion-movie?r=US&amp;IR=T">Barbie is the star of the summer's hottest blockbuster. The much-hyped movie is the pinnacle of a 60-year history filled with rejections, lawsuits, and controversies for the world's most iconic doll.</a>Greta Gerwig tapped into the world's need for something — anything — fun after the pandemic years with her loopy, fun take on Barbie. Did you know Barbie's sometimes-controversial inventor was a woman, Ruth Handler, and her iconic toy would make her fabulously wealthy? Grace Dean delved into the history of Barbie.<a href="https://www.businessinsider.com/startup-gostudent-struggled-to-vet-tutors-laid-off-hundreds-2023-10">GoStudent, the $3 billion edtech darling, scaled fast and partied hard. The result was a mess.</a>Tasmin Lockwood and Riddhi Kanetkar uncovered shocking incidents at GoStudent, the $3 billion SoftBank-backed tutoring platform that links up children with private tutors online. One father seeking a tutor for his daughter found one GoStudent candidate had been fired from his school for exchanging nudes with a female pupil. The company says it's a different, better operation today.<a href="https://www.businessinsider.com/finland-happiest-country-in-world-happiness-report-rankings-rolls-eyes-2023-6">Finland is the world's happiest country, but Finns say we're confusing happiness for something else</a>Finland is the world's happiest country. But, as Bea Nolan discovered when she visited, Finns are pretty annoyed by this perception. They are happy, they said, just not in the way you think.<a href="https://www.businessinsider.com/exclusive-mistral-in-talks-raise-big-cash-build-openai-rival-2023-5">Ex-Facebook and DeepMind employees in talks to raise sizable initial funding round to build OpenAI rival</a>Everyone wants to find (and fund) the next ChatGPT. To that end, Europe's venture capitalists are in a mad dash to back any continental company that could rival OpenAI — and they think they've found it. Callum Burroughs broke the news that former Meta and Google DeepMind employees set up Mistral AI, which produces its own large language models. It's already worth $2 billion.<h2>3 things in markets</h2><a href="https://www.businessinsider.com/commercial-real-estate-crash-debt-interest-rates-property-prices-outlook-2023-12"></a><div type="image" title="Sunset over New York City" height="500" width="1000" msid="106385012" hostid="261" sizebytes="27110"></div><ol><li>US commercial real estate is headed for disaster. Experts detailed why the industry, which banks are heavily exposed to, could fall into crisis in 2024. Some of the biggest red flags include <a href="https://www.businessinsider.com/commercial-real-estate-crash-debt-interest-rates-property-prices-outlook-2023-12">a decline in office property prices and rising defaults</a>. But for others, it's a <a href="https://www.businessinsider.com/commercial-real-estate-fundrise-ben-miller-interest-rates-2023-12">good time to get in the market</a>.</li><li>The new wealth whisperers. The wealth-management industry was upended in 2023, with high-profile leadership changes at Merrill Lynch, Citi, and Morgan Stanley. Analysts explain <a href="https://www.businessinsider.com/wealth-management-andy-sieg-jed-finn-merrill-lynch-outlook-2023-12">what's at stake for executives looking to court rich clients</a>.</li><li>The wild and wacky state of the markets in 2023. Banks collapse. A meltdown in the bond market. This year wasn't a quiet one for the markets. <a href="https://markets.businessinsider.com/news/stocks/craziest-stories-bitcoin-russia-magnificent-seven-recession-bond-market-crash-2023-12">Check out eight of the more memorable market stories from 2023</a>.</li></ol><h2>3 things in tech</h2><a href="https://www.businessinsider.com/5-executive-assistants-who-were-behind-techs-most-influential-people-2023-12"></a><div type="image" title="Steve Ballmer and Bill Gates in 2000" height="1500" width="2000" msid="106385016" hostid="261" sizebytes="189156"></div><ol><li>Meet the former executive assistants behind the most powerful people in tech. Influential leaders like Steve Jobs and Bill Gates have had executive assistants who worked around the clock to make their lives easier — and <a href="https://www.businessinsider.com/5-executive-assistants-who-were-behind-techs-most-influential-people-2023-12">went on to build high-powered careers</a>.</li><li>Experts share what could happen with AI in 2024. Artificial intelligence experts told BI that the tech will become further ingrained into our daily lives — and that <a href="https://www.businessinsider.com/experts-ai-in-2024-could-be-bad-news-for-openai-2023-12">it could spell trouble for OpenAI</a>.