Is OpenAI Still a Good Investment?

Or Is $150B too High of a Valuation To Get a Decent Return...

Author

Mat Sherman
September 25, 2024

What’s Going On In This Post?

Moving Email Providers

I am moving Seedscout marketing emails from Loops to Beehiiv and am putting a more personal touch to it. I (Mat Sherman) write every email myself, so I figure let’s call a spade a spade….this is now Mat’s Newsletter, hyper focused around sharing updates around Seedscout + providing value to founders, investors, and other players in our ecosystem. I’ll share advice, I’ll share industry trends and analysis, and I’ll even include some spicy takes every once in a while. That plus all news related to Seedscout. Not into that? All good, you can Unsubscribe at the bottom of this email. With that said, let’s get into the good stuff….

I applied for an interesting opportunity yesterday, and I wanted to share my answers here.

Would I Invest In OpenAI at a $150B valuation? Why or why not?

Yes. Peter Thiel once said that if a company is raising massive up rounds by smart investors, the company is surely undervalued. Kushner, Khosla, Nvidia, Apple, and Sequoia are all firms in the mix for the $150 billion round, so I’d say OpenAI is still massively undervalued. The primary risk to OpenAI is that its safety measures are not prioritized, and it eventually loses to an alternative like Anthropic, which values safety more. That said, I believe Sam Altman cares enough about winning this race that he will focus on this because he knows it's a vulnerability. If OpenAI gets safety right, I candidly can’t see how the $1.5 billion valuation isn't 10X'd within 5-10 years, proving it to be a worthwhile investment.

What are a couple pre-series A companies I would invest in right now, and why?

Friend - I have been tracking Avi Schiffmann since the middle of 2020, where he went viral for building a COVID tracker from his bedroom. This guy knows how to get attention. He knows how to build with taste. And he has guts. he spent $1.8M on a domain, which led to a PR boom so large, it may have already made $1M back. In a world where SV techies compete to create the AI companion, I think the non standard "outsider" techie will win the crowd, and I think that techie is Avi. (If you look at their traffic graph on SEMrush, its been spiking non stop since his launch, so it wasn't a flash in the pan).

222 - I think in a world where AI is a dominant force, there will be a clear pushback from people who want to escape the algorithms and spend time with others. I find that 222 has a very interesting take on this. I'm on their LA texting list, and every few days, they text me about a new event I can attend in LA. The events are thoughtful and unique, and they make me want to go simply by the structure of their messages. I can usually bring a friend as well, introducing a clear viral effect. It also appears they haven’t rushed to scale quickly to other locations. They are taking the approach of wanting to dominate certain areas before moving on, rather than spreading themselves too thin. This tells me the founding team is strategic and truly cares about winning vs. "going through the motions". I haven’t seen a deck, but after observing the thoughtfulness of their product combined with my conviction that humanity needs a outlet away from AI, I think 222 has a good shot at becoming very big.

Three Books That Have Had An Impact On Me

Jab, Jab, Jab, Right Hook - This is the first book I read by Gary Vaynerchuk at the very beginning of my career, and its message is something I've carried with me throughout my journey thus far. I read it as always create value before you capture it, and in general, create more value than you capture at all times. I think this is a very valuable lesson for venture capital, or really any role.

The Power Law by Sebastian Mallaby - This book taught me the history of venture capital and how we got here. I think it provided me with a grounding in how our predecessors operated, allowing me to call BS on some of the current pushbacks in our industry. Understanding where this industry came from allows me to appreciate its nuances and imperfections of the present.

The Enlightened CEO by Bob Fifer - This is a book that few people have read. I came across it in a Half Price Books store, but no other book has described the "soft side" of being a CEO. It delves into emotional intelligence, situational awareness, managing your own psychology, and many other topics in ways that other authors haven't even come close to. I wish the book were more well-known, but it also feels like my little secret.

Quick News Tidbits

Have any feedback or content you want to see in these posts? Please reply and let me know. Trying to double down on this content thing 🙂 Thanks for reading.