C2V December Notes From the Trenches
Welcome, friends, and Happy Holidays to all! Lots to cover this month, so while Matt and Chris try to figure out how to introduce our 11 and 12-year-old sons to that greatest of Christmas movies — Die Hard — without our wives finding out (while also confirming once and for all that our wives don’t actually read our newsletters), let’s jump right into it.
To kick things off, it’s prediction time! As usual, we’ll look back at last year’s prognostications and share a new batch for the upcoming year. After that, we share some data on the makeup of our LP group, as well as a brief Q&A with three of them, plus the latest and greatest from our portfolio companies. Enjoy!
Predictions
Yes, it’s that time again! New predictions for 2023 are below, but first…
How did we do with our 2022 prophecies?
Forgive the immodesty, but we crushed it. We made some pretty bold predictions last year and took some flack for leaning cynical with our views on trends that, at the time, seemed unstoppable (notably SPACs, NFT/Web3/Metaverse, and late-stage tech).
But as the old saying goes, one person’s cynicism is another person’s rational practicality (okay, not a saying, but it should be):
We can all finally agree that a very high percentage of SPACs raised and companies backed over the past several years have turned into epic failures. When the primary rationale for raising and deploying huge sums of money is “because we can,” it usually doesn’t end well (write that down).
While the VCverse was ogling over the sexy new NFT/Web3 world, we stayed true to our thesis and steered well clear of the category. Turns out that lots of money chasing impossibly rosy projections is fertile ground for bad actors to prey on the unscrupulous (and our parents were right when they told us if it sounds too good to be true, it probably is). We’d like to say “lesson learned,” but of course, this isn’t anywhere near the first time this has happened (Madoff, Theranos, CDOs, Enron, WorldCom, and on and on and on…), and it will definitely not be the last. Sigh.
Matt took a page out of Nouriel Roubini’s playbook — keep predicting “the big crash” every year, and eventually, you’ll be right. Okay, that’s not fair as it was only the second year predicting the spectacular late-stage tech bubble burst. After spending 3+ years indiscriminately firing at everything that moved, late-stage VCs are finally getting their asse(t)s handed to them (see what we did there?).
So what lies ahead for 2023?
Glad you asked…
Besides Lensa.ai (the latest version of “hot or not” that everyone shares on Twitter), AI is the real deal. We will see its application spread well beyond its “big data” roots to every corner of tech. There will be many smart use cases in verticals like industrial automation, large-scale inspection/maintenance (in powering computer vision), and replacing the worst hourly wage jobs (e.g., autonomous robots cleaning public bathrooms). The application of AI for real-world usage is finally here, and rather than replacing humans (as some fear), it will support them in real ways (well beyond de-aging them in photos).
Climate change tech going mainstream. The good news is people are finally recognizing that climate change is happening and is a real and imminent danger to the planet. As a result, a record amount of capital is available for a record number of startups trying to address the problem from various angles. The bad news is that they will need way more time and money to gain acceptance and adoption than perhaps people expect. This transition may, unfortunately, need a decade or more to see tangible results (but we have to start somewhere, so keep it up, everyone).
As OG social media platforms lose relevance for different reasons (from data access restrictions to megalomaniacs long on wealth and short on basic human decency), there will be major ripple effects. Our thoughts on two of them:
As it becomes clear that the effectiveness of Facebook & Instagram ads isn’t bouncing back to pre-iOS “App Tracking Transparency” levels, eCommerce brands branch out to other channels in a big way. Among other impacts, this helps podcasts buck macro ad-spend headwinds and continue to grow in the 45-50% YoY range.
A viable Twitter competitor emerges, Twitter users with the biggest followings begin to simul-post on both platforms, advertisers and smaller users follow, all of the above gradually stop bothering with Twitter, and (maybe not until 2024) Twitter falls below a critical mass of users and Elon engineers a hasty, desperation merger with Truth Social, which only serves to throw off some additional investment banking fees before the inevitable $45 billion dumpster fire.
(Really “2a”) On the bright side, NeoTwitter is actually well run and manages not to degenerate into a hate-fueled cesspool quickly (maybe more hope than a prediction, but come on people, we can do this!)
