According to Paris Heymann, a partner at Index Ventures, the current wave of AI-powered products and services can be sorted into three layers:

• Foundational models
• AI infrastructure
• AI applications

“Some of these applications will be broadly horizontal,” he writes in TC+, “but many AI applications will also be vertical, or industry-focused.”

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In this market map, Heymann looks at AI stack startups exploring myriad aspects of this explosive sector, shares thoughts on where “Vertical AI” is heading, and offers advice on how SaaS startups should approach embedding features and functionality.

“Proprietary data and distribution will be a winning combination in the race to build both horizontal and vertical AI applications,” he predicts.

We’re publishing on a lighter schedule to commemorate Independence Day, so I’ll return on Friday, July 7 with a new TC+ roundup.

Have a great week!

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

How confidential computing could secure generative AI adoption

Image Credits: MirageC (opens in a new window) / Getty Images

The generative AI land rush has created a new challenge: How can enterprises use proprietary data to build powerful models while maintaining security and privacy?

“Protecting training data and models must be the top priority,” says Anjuna CEO and co-founder Ayal Yogev.

“It’s no longer sufficient to encrypt fields in databases or rows on a form.”

Big tech corporate venture capital 🤝 generative AI startups

Image Credits: Bryce Durbin / TechCrunch

Generative AI startup Typeface emerged from stealth this year, but the $100 million Series B round that just boosted it to a billion-dollar valuation signals that “big tech companies are busy wielding their most powerful weapons: checkbooks,” writes Alex Wilhelm.

In The Exchange, he examines how companies like Microsoft, Salesforce and other corporate venture entities are buying their way into AI-adjacent products and services.

“So long as your founding team has an AI pedigree and a plan to sell lots of AI tech to big companies, you can expect a flood of cash from big tech funds and traditional venture investors alike.”

Crypto losses halved in Q2 2023 to $204M

Image Credits: Getty Images

Are the rug pulls, exploits and pump-and-dump schemes that have scammed so many crypto consumers becoming a thing of the past?

According to a report by De.Fi that used information from REKT, “losses in the second quarter were 55% narrower than in Q1 2023, when the industry lost a whopping $462.3 million to hacks and scams,” writes Jacquelyn Melinek.

4 VCs illustrate why there’s good reason to be optimistic about the machine learning startup market

Image Credits: Bryce Durbin / TechCrunch

Training the expansive models that power AI applications is thirsty work: Machine learning startups can charge clients for anything from optimizing ad campaigns to generating gargantuan datasets.

Kyle Wiggers surveyed four investors to get their thoughts on whether “the hype cycle in ML is dying down or going strong,” discuss technical roadblocks holding the industry back and get their advice for founders who are building in the sector:

• Lonne Jaffe, managing director, Insight Partners
• Jerry Chen, partner, Greylock
• Ashish Kakran, principal, Thomvest
• Janelle Teng, VP, Bessemer Venture Partners

Ask Sophie: How do we relocate Ukrainian and Russian team members to the US?

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

Our startup employs about 30 people globally through a combination of direct and co-employment based on their country.

Over the last year and a half or so, we helped several team members relocate from Ukraine and Russia to various non-Schengen countries such as