🎆 Our 2023 Year in Review
Before we resume our regular programming for your guide to AI in 2024, I wanted to look back at our work in 2023. This issue covers Air Street Capital, Spinout.fyi, the State of AI Report, European Dynamism, and our community engagement.
I’m also sharing a 1hr roundup of AI in 2023 that I recently recorded with The Gradient Podcast. We cover the major events of the year across research, industry, geopolitics, safety, and predictions - in keeping with the structure of our State of AI Report.
Reminder: We’re looking for an outgoing and technical generalist as our Community Lead at Air Street who will be responsible for building and engaging our community of founders, researchers, and builders. If you or a friend might be interested, check out the description here and drop us a line on email@example.com.
All the best for 2024, let’s go!
2023 was a year of both immense technological acceleration and constant flux. AI truly exploded into the mainstream: industries witnessed the birth of potentially existential competition overnight and unprecedented volumes of private and corporate capital flowed into large-scale AI endeavors. Esoteric topics such as OpenAI’s corporate structure shakeup achieved mindshare parity with the colossal implosions of FTX and Silicon Valley Bank. All of this happened against a backdrop of tightening private markets, a 20 year record high ending for the Nasdaq, and shifting political agendas. And yet, as we continue to repeat, it is still arguably day 1 for AI.
The last 12 months were big for Air Street on several fronts. In September, we announced our second fund (or second epoch, as we call it) of $121,212,121. We now have the long-term support of institutions that advance world-leading science, technology, and education. We’re immensely grateful to our investors as we accelerate our own mission to be the very best partner to AI-first company builders from the start of their journey.
In 2023, we closely reviewed 444 opportunities and many more, ahead of a round or even a company being formed.
This year, Fund 1 made 3 follow-on investments, while our new Fund 2 made 3 Seed investments and 1 Series A follow-on investment. Several additional rounds have not yet been announced. Now turning to the portfolio highlights:
🧬 Profluent, Jan ‘23
$9M Seed round to develop large-scale AI models to design new protein medicines. Among other things, this has potential to create lasting cures for diseases while overcoming patent restrictions. Led by Ali Madani, a pioneering researcher in this space.
🤖 Adept, Mar ‘23
$350M Series B to scale an AI copilot that works with any software or API you use at work. With Persimmon-8B and Fuyu-8B, Adept have made significant contributions to the open source model community this year.
📸 Clipdrop, Mar ‘23
Clipdrop, which developed popular image editing capabilities and generative AI applications was acquired by Stability AI - the company’s first acquisition.
🔬 Valence Discovery, May ‘23
After we co-led their Seed round, Valence was acquired by Nasdaq-listed Recursion for $47.5M to create Valence Labs, an “OpenAI/DeepMind for drug discovery”. Their work in foundation models was instrumental in securing a $50 million investment into Recursion from NVIDIA. Much more to be unveiled soon!
🦾 Sereact, Aug ‘23
$5M Seed to build software to fully automate the pick-and-pack process in warehouses and manufacturing. Led by Ralf and Marc, Sereact unveiled PickGPT this year, the first foundation model for generalized robot manipulation and control.
🛡️ Lambda Automata, Oct ‘23
€6M Seed to build defense technology for European democracies and their allies. Led by former Apple SPG engineer Dimitrios Kottas, their first product - an autonomous surveillance tower - is already being deployed for forest fire detection and coastal monitoring.
🥷 Samaya, ‘23
Raised a Seed to develop an LLM-powered enterprise knowledge discovery platform. Led by Maithra Raghu and Fabio Petroni, formerly of Google Brain and Meta AI, respectively, the team is building in stealth.
pre-Air Street and angel portfolio
Finally, a handful of my angel and pre-Air Street portfolio companies raised great rounds in 2023. These include:
📹 Synthesia $90M Series C
🏭 Crusoe Energy $200M debt for GPUs
🌱 Enveda Biosciences $51M round
🏎️ Tractable $65M Series E
🦾 Automata $40M round
💻 Chroma $18M Seed
💻 Contextual.ai $20M Seed
Building Air Street into the very best partner to AI-first company founders from the start of their journey requires more than writing cheques. We live in an increasingly chaotic world, one in which regulations could overhaul business as usual and where competition for talent, capital and attention is fierce. We believe that the very best companies not only build the very best products, but are able to navigate established and emerging complexities nascent to their markets with necessary policy and strategic communications. In August 2023, I welcomed Alex Chalmers, formerly of Milltown Partners, to lead this work for Air Street and our portfolio companies.
In the 5 months since Alex joined, we’ve shipped a number of essays and research to shape our European Dynamism work, produced a sixth State of AI Report, several Guide to AI newsletters, and saw the UK Government accept Air Street’s recommendations for how to rewrite the university spinout playbook. More on that below!
Our Venture Fellowship program, which enables talented operators, researchers and students to work with us full- or part-time, moved into its second year. Corina Gurau joined us as our second Venture Fellow, following 4.5 years working on self-driving cars and learned world models at Wayve. We worked together on everything from new investments through to the State of AI Report and the Guide to AI.
Speaking of our Venture Fellows, Nitarshan Rajkumar, who worked with us last year, became the first frontier AI researcher at the UK Department for Science, Innovation and Technology. Recruited by the Secretary of State, he advised the Government’s approach to critical safety, compute and sovereign capability questions before the AI Safety Taskforce, turned Institute, was launched.
