Ecosystem decline

Why a Newsletter • Tech’s health check • Rabbit R1

Hi there! 👋 In the product world, features under development are often dubbed WIP: Work–in–Progress. In that spirit, welcome to Week-in-Progress, your quick rundown of research, analysis, and data on the top early–stage companies and projects, published every Wednesday.

• Why a Newsletter? The number of people in startups focusing on peripheral activities like podcasts, newsletters, and investing appears to be growing rapidly.
• With my newsletter, I transitioned from building an AI startup to mastering distribution, content creation, and engaging a niche audience. Drawing from my real-world experience, I contrast the approaches of large Total Addressable Markets with small-scale projects.
• I view this newsletter as both a strategic hobby and a practical resource, aiming to share insights and complement my ongoing startup work, and I hope it’s going to help me with future projects.

• Last year experienced the most severe decline in startup liquidity since the global financial crisis, over a decade ago.
• There was a 38% drop in active venture capital firms, resulting in 2,725 fewer firms participating in deals. Only 474 funds were raised, the lowest since 2013, with total funds dropping to about $70 billion from $173 billion in 2022.
• There’s a more than 40% decrease in startup formation. Funding is split into two main segments: seed rounds—high-risk but easier to secure small investments—and growth rounds—large investments with substantial data to mitigate total loss.
• Series A funding, crucial for transitioning startups into stable companies, seems to be disappearing. This leaves many startups in a difficult position, struggling to meet targets for significant growth funding or profitability while avoiding running out of funds.

• I previously explored AI-enabled hardware like Meta Smart Glasses and the Rewind Pendant. I didn’t get a chance to write about Humane’s AI Pin, but it didn’t impress me much.
• The R1 from Rabbit is a new launch in this space. It’s a standalone, pocket-sized device designed like a walkie-talkie with a touchscreen, 360° camera, and an analog scroll wheel. Its key feature is the “rabbits,” automated scripts for everyday tasks.
• The R1 has a fun, GameBoy-like appearance, offering both nostalgia and futurism, making it more appealing than Humane’s AI Pin.
• The R1’s main appeal lies in its cloud-based AI capabilities, using a Large Action Model trained to understand graphical user interfaces. This allows it to interact with apps like Uber Eats to perform tasks like ordering pizza.
• Its success might depend on its operating system’s ability to interact directly with various user interfaces, a challenging implementation on iOS and Android due to security permissions. They’ll need exceptionally strong use cases to persuade people to move away from smartphones, as seen with other AI assistants like Google Assistant, and Alexa.

This edition of WIP only includes a preview of this week’s issue of Before Growth — my newsletter about startups and their builders before product–market fit. To read the full article, click here. It also contains links related to the topics discussed above.

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