</li><li>2023 was Mark Zuckerberg's comeback season. Over the past year, Zuckerberg has <a href="https://www.businessinsider.com/mark-zuckerberg-reinvented-himself-and-got-richer-this-year-2023-12">reinvented himself as being kind of cool</a> and even sort of relatable. Oh, and he also got $84 billion richer.</li></ol><h2>3 things in business</h2><a href="https://www.businessinsider.com/best-economy-us-south-texas-florida-houston-dallas-nashville-miami-2023-12"></a><div type="image" title="downtown Dallas" height="975" width="1300" msid="106385017" hostid="261" sizebytes="179864"></div><ol><li>The future of the US economy is in the South. The region is poised to play a bigger role in the American economy due to <a href="https://www.businessinsider.com/best-economy-us-south-texas-florida-houston-dallas-nashville-miami-2023-12">a population spike followed by economic growth</a>.</li><li>Tesla can still win the EV wars. Within the next few days, Tesla could<a href="https://www.businessinsider.com/tesla-can-win-ev-war-without-most-sales-china-byd-2023-12"> lose its spot as the world's most popular EV maker</a> to Chinese rival BYD. But it's not all bad news — Tesla's EVs outstrip others <a href="https://www.businessinsider.com/tesla-model-y-redesign-what-could-change-features-2023-12">when it comes to charging</a>, and a <a href="https://www.businessinsider.com/tesla-model-y-redesign-what-could-change-features-2023-12">redesigned Model Y</a> could be on the way.</li><li>How OpenAI and Microsoft could impact The New York Times' revenue. The outlet's copyright infringement lawsuit lays out <a href="https://www.businessinsider.com/new-york-times-openai-and-microsoft-could-cost-it-billions-2023-12">three ways the companies could massively impact its business</a>, including by undercutting its paywall.</li></ol><h2>In other news</h2><ul><li><a href="https://www.businessinsider.com/comic-capsize-adriana-migrant-boat-sinking-greece-2023-12">COMIC: I survived the capsizing of the Adriana, which sank off the coast of Greece while the world was transfixed on the Titan sub</a>.</li><li><a href="https://www.businessinsider.com/big-law-associate-quit-job-jealousy-career-life-goals-2023-12">When I get jealous of people, I use that envy as a guidepost. Here's how it led me to quit my prestigious Big Law job</a>.</li><li><a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-sp500-record-highs-bullish-what-comes-next-2023-12">The S&amp;P 500 is about to notch a new all-time high. Here's what could come next</a>.</li><li><a href="https://www.businessinsider.com/russia-celebs-lose-jobs-jailed-raunchy-party-backlash-anastasia-ivleeva-2023-12">Russian celebs are losing their jobs and one was jailed after attending a controversial 'almost naked' party</a>.</li><li><a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-2024-sp500-forecast-5200-target-tom-lee-2023-12">This strategist had Wall Street's most accurate stock market forecast in 2023. Here's what he thinks is in store for 2024</a>.</li><li><a href="https://www.businessinsider.com/moving-to-texas-from-california-florida-ny-generations-income-2023-12">Meet the typical person moving to Texas: An unmarried millennial making $50,000 in search of a better life</a>.</li><li><a href="https://www.businessinsider.com/austin-attracting-most-san-francisco-talent-miami-nyc-remote-work-2023-12">Austin is deeply tied to San Francisco and Miami to New York in a world of connected 'meta cities,' report finds</a>.</li><li><a href="https://www.businessinsider.com/what-to-expect-from-europes-ai-startups-in-2024-vcs-2023-12">What to expect from Europe's AI startups in 2024, according to VCs</a>.</li><li><a href="https://www.businessinsider.com/best-time-apply-jobs-year-end-january-tech-recruiter-2023-12">The best time to apply for jobs is actually the end of the year, a tech recruiter says. Those companies are serious about hiring</a>.</li></ul><h2>What's happening today</h2><ul><li>NFL's Pro Bowlers announced. Rosters for the annual all-star game, which will take place February 4 in Orlando, will be revealed on NFL Network.</li><li>Happy Birthday, Jon Voight! The "Heat" star shares his special day with Jude Law, Danny McBride, and Dylan Mulvaney.</li><li>Testing the confetti before the ball drops. Handfuls of confetti will be thrown from the Hard Rock Cafe marquee in Times Square ahead of the 1.5 tons of confetti that will be dropped on New Year's Eve.