This year saw a big win for university spinout founders in the UK. We launched Spinout.fyi in 2021 to push for a rewrite of the spinout playbook. For over two years, we’ve written essays, several op-eds, debunkings, data (V1) releases (V2), case studies, and made contributions to others' work. This relentless commitment to modernizing archaic spinout practices in the backdrop of a Government seeking Science Superpower status prompted the Treasury to commission an independent review of spinouts, which was published in November 2023.
This government has accepted a number of key Air Street reforms - arguably the most progress we’ve seen to enable company creation from university research in several decades - including:
Significantly reduced and dilutable equity ownership by universities at inception;
The adoption of a simple agreement to spinout, available publicly;
Significantly faster deal times by moving away from ad hoc negotiations and committee-led decision making in which spinouts are powerless;
Fairer distribution of IP among founding teams, so that PhD supervisors don’t walk away with disproportionate allocations;
New transparency requirements around spinout deal terms, extending the spirit of spinout.fyi.
When we started out motivating spinout policy change in public, we faced significant pushback from universities, the government, funding bodies, and university-affiliated investors. I’ve always believed that change will only come if you’re prepared to repeat in public what you say on WhatsApp - even if it doesn’t always win you many friends.
Along with continuing to write the Guide to AI, which is now closing in on 25,000 subscribers (up from 18,000 last year), we have kept the Spinout.fyi open spirit alive in our other work. This year, we didn’t shy away from sharing our analysis of where the relationship between government and technology is broken. We’ve grouped this work together under the heading of ‘European Dynamism’ - pushing for a culture that incentivizes and rewards mission-driven entrepreneurship.
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Our European Dynamism writing has included:
A critical analysis of how the UK’s political discussion about AI has hit a dead end;
Our defense of the UK’s approach to AI regulation and why we felt the EU Act was a retrograde move;
Our concerns about the desire of some in the AI governance debate to seek closer ties with China;
Proposals to improve the quality of government technology investment.
This culminated in an appearance before the House of Lords’ Digital and Communications Committee to discuss how the UK needed to shake itself out of its complacency on AI.
With war continuing to rage in Ukraine and Israel facing unprecedented terrorist attacks, defense has taken a central role in our work on European Dynamism.
Back in May, we warned that many European governments simply weren’t learning the lessons of the war in Ukraine and were continuing to live in a peacetime mentality.
We followed this up with a deeper dive into why Europe’s model of defense procurement isn’t working, the risk this poses, and some potential solutions.
Our work, alongside many of our friends’, was featured in an FT analysis of Europe’s lack of seriousness on defense modernisation.
State of AI Report 2023
Our goal is to create a canonical open access resource that analyzes progress in AI. In October, we released the 6th edition of the State of AI Report, covering the developments across research, industry, politics, and safety. We saw 60% more traffic in the first 3 months since launch than the whole of the last 12 months combined.
During the UK’s AI Summit, our stats were called out in the FT’s examination of who’s really writing the global rulebook.
While one of our more contested predictions received some air-time: "financial institutions will launch GPU debt funds". We also saw the first coverage of the report in India as well as a call out in Le Monde’s review of AI in 2023.
To end the year, I also had a great time discussing the report with Daniel Bashir on The Gradient Podcast, where I ran through the main headlines, along with some of our predictions.
As we rev up our community engagement, we held our first ever State of AI launch event over at Notion’s HQ in San Francisco. I presented an abridged version of the report - you can see the video here - and I ran fireside chats with founders and executives from Recursion Pharmaceuticals, Meta AI and Adept.
2023 saw the eagerly-awaited return of our Research and Applied AI Summit (RAAIS) in-person (turns out virtual ain’t that fun after all) and our most action-packed programme ever of meet-ups. You can register for the 2024 RAAIS here.
We started the year with our 26th and biggest ever London.AI (300 attendees and almost 800 requests). We were joined by friends from Adept, Palantir, Google DeepMind, and Basecamp Research for a meet-up spanning general intelligence, security, and sifting through natural environments for new proteins. Sign up here to stay in the loop for future events.
A few weeks later, we were in 🗽 New York, where over 600 engineers, founders, researchers and friends applied to join our sold-out (figuratively speaking, we don’t monetise :) LLM best practices meet-up.
And it was the same story a couple of days later in 🌁 San Francisco...
In June, we brought 200 researchers, entrepreneurs, and operators together for the 7th annual Research and Applied AI Summit to discuss where the field is going next and share best practices for building AI-first products.
We had a great range of speakers from industry and academia. You can catch all the talks on our YouTube channel.
We were also out and about on continental Europe, convening Paris.AI that brought together friends from the thriving startup scene, as well as academia and key public companies.
We rounded things off in Lisbon.ai, co-organising a 1-day meetup on turning science into AI-first software, along with Point Nine and the Champalimaud Foundation.
Building a new venture firm is hard - the market is crowded, capital is often called a commodity and the barriers to entry are high. Doing so as a solo GP - i.e. without an investment team and much support - is even harder. To foster community, best practices and peer support for solo GPs, we teamed up with our solo GP friend, Nico Wittenborn of Adjacent, to run the first in-person hansolo.vc event in San Francisco with two legendary solo venture capitalists and 12 of the industry’s emerging solos.
Entering my second next decade in venture capital
On the 10th year anniversary of my career in venture capital, Business Insider profiled my journey as an investor, the founding of Air Street, what we've achieved and where we're going next.
Here's to a big 2024 😎
Nathan Benaich 7 January 2024
Air Street Capital invests in AI-first technology and life science entrepreneurs from the very beginning of your company-building journey.