5: Generative AI Event, Snyk Series G, Coffee & Sea
Hello there, and happy holidays! Most newsletters I follow have been publishing a “2022 in review” this week, but since I just got this started in November of 2022, I don’t have much to summarize yet. I hope to keep this going throughout 2023 and to share an awesome “TLV Tech 2023 in Review” post with you all at the end of next year. I’ve been trying to imagine what that summary might look like… For now, here is this week’s edition -
Generative AI Event
“Strive to understand the limitations of this technology. Don’t get blindsided by how exciting and magical it might feel” - This was one thing that all four speakers agreed on at the “Generative AI: Building to Last” event I attended yesterday. Yoav Shoham, co-CEO of AI21 Labs (the company behind WordTune), explained that while artificial intelligence has made an incredible leap in the last few years, the risk is that irrational exuberance might lead some people to overlook the limitations, and learn about them in a painful way.
AI21 Labs has been referred to as “An Israeli OpenAI”. Another insight from co-founder Yoav Shoham was that while images generated by DALL-E can be mind-blowing, there is far more than one “right” answer when something like “Pluto eating an apple on the moon” is typed as a prompt. There is a large area within the search space that would make us happy. Some other applications are built around a much more narrow target. It’s important to be aware of that.
One source of disagreement was around the role AI would play in creativity. The other panelists - a researcher from the Weizmann Institute of Science and two startup founders - debated on whether generative AI is just a tool that increases the productivity of a creative human, or can the AI algorithm be viewed as doing creative work on its own. While the algorithm can carry out technical tasks like combining objects into a visually appealing image, guided by a human, some of the dialogs and movie scripts produced by ChatGPT can be considered as creative work. It was getting a bit philosophical at some point.
All four panelists agreed that the space is getting crowded and the technology is moving fast. You have to “run as fast as you can just to stay in place”. Their advice to founders is to view this as an opportunity, and focus on a real problem that could benefit from the arms race in training Large Language Models. While Yohav Shoham agreed that it’s better to start with a problem and look for the right tool to solve it (whether it is AI or otherwise), he mentioned that he has never done that. He was always driven by a passion for pushing the technology forward. For him, the problem was found at a later stage.
VC fund Entree Capital have hosted the event in Meta’s hip Tel Aviv office. Almost 1,000 attendees have registered, and some had to watch the livestream due to lack of space. There is clearly a lot of excitement in Tel Aviv over the recent developments in AI. I still miss being able to attend these kind of events in Silicon Valley, where they would probably host speakers from OpenAI and Stanford who are at the forefront of artificial intelligence. Even so, I gained some interesting insights that kept me pondering for the rest of the day.
Oh, and in case you’re wondering - I have not used AI to write this newsletter. At some point I might give WordTune a try though.
Snyk’s Mildly-Down Round
In contrast to the booming Generative AI startup scene, cybersecurity companies have been facing an increasingly challenging funding environment. IT budgets are expected to come down next year, and so CISOs might no longer have blank checks to spend on protecting their companies’ digital assets as they transition to the cloud.
I’ve mentioned the Israeli cyber startup mania in edition #2, and while I don’t think the cloud and the need for zero-trust security is going away, Israeli cybersecurity companies are going to have a harder time demonstrating the triple-digit growth rates of recent years. Some might even end up losing market share, as companies consolidate around fewer security vendors.
In this context, there were two interesting things in the following announcement from Israeli-founded Snyk came last week:
Snyk Closes $196.5 Million Series G Funding at $7.4 Billion Valuation …
Snyk, the leader in developer security, today announced a $196.5 million Series G investment, further validating the company’s unique developer security approach as well as increasingly strong industry demand for this rapidly growing new market category. The round was led by QIA (Qatar Investment Authority) …
“In 2022, I’m proud that Snyk achieved a 100% year-over-year increase in revenue as well as net revenue retention of over 130%,” said Peter McKay, CEO, Snyk.”
The thing that got everyone’s attention was: this is a down round. Even though Snyk’s revenue have doubled, the valuation came down 13% from the Series F round that valued the company at $8.5B in September 2021. While we don’t know the full terms of the deal, being able to raise $200M in the current environment, and losing only 13% of the company’s valuation, is actually a great sign of strength!
Especially when considering public market security companies, like SentinelOne, one of the pioneers in XDR and machine learning based thread detection, that is led by an Israeli CEO. They experienced a stock price drop of a whooping 82%(!) from its 2021 peak. Even the more mature and stable Palo Alto Networks, founded by Israeli Nir Zuk, had its share price decline 30% from its all-times-high. That puts this “mildly-down round” in perspective. Other Israeli cyber startups might not be able to pull off what Snyk did.
The second interesting point to make here is about the Qatar Investment Authority leading the round. Outside of the “QIA is the new SoftBank” discussion, there could be an angle here about Israeli-Arab relations. This might require some squinting, but even though Snyk is a US company headquartered in Boston, it was started in Tel Aviv by three Israeli founders who had previously served in the Israeli intelligence. Israel and Qatar have no official diplomatic relations, despite some economic and cultural links in recent years, and the Israel-UAE and Israel-Bahrain normalization statements in 2020.
I might be forcing it, but this could perhaps be viewed as a positive tiny step toward more peace and stability in the region. At the end of a year so heavily focused around the terrible war in Ukraine and the growing tensions between the US and China, maybe it’s ok to be hopeful and over-interpreting a startup funding round.
Personal Anecdote of the Week: Coffee & Sea
We spent a sunny Saturday morning at a Coffee cart near the beach!
It wasn’t until I first moved to the Bay Area that I learned about the “food truck scene”. I became a food truck fan, something about the limited menu size, and the outdoor setting, just did the trick for me. My two San Francisco favorites were Spark Social in the Mission Bay and Off The Grid events in Fort Mason and Presidio. Me and a friend were even toying with the idea of starting a Hummus truck.
According to Wikipedia, the Great Recession led to an increase in popularity of food trucks since 2010, due to a surplus in available trucks (as the construction business drying up) and chefs who were being laid off. Similar circumstances have happened in Israel in 2020.
While I don’t remember food trucks being a thing in Israel when I was younger, it has certainly become a thing during Covid, when restaurants were forced to shut down multiple times. A “coffee truck” (that also serves food) allows for far more flexibility.
Restaurants have long been reopened (remember the rapid Israeli vaccine rollout? feels like a decade ago, but it was just last year), but the coffee cart scene is still around. Luckily for us.
A short 15 minute drive out of Tel Aviv, “Kafe Veyam” (coffee & sea) is located on a cliff right next to the, well, Mediterranean sea. We were planning a hike, but settled for a short walk given it was too hot (yes, 80 degrees Fahrenheit in December).
Happy Hanukkah from Tel Aviv!
What about that Hummus truck?