</li></ul><h3>For your bookmarks</h3><h2>The anti-aging diet</h2><a href="https://www.businessinsider.com/millionaire-trying-live-forever-shares-recipes-lunch-dessert-bryan-johnson-2023-12"></a><div type="image" title="A composite image of Bryan Johnson and his pre-blended meal." height="3000" width="4000" msid="106385018" hostid="261" sizebytes="652220"></div>A millionaire obsessed with reversing his age shares what he eats for lunch and dessert. Bryan Johnson, who spends as much as $2 million a year on his supposedly age-reversing regimen, <a href="https://www.businessinsider.com/millionaire-trying-live-forever-shares-recipes-lunch-dessert-bryan-johnson-2023-12">packs on the veggies for lunch and opts for his own version of a pudding for dessert</a>.The Insider Today team: <a href="https://www.businessinsider.com/author/dan-defrancesco">Dan DeFrancesco</a>, deputy editor and anchor, in New York. <a href="https://www.businessinsider.com/author/diamond-naga-siu">Diamond Naga Siu</a>, senior reporter, in San Diego. <a href="https://www.businessinsider.com/author/hallam-bullock">Hallam Bullock</a>, editor, in London. <a href="https://www.businessinsider.com/author/jordan-parker-erb">Jordan Parker Erb</a>, editor, in New York. <a href="https://newsletter.businessinsider.com/click/33739711.1210015/aHR0cHM6Ly93d3cuYnVzaW5lc3NpbnNpZGVyLmNvbS9hdXRob3IvaGF5bGV5LWh1ZHNvbj91dG1fbWVkaXVtPW5ld3NsZXR0ZXImdXRtX3NvdXJjZT1TYWlsdGhydSZ1dG1fY2FtcGFpZ249SW5zaWRlcl9Ub2RheQ/6388bd81e7b7ccd0ba0929daB5b9051cd" target="_blank" rel="noopener">Hayley Hudson</a>, director, in Edinburgh. <a href="https://www.businessinsider.com/author/lisa-ryan">Lisa Ryan</a>, executive editor, in New York.

Wrapping up 2023 with some of the top business stories

<ul class="summary-list"><li>Gaurav Singh founded a fund to buy software companies after his Harvard MBA.</li><li>He shifted to search funds after struggling to gain traction with startups.</li></ul>During his MBA at Harvard Business School, Gaurav Singh pursued a tennis coaching app that didn't gain much traction with venture capitalists.The app ultimately failed, and after graduation, he worked for a year and a half at an artificial intelligence startup in Toronto before exploring other avenues. He landed on an option that's becoming increasingly popular with top MBAs and entrepreneurs: launching his own search fund.In February, Singh, 31, founded Guddi Growth. The Toronto-based search fund focuses on buying software-as-a-service companies with annual recurring revenue of at least $5 million.<h2 id="a04e0ee0-c77f-4845-9cff-fb8684d52c52">Lower salary — but a big potential payday</h2>A search fund founder like Singh raises money from investors to buy and operate a privately held business, like manufacturing, home improvement, and transportation companies.Investors put $2.3 billion in search funds between 1986 and 2021, according to a <a target="_blank" href="https://www.gsb.stanford.edu/gsb-box/route-download/618926">2022 report from the Stanford Graduate School of Business</a> — a small sliver of the money that's gone to private equity firms. They have generated about $9.8 billion for investors and $2.4 billion for entrepreneurs, per Stanford.And they're becoming an increasingly popular career choice: Until 2013, fewer than 10 funds were launched per year, on average, according to Stanford's report. But by 2020, 66 such funds hit the market. A third of "searchers," as Stanford termed the fund founders, took a recent business school class about entrepreneurship through acquisition.In some ways, search funds are like a mini version of private equity: They target small companies, often with a handful of employees that serve regional markets, and can own several businesses. Investors typically mentor the searcher in their day-to-day operations.Singh said he raised $530,000 from investors for the next two years — an amount he can spend at his discretion to pay his salary, business travel, and company expenses. That's above the median of $425,000 per person raised in Stanford's survey of searchers in 2021.His fund is backed by a dozen investors, including search fund-specific investors and private equity firms he pitched. He's in talks to buy two companies.Exit strategies can include selling the revamped company to a bigger private equity firm, going public, or buying out the initial investors and continuing to run the business.For Singh, running a search fund means making less money in the short-term than his HBS classmates who work in consulting or private equity."Why you do this job is that when you make a sale, you probably get $5 million at the end of it," he said about selling one of his acquisitions down the line.Here are three reasons why he decided on a search fund:<h2 id="782dc869-23ea-4dea-951d-8c082a8b64f7">Shift in the search fund business</h2><div type="image" title="Gaurav Singh outside Harvard Business School" height="1682" width="2243" msid="110649671" hostid="261"></div>Search funds stereotypically pick up small HVAC companies in the Midwest, not tech businesses."Historically, tech people have stayed away from search funds because it's not exciting to them," he said. "In the last couple of years, people have started to love software within the search fund space because it makes a lot of money for everyone."There is "massive opportunity" to find legacy software businesses that could benefit from a new or more efficient business model, he said. These could be projects that convert on-premise software companies to cloud companies or projects that change one-time software purchases to yearly subscriptions.<h2 id="93404864-09aa-4b63-a532-bf3d50a1060b">Generational transfer opportunities</h2>Many small companies do not have <a target="_blank" href="https://www.businessinsider.com/how-to-create-business-succession-plan-step-down-ceo-2022-1">succession plans</a> and may fold if they are not acquired, giving search funds a good pitch for buying them, Singh said."<a target="_blank" href="https://www.businessinsider.com/boomer-retiring-soon-ready-to-do-all-the-things-2024-5">Baby boomers are retiring</a>," he said. "They have had profitable companies with long-term sticky customer bases, and these customer bases are not going to go away."Singh said he is particularly excited about companies that could benefit from AI overhauls by automating sales and marketing or widening customer bases without increasing the number of employees.<h2 id="b3ac87ea-abe9-46a8-b7ef-d61000a353ab">Driver's seat</h2>Search funds are also an opportunity for Singh to work for himself. If he'd started in VC or PE, he wouldn't get as much hands-on expertise or immediate leadership experience."For me, it was the fastest way to get into the driver's seat," he said.He can work from anywhere in the world, which gives him flexibility to spend time with his friends and family, including his toddler daughter."As an entrepreneur, you work even harder, but how you work and where you work from is totally different," he said.Singh said he knew of about 20 MBAs from his Harvard cohort who started search funds, out of about 800 in his class.

Top MBAs are flocking to search funds. One Harvard grad explained why he founded a $530,000 fund to buy tech companies.

<ul><li>When exercising your ESOP options, you need to pay for the shares at the exercise price. </li><li>There may be an additional tax burden if the <keyword id="173739" type="General" weightage="20" keywordseo="esops" source="Orion">ESOPs</keyword> are provided at a value lower than the fair <keyword id="6463972" type="General" weightage="20" keywordseo="market-value" source="Orion">market value</keyword> at the time of vesting. </li><li>If the company fails to perform well, or lacks successful liquidity events, the potential returns on ESOPs may remain unrealised. </li></ul>When talking about the glitzy world of start-ups, a discussion on employee stock ownership plan (ESOPs), always comes up. In recent news Swiggy announced that it will buy back shares worth $50 million from employees. Also, Paytm granted 1.7 million new ESOPs to employees. A few weeks ago Flipkart announced a $700 million ESOPs payout. However, the world of ESOPs may not all be as rosy as it seems at first glance. ESOPs work in a certain way and there are a lot of factors which need to fall into place before an employee can make a profit out of them. Therefore, one needs to understand that with start-ups coming under a lot of pressure due to an uncertain economic scenario and a funding crunch, have ESOPs lost their charm? “ ESOPs are often offered to outstanding performers to foster a sense of ownership, and nowadays, start-ups use them as a means to attract and retain top talent. However, it is essential to be aware that some companies might also offer ESOPs to compensate for situations when they cannot offer competitive salaries,’ says Anjali Raghuvanshi, Chief People Officer, Randstad India, a HR consulting firm. What this essentially means is that when taking up a job offer, do note if ESOPs are a part of the salary package as this may come at the cost of foregoing some salary. It is important to understand two major risks associated with ESOPs. Let us take a