SaaS Shudders After Airtable's Humbling Sale to Italian Grim Reaper Bending Spoons
Plus, Google shakes up DeepMind leadership & hardware startups raise billions
The Week In Short
Bending Spoons agrees to acquire Airtable at a steep discount to its ZIRP-era valuation, but early-stage investors make out well. Jeff Dean leaves Google DeepMind and Demis Hassabis steps back amid an overhaul of Google’s AI teams. Fresh TVPI data from Carta shows how wide the gap is between a good and great outcome in venture. Hardware companies from nuclear reactors to automated manufacturing raise billion-dollar rounds. Two profiles on Sequoia dig into the inner workings of the firm under new stewards Alfred Lin and Pat Grady. Earnings calls spook the markets on SpaceX but give Palantir a big boost. Jasmine Sun travels to the Midwest to discover why Americans hate data centers so much. Nikita Bier steps down as X’s head of product.
The Main Item
Airtable’s Sale to Bending Spoons Wasn’t a Dream Venture Exit. Still, Timing Can Be Everything.
Airtable’s definitive agreement on Tuesday to sell to European roll-up juggernaut Bending Spoons at an enterprise value of $1.285 billion could be just a taste of the disappointing exits in store for pre-AI software-as-a-service companies.
Airtable, founded in 2013, had around $480 million in ARR and was growing more than 20% year-over-year at the time of the deal. That still wasn't enough in an era of supercharged AI growth and worries that agentic coding will kill software companies. Even counting the roughly $965 million in cash, that brings the deal's equity value to $2.25 billion, it's a steep discount to Airtable's pandemic-era $11.7 billion valuation.
Still, smart investors find a way to make money.
Venture can be a timing game. While Airtable’s exit may not play as well into the lifetime-partner narrative many VCs push, strategically planned cash-outs made some VCs quite a pretty penny even though the ultimate outcome was underwhelming.
Freestyle Capital GP Dave Samuel is one investor in Airtable who cashed out at the right time.
Samuel wrote Freestyle’s first check into Airtable’s first funding round in March of 2013 for about 10% ownership at a less-than-$10 million valuation before other investors came in, we heard. Freestyle followed on through the Series B round.
The two teams’ relationship went back years before: Samuel had met Airtable CEO Howie Liu when Liu was still a senior at Duke University, and Liu served as Freestyle’s first intern right after the fund’s launch. Liu’s first post-college job was at a Freestyle portfolio company.
As a general house rule, Freestyle sells some shares of its portfolio companies once they hit a unicorn valuation. Freestyle exited a significant amount of its position in 2021 at Airtable’s peak valuation of $11.7 billion. While the exact share count couldn’t be learned, Freestyle’s multiple on invested capital will be more than 55x, we heard (The Wall Street Journal previously reported on Freestyle’s multiple).
Early investors who held on will make decent returns.
Caffeinated Capital's Raymond Tonsing wrote his first check a month after Samuel, in April 2013, and led the following seed round. Angel investor Felix Shpilman also backed Airtable at seed. Tonsing didn't lead the $7.6 million Series A — CRV's Max Gazor did — but he invested, and co-led the Series B alongside CRV. He backed every round after that, through the Series F in December 2021. Tonsing, Gazor, and Shpilman will likely get a sizable return on shares they’ve retained, although we’ve heard that the final totals have not been confirmed by the company yet.
Airtable raised at a $1.1 billion valuation in 2018 for its Series C, with Thrive, Benchmark, and Coatue all participating. Every round after that priced above Tuesday’s deal. The company raised more than $1.4 billion over its 13-year history and hadn’t spent most of it. (At the time of the signing, the company had about $965 million sitting on its balance sheet.) Late investors including Greenoaks, WndrCo, XN, and Franklin Templeton should get their capital back.
Still, a lot of TVPI will have to be readjusted internally for funds who were holding Airtable at $11.7 billion.
Ahead of the deal, Airtable spun out its fast-growing AI agent platform Hyperagent.
Early angel investors who spoke with Newcomer said Airtable has not informed them whether their ownership stakes will transfer over proportionally to Hyperagent.
Despite his own success on this deal, Samuel sees the writing on the wall for SaaS businesses. He told the Journal that he’s “strongly suggesting” that all of his portfolio companies in this sector attempt to sell to at least get out while they can.
Machine Earning
Apply for a Spot at Our Machine Earning AI Summit on Sept. 29 in San Francisco
Newcomer is hosting our first-ever Machine Earning AI Summit in San Francisco on September 29.
We’re bringing together the most prominent venture-backed founders and builders in commerce and AI for a curated invite-only event.
Spots are extremely limited, so apply as soon as you can for a chance to attend.
DeepMind Shakeup
Google Loses More Top Scientists at a Key Moment in AI Race
Google shook up its AI leadership this week, making clear what people have been whispering about for months: it’s fallen behind.
On Wednesday Google announced its chief scientist Jeff Dean was leaving after 27 years to start his own company, and Demis Hassabis was stepping back from his role as the CEO of DeepMind to become the division's Chair and Chief Scientist at Alphabet, letting him focus more on Google’s AI biotech wing Isomorphic Labs.
DeepMind’s CTO Koray Kavukcuoglu was promoted to senior vice president and will report to Sundar Pichai, but notably he will not take a CEO title.
Dean, alongside three other Google researchers, is founding a neolab called Discovery Loop to chase recursive self-improvement. Radical Ventures and Khosla Ventures have already backed it, alongside Kleiner Perkins, Lightspeed, Doerr Capital, and Google itself.
The tech giant put a friendly spin on the news. Hassabis addressed employees in a memo saying he had to step back from day-to-day responsibilities with the promise of AGI fast-approaching.
But the rosy views couldn’t distract the stock market from the reality that Gemini’s next Pro model is months behind schedule, and many other top scientists have defected to OpenAI and Anthropic in recent weeks. Noam Shazeer took off for OpenAI in June, while AlphaFold Nobel prize winner John Jumper and other top scientists left to work on Anthropic’s growing scientific initiatives. Alphabet’s stock fell on the news.
Talking to sources at DeepMind, we hear the problems have been organizational as well as cultural. They’ve struggled to build a competitive coding model partly because developing products for enterprise customers is historically a weakness for Google. The company has traditionally been stronger on the consumer side of things, which is why Gemini has cut into ChatGPT’s market share. Unfortunately for Google the momentum (and money) is in coding — and its models haven’t measured up.
Despite the hand-wringing, it’s hard to count Google completely out of the AI race now. It’s been dogged on before about model performance and slow-moving culture but has been able to bounce back. Any well-funded lab is perpetually one good model run and post-training process away from being near the top of the charts. It’s also the only truly verticalized tech giant.
But even a cash-printing machine like Google has its limits. Q2 marked the company’s first ever cash-flow negative quarter due to its massive capex spend. The company is expected to spend $195 billion to $205 billion this year on capital expenditures.
Dean’s recursive self-improvement company will be worth watching given the in-house talent, but Google’s race to get back into the mix will remain a major storyline through the end of the year.