We could not talk 2023 prediction without discussing the future of work. If the last two years have taught us anything, it’s that we really have no idea how this remote/in-person thing is going to shake out, and while millions have been poured into this investment category, we will take the plunge and predict it does not live up to the hype.
Software-driven efficiency improvements (on top of lingering supply chain trust issues and deteriorating U.S.-China relations) will lead to a noticeable uptick in US manufacturing growth.
While virtual reality migrates back to the novelty-product fringe (where it belongs; for now, anyway), augmented reality will have its breakout year as a truly transformative software feature for applications in construction, real estate, infrastructure, and beyond.
And finally, ChatGPT proves to be a little too good, leading to widespread high school and college cheating scandals (and maybe an academic journal submission scandal or two), followed by a (mostly) healthy national debate about whether this actually is cheating, or whether we need to figure out how to incorporate new AI tools into academic research and curricula.
There you have it, folks, our 2023 predictions are laid out and ready to crush again next year!
LP Fun Facts
As the year draws to a close, we thought it would be fun to ask our LPs to share some stats with us. We have an incredible group of people who provide immense support to our founders, so here are some things you may want to know about them.
While making money is a big driver for investors, the graph above shows that our LP support goes way beyond that. Their investment is more than financial gain but an opportunity to help others.
What is so impressive about the graph above is the scope of our LPs' expertise and the opportunity our founders have to plug into those areas to drive greater success for their startups.
Well, the LPs have spoken, and while the competition was tight, Matt eeked out his win. Chris will have to work harder on his hair game in 2023. (Matt’s note: Wait, what??? This is like saying Steve Jobs was a slightly better founder than Adam Neumann. I demand a recount.)
LP Highlights
Why are you passionate about working with our founders?
Renae Cormier: Having a deep understanding of finance and investing, with a focus on value proposition, my skills fit well with entrepreneurial founders so they can focus on other aspects of running their companies.
Rob Small: 20 years ago, I was in the exact same situation, and thanks to the support and advice of others, I was able to beat the odds and turn my company into a success.
Peter Naylor: I'm passionate about working with founders because founders have passion. I find their energy inspiring and intoxicating, fueling my energy for my job. Founders are game-changers who lead the world.
What is the one thing C2V does right when it comes to investing?
Renae Cormier: A well-defined investment strategy allows C2V to be disciplined on the front end, increasing its success throughout the investment. Analyzing hundreds of companies a year could be overwhelming, but they can quickly pass on investments that don’t fit their framework.
Rob Small: Most VCs I’ve met provide nothing but money. C2V differs; Chris & Matt try to get close to the team and provide tangible support and advice.
Peter Naylor: I think C2V does a lot of things right, but one thing that sticks out is that they seem to find opportunities in unexpected places, and that's precisely where opportunity presents itself.
Portfolio Highlights
Forbes 30 Under 30 for Eze - Enterprise Technology
Nigerian American best friends David Iya and Joshua Nzewi launched Eze in 2020 as a B2B wholesale marketplace for used smartphones and other electronics. The startup validates the quality of products for buyers, countering the common issue of fraud in used electronics. Eze has been used in 10 countries and is on track to make $2.3 million in 2022.
Mike Dorfman of Koffie Financial joins the Insurance Dream Podcast to talk about how Koffie is paving the road to the future of Trucking Insurance with precision data that allows Koffie to rate each truck they insure properly.
InsurTechs seek to provide services in underserved insurance markets
Marcus Newbury, chief operating officer and co-founder of auto insurance-focused Driver Technologies Inc., said he’s seen a hyper-personalization trend playing out in the auto space as InsurTechs seek to provide services in underserved insurance markets, such as trucking, rideshare, or the rental market.
The Platform Business Model Is Transforming Real Estate
Platform businesses like Unreal Estate can often scale quickly and reach a global audience for several reasons. First, they typically have very low fixed costs, effectuating significant value for money compared to traditional market offerings.
Second, they often capture substantial user data—which can be used to improve the platform, making it more valuable to its users. This has significant implications for leaders.