look. <cmsannotation type="cmsannotation" annotationid="You would need to fork out money upfront" comment="subhead" text="You would need to fork out money upfront">You would need to fork out money upfront</cmsannotation> Here is where owning ESOPs can get tricky. “There are two up-front costs you have to bear when you are exercising your ESOP options. The first cost is the amount you pay the company for those ESOPs,” says BM Singh, ESOP Expert &amp; Managing Partner, BMSA, a consulting firm. Suppose an employee is granted 1,000 ESOP options by a company. The exercise price or strike price of each option is ₹100. This means that the employee can purchase the company's shares at ₹100 per share at a future date, regardless of the market price at that time. Now, let's assume that the market price of the company's shares increases to ₹150 when the employee decides to exercise their ESOP options. To exercise the options, the employee needs to pay the exercise price, which is ₹100 per share. The cost to the employee to exercise their ESOP options would be ₹100,000. <cmsannotation type="cmsannotation" annotationid="Additionally, there may be a tax implication" comment="subhead" text="Additionally, there may be a tax implication">Additionally, there may be a tax implication</cmsannotation> The next is the tax implication that arises here. If the ESOPs are granted at a value lower than the fair market value during vesting, there could be an extra tax burden, resulting in potential tax liabilities before fully realising the value of the ESOPs. “ESOPs are taxable in the hands of the employees as perquisite u/s 17(2) of the IT Act. The taxable amount of such perquisite would be the fair market value (FMV) of the shares (computed in accordance with Rule 3(8) of the IT Act) on the date of exercising such option less any amount paid by the employee for such ESOPs,” says Suresh Surana, Founder, RSM India, an audit, tax and consulting firm. In the above example, the employee would need to pay tax on the taxable amount of ₹50,000 at the applicable tax rate. The exact tax amount will depend on the individual's income tax slab rate. <cmsannotation type="cmsannotation" annotationid="A bigger concern" comment="subhead" text="A bigger concern">A bigger concern</cmsannotation> Poor company performance and uncertainty of liquidity events may render ESOPs worthless. “If the company fails to perform well or lacks successful liquidity events, the potential returns on ESOPs may remain unrealised, potentially impacting the value of the effort and time invested over the years, “ says Raghuvanshi. The value of ESOPs is closely tied to the company's performance and growth potential. If the company's value decreases, it can negatively impact the value of your stock options, potentially making it challenging to sell your shares at a profit. Hence, it is important for an employee to evaluate the future prospects and growth of a company before making a decision to exercise the option. When an employee exercises the options, he should have trust in the company's future growth and performance. “The employee should also be aware about the exit possibilities in case of unlisted shares i.e. buyback track record, funding rounds etc,” says Akhil Chandna, Partner, Tax, Grant Thornton Bharat, a professional services firm. When exercising ESOPs, it is thus essential to conduct a thorough assessment of the company's current performance and financial well-being. This evaluation helps the employee make informed decisions about exercising their options. “Any significant changes since joining could impact the decision,” says Raghuvanshi. <cmsannotation type="cmsannotation" annotationid="Risk of ESOPs are higher in an early stage start-up" comment="subhead" text="Risk of ESOPs are higher in an early stage start-up">Risk of ESOPs are higher in an early stage start-up</cmsannotation> If a start-up is bootstrapped or in the idea phase, the risks are higher. In that case ESOPs are merely paper money. As the different rounds happen, the value of the ESOPs and the probability of liquidity increases. “You should see at which stage of the start-up you are entering. At each phase the value of ESOPs is different. So if you are joining a company just on the basis of ESOPs and not getting a reasonable salary and the company is in its early stages, then you should also focus on the cash component,” says Singh. If it has reached the Series A or Series B funding stage, then you can consider the value of ESOPs when joining and can consider it an important part of your salary package.

