We’ve spent the last several days on the road across New York (Primary Summit), the Middle East and Asia. We heard polar opposite sentiments among founders and investors — ‘this time it’s different’ and ‘when will the AI bubble pop?’
We are somewhere in the middle: On the one hand, the new TAM created by AI is large and unprecedented, its utility is evident (unlike for example crypto’s early days) and reflected in real revenues, there’s lots of obvious ground to be covered (e.g. agents barely work today) and more proofs of high value exits are emerging. On the other hand, we acknowledge that many $1B+ AI companies today will not be enduring businesses, moats are unclear for most businesses — which means pricing and margins will move — and valuations can get crazy for perceived successful companies. We are studying opportunities and trends with an open mind.
The current payment system was designed for humans and to specifically keep bots away.
Autonomous bots aka agents are evolving into economic actors. Consumers are beginning to use OpenAI Operator, Perplexity Shopping to discover and buy their favorite products – “ChatGPT, could you please find a 2 night experience for me and my wife on the labor day weekend under $500?”
Because agents transact differently – search many more catalogs and websites, split checkouts across n-number of merchants, transact without card and human present, multiplex 1 human to many agents workflows, are temporal (one-time use agent vs persistent use cases), require instant settlement and reconciliation, we believe a more efficient, instant and scalable payments stack will emerge.
Two key blueprints — Stripe’s Tempo (regulated, merchant-focused) and Coinbase’s x402 (open source, composable, more web3 native) — have laid claim to become payment rails for agents. Other incumbents have been busy too – Visa launched VisaPay, Mastercard announced AgentPay and last week Shopify launched an agent development kit.
This is a massive opportunity
Pre-agentic infra companies have produced large winners – Stripe and Adyen are $90B and $50B+ in value respectively. We believe the addressable market for agentic payments will be much, much larger driven by low friction and nano - payments. The market is very early – mostly dominated by agile incumbents – but we are closely watching this space.
We have joined cap tables alongside General Catalyst, NEA, Kleiner Perkins, NFX, Sequoia Arc and Lightspeed in recent months. With each new investment, our reputation is growing and our right to win is becoming stronger.
We have made fourteen investments — all examples of pre-seed/seed investments in top global engineers using AI to solve real problems. Few noteworthy updates:
● Anterior (entry $15M cap) raised a Ser B round at $250M post led by a top tier firm
● Antes (in stealth) raised a follow-on $3.5M seed led by Jeanette at General Catalyst
We relish opportunities to bring founders together. These events have delivered immeasurable value to us and our companies – for instance, it has added startup prospects to our pipeline and helped our portfolio companies recruit new talent.
● In June, we hosted a fireside with AJ Tennant (ex VP Sales, Glean) to explore the tactics of scaling an AI company to $100M ARR in under two years. A private dinner with 35 startup founders followed the discussion
● We also co-hosted dinners each with Brex (b2b payments) and Rho for pre-seed and seed startup founders in San Francisco.
● In August, we spoke to several successful Indian-origin founders to get their feedback. Lack of community in the first 500 days of the journey has repeatedly come up. We are ideating what could bridge the gap.
The opportunity in front of us is much, much larger than we first imagined. It is highly probable that 2 years from now we would look back and say – gee, we should have invested in more companies.
Co-invest opportunity: Port-co is on a strong trajectory $40M revenue run-rate, 20% margin, 70% business from repeat customers, target $100M run-rate by end of year. The addressable market is virtually uncapped and there is an opportunity to be ‘the’ company in the category. We have up to ~$3M allocation as part of a target $50M round. Happy to share more one on one.
If you’d be visiting San Francisco before the end of the year, please let us know. We’d love to host and even perhaps convene a small-group of founders/investors while you’re here.
That’s all folks!
Team ODDBIRD
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