Explained: What accepting ESOPs, especially if joining a start-up, might entail

<ul class="summary-list"><li>We attended the Bits&amp;Pretzels Healthtech conference for startups and VCs.</li><li>They named drug discovery and the emerging 'techbio' sector as areas of interest.</li></ul>COVID-19 fueled huge interest in health-tech startups, with VCs <a href="https://app.dealroom.co/transactions.rounds/f/industries/anyof_health/regions/anyof_Europe?showStats=YEAR&amp;statsType=rounds" target="_blank" rel="noopener">pouring a record $25.1 billion</a> into health and biotech startups in 2021.The sector experienced a subsequent slowdown, in line with broader pall in startup funding. But in 2023, health-tech startups are faring well compared to their counterparts in fintech and climate. We went to the Bits&amp;Pretzels Healthtech in Munich, Germany, and spoke with investors, founders, and operators from across Europe.Here are some of their takeaways for the future of health startups and innovation. <h2>1. 'Techbio' is a priority </h2>Techbio (not to be confused with its sister discipline, biotech) is the meeting point between technology and biology. The idea is to innovate the ways in which hardware and software can speed up processes such as the discovery of new drugs, or streamlining the collection of data in drug trials. While biotech is research-based, techbio focuses on the application of technology and engineering to bring this research to market.Startups in the space are bringing new applications of tech to fields <a href="https://www.mills-reeve.com/insights/publications/techbio-%E2%80%93-evolution-or-revolution" target="_blank" rel="noopener">such as drug discovery, bioengineering, and patient care</a>. It's a pretty nascent field, but 95% of the VCs Insider spoke to had techbio on their agenda for the coming year. It points to sustained appetite for digitizing many of the processes in the pharma industry, which many investors see as an untapped opportunity. <h2>2. VCs are still betting on drug discovery </h2>Even though funding into drug discovery startups has significantly stalled this year, <a href="https://app.dealroom.co/transactions.rounds/f/regions/anyof_Europe/tags/anyof_drug%20development?showStats=YEAR&amp;statsType=rounds" target="_blank" rel="noopener">at just $126 million,</a> startup valuations have picked up since 2022.Drug discovery is a process which aims to develop new medications and therapeutics.Startups have been deploying AI to streamline the development of drugs for about a decade, and the space is building up traction with investors. VCs are bullish that a well-calculated bet on certain drug discovery upstarts could generate lucrative exits and returns, especially via <a href="https://www.ft.com/content/e03d746c-e74c-4e95-8d12-d1edef2880d7" target="_blank" rel="noopener">Big Pharma companies</a>.<h2>3. AI can be a game changer — but not everyone needs to deploy it </h2>Despite the huge uptick in interest since the release of OpenAI's ChatGPT chatbot, artificial intelligence wasn't necessarily top of every investor's agenda.Many VCs agreed that AI has potential to transform healthcare, especially in streamlining admin tasks for health workers, to speeding up the diagnostics process. But many are also aware that any use of AI would be accompanied by stringent regulation, given the potential to misuse confidential patient data. Many of Europe's top investors were also cautious about startups applying AI for the sake of it, a time and cost-intensive process. <h2>4. Health data is a gold mine </h2>Clinical data has always been important, but a wave of startups have started to monetize their collection of this data — and VCs are looking to cash in. Clinical data is the umbrella term for data gathered during clinical trials, as well as during the delivery of care for patients.One gap identified by founders is that pharma companies <a href="https://www.reuters.com/article/us-pharmaceuticals-data-idUSKCN1GD4MM" target="_blank" rel="noopener">are struggling to acquire data</a> on clinical trials and drug candidates.As AI can't wholly replace the clinical trials process, startups are tapping into a potentially lucrative market, and VCs were very enthused by these emerging players.<h2>5. Health-tech VCs won't splurge cash</h2>While COVID-19 did give healthtech startups a chance at the spotlight, they were still overshadowed by their counterparts <a href="https://sifted.eu/articles/european-tech-2021-data" target="_blank" rel="noopener">in fintech and software-as-a-service</a>. Part of the reason was that health-tech VCs, by their own accord, did not splurge as lavishly as other specialist investors. That's changing a little as early-stage healthtech startups are leading the race, nabbing $550 million — <a href="https://app.dealroom.co/transactions.rounds/f/growth_stages/anyof_seed/industries/anyof_health/regions/anyof_Europe/years/anyof_2023?showStats=YEAR&amp;statsType=rounds" target="_blank" rel="noopener">double the amount of funding as fintech startups</a> — in 2023 so far. Still, healthtech VC say they are mostly standing by their prudent approach amid a tumultuous tech market.

Drug discovery and 'techbio': What Europe's health startup investors are betting on in 2023

Hello there! <a href="https://twitter.com/dandefrancesco">Dan DeFrancesco</a> in NYC, but I can't stop watching this video of a car ramming into a booth where two podcasters were recording (no one got seriously hurt). <a href="https://www.insider.com/video-shows-car-crashing-into-coffee-shop-during-podcast-2023-3">Check it out here.</a>We've also got an upcoming event hosted by yours truly! Join us March 23 for "<a href="https://events.insider.com/financemeetsitsfuture?utm_source=Newsletter&amp;utm_medium=email&amp;utm_campaign=2023-03-23_Finance_Amberdata" target="_blank" rel="noopener noreferrer">Finance Meets Its Future</a>," an event presented by amberdata. Learn how finance pros are addressing digital transformation through digital assets, frictionless payments, ESG Investing, and more. <a href="https://events.insider.com/financemeetsitsfuture?utm_source=Newsletter&amp;utm_medium=email&amp;utm_campaign=2023-03-23_Finance_Amberdata" target="_blank" rel="noopener noreferrer">Register here for the live event</a>.On tap, we've got stories on <a href="https://www.businessinsider.com/bnpl-sezzle-comeback-buy-now-pay-later-payments-2023-3">a buy now, pay later company looking to make a comeback</a>, <a href="https://www.businessinsider.com/meet-the-10-power-players-dominating-the-venture-debt-boom-2023-2">the top people leading venture debt deals</a>, and <a href="https://www.insider.com/things-guests-should-stop-doing-at-hotels-former-employee">what not to do when you stay at a hotel.</a> But first, we're running a special sale.If this was forwarded to you, <a href="https://www.businessinsider.com/subscription/newsletter/10-things-on-wall-street">sign up here</a>. Download Insider's app <a href="https://www.insider.com/app">here</a>.<a href="https://www.businessinsider.com/goldman-sachs-head-of-digital-assets-investing-future-of-crypto-2023-3"></a>1. Crypto clearance.After an awful 2022 that saw one of the industry's <a href="https://www.businessinsider.com/ftx-crypto-king-sam-bankman-fried-rise-and-fall-2022-11">high-profile figures implode</a>, the crypto market is looking for a bounceback.But as Mathew McDermott, global head of digital assets at Goldman Sachs, put it to Insider, there is still <a href="https://www.businessinsider.com/goldman-sachs-head-of-digital-assets-investing-future-of-crypto-2023-3">"a little bit more pain"</a> for the industry. McDermott <a href="https://www.businessinsider.com/goldman-sachs-head-of-digital-assets-investing-future-of-crypto-2023-3">laid out to Insider's Bianca Chan and Dakin Campbell</a> how tough times for crypto startups mean more realistic valuations and, in some cases, a reevaluation of the business model.In short, crypto's about to have a long, hard look in the mirror.I see one of three outcomes for most startups this year:They run out of money and fold. The unfortunate realities of the startup game. Many could end up getting "acquired" in deals that will essentially function more as acqui-hires than anything else. They refocus their business and streamline things. Once of the most common critiques I hear about crypto is "It's a solution looking for a problem." The most recent crypto winter could force startups to be a bit more pragmatic about the specific problem they are looking to address. They pivot their business to look outside crypto. A VC I spoke with last week mentioned this as a likely outcome. In short, a lot of the use cases in crypto that seemed to make sense a year ago simply don't anymore. But that doesn't mean the entire company needs to be scrapped. Take Alain Meier, who got into crypto while at Stanford University and had an idea for using it to help with cross-border money movement. It didn't pan out, but in the process Meier and his cofounder had built tech for identity verification in crypto that proved to be pretty valuable. The company eventually expanded beyond crypto and was acquired by Plaid in 2022. Now, it's a key piece of the fintech's growth plans for 2023, <a href="https://www.businessinsider.com/plaid-identity-verification-information-sharing-plans-growth-strategy-2023-2">as Insider reported</a>.And a big part of that, Meier admits, is thanks to those original roots in crypto."If you can solve fraud in crypto, you can solve fraud in basically any part of finance," Meier told Insider. "We kind of cut our teeth in that industry and then expanded out."<a href="https://www.businessinsider.com/goldman-sachs-head-of-digital-assets-investing-future-of-crypto-2023-3">Click here to read more about Goldman Sachs' strategy around digital assets. </a>In other news:<a href="https://www.insider.com/pasta-dishes-good-value-private-chef-2023-3"></a><div type="image" title="meredith hayden and lobster pasta" height="1500" width="2000" msid="98480285" hostid="261" sizebytes="228262"></div>2. A BNPL comeback story. Buy now, pay later service Sezzle was having a tough go of things last year, with one research analyst slashing their price target for its shares to just a penny. But the company has had a much better start to the year, thanks in part to a strategic pivot. <a href="https://www.businessinsider.com/bnpl-sezzle-comeback-buy-now-pay-later-payments-2023-3">More on that here</a>. 3. Venture debt's top dogs. While equity investing in venture largely dried up in 2022, debt investing continued to explode as founders looked to extend their runway without their valuations getting knocked. <a href="https://www.businessinsider.com/meet-the-10-power-players-dominating-the-venture-debt-boom-2023-2">Meet the 10 key people structuring these debt deals for startups.</a>4. A startup that wants to revolutionize housing with its tiny, affordable homes is facing plenty of headaches. Boxabl's Casitas, 375-square-foot houses that retail for $60,000, have caught the attention of celebrities, including Elon Musk, and attracted a wait list of 157,000 people. But questions remain around production costs, the company's governance, and the spending habits of the father-and-son cofounders. <a href="https://www.businessinsider.com/boxabl-tiny-home-casita-production-governance-galiano-paolo-tiramani-spending-2023-2">Read more about the big problems facing these tiny-home manufacturers.</a>5. One of Goldman's top traders is heading for the exits. Joe Montesano, Goldman Sachs' head of equities trading for the Americas, who was also one of the bank's highest-paid employees in recent years, is leaving the firm with no specific plans on where he will land, <a href="https://www.bloomberg.com/news/articles/2023-03-06/goldman-stock-trader-joe-montesano-whose-pay-rivaled-ceo-s-makes-surprise-exit?srnd=premium&amp;sref=5xrDvJna">Bloomberg reports</a>. Part of Montesano's oversight at the bank was its index-rebalancing team, a type of trading <a href="https://www.businessinsider.com/millennium-hedge-funds-glen-scheinberg-index-rebalance-tesla-2022-1">that boomed during the pandemic</a> before <a href="https://www.businessinsider.com/overcrowded-index-rebalance-trade-leads-to-losses-for-hedge-funds-2022-6">falling flat last summer due to overcrowding</a>. And be sure to check out <a href="https://www.businessinsider.com/goldman-sachs-partners-who-have-left-under-david-solomon">our running list of partners who have left the bank during David Solomon's tenure. </a>6. The secret to Citadel's success in commodities. Ken Griffin's hedge fund hired nearly two-dozen scientists and analysts back in 2018 to help the firm with its trading strategy by correctly forecasting the weather months in advance. <a href="https://markets.businessinsider.com/news/commodities/citadel-ken-griffin-gas-prices-commodities-market-bets-russia-europe-2023-3?_gl=1*1q4csgr*_ga*NDEwMTkzOTE2LjE2NjYxMjcyNDQ.*_ga_E21CV80ZCZ*MTY3ODEyNjIyNS40NzIuMS4xNjc4MTI2ODQ0LjAuMC4w">Read more here.</a>7. FTX just took a shot at a massive crypto asset manager. FTX trading affiliate Alameda filed a lawsuit against Grayscale Investments over its fees and the way in which it allows investors to redeem their shares. <a href="https://www.prnewswire.com/news-releases/ftx-debtors-file-lawsuit-against-grayscale-investments-llc-and-its-ceo-and-owners-301763694.html?tc=eml_cleartime">Read more about the lawsuit here.</a>8. Next time you stay at a hotel, avoid these common mistakes. From the best way to go about booking a room to why you should always read the Bible, some valuable tips via a former employee of a hotel chain. <a href="https://www.insider.com/things-guests-should-stop-doing-at-hotels-former-employee">Check out all the advice here.</a>9. Toblerone might have to change its logo because its level of "Swissness" isn't high enough. The chocolate bar's parent company is moving some of Toblerone's production to Slovakia, which means it might not meet Switzerland's legal definition of "Swissness." Perhaps it can launch a secretive, private bank for the uber rich? <a href="https://www.businessinsider.com/toblerone-chocolate-may-lose-iconic-swiss-mountain-logo-2023-3">More on how one maintains high levels of "Swissness."</a>10. How to not break the bank, but still impress, at your next dinner party. Private chef Meredith Hayden spills the beans on how to make dishes that feel expensive even though they aren't. <a href="https://www.insider.com/pasta-dishes-good-value-private-chef-2023-3">Here are some go-to pasta dishes to spin up that'll leave your guests asking for the recipe.</a>Curated by Dan DeFrancesco in New York. Feedback or tips? Email <a href="mailto:ddefrancesco@insider.com">ddefrancesco@insider.com</a>, tweet <a href="https://twitter.com/dandefrancesco">@dandefrancesco</a>, or <a href="https://affiliate.insider.com?h=b83e78f6bb45aba7034c3baf1ec66d1b6c1d3afa26264bdb8604d5b9f2351262&amp;postID=63485853dda1a56a22013c93&amp;site=bi&amp;u=https%3A%2F%2Fwww.linkedin.com%2Fin%2Fdan-defrancesco-29b12449%2F">connect on LinkedIn</a>. Edited by Jeffrey Cane (tweet <a href="https://twitter.com/jeffrey_cane">@jeffrey_cane</a>) in New York and Hallam Bullock (tweet <a href="https://twitter.com/hallam_bullock">@hallam_bullock</a>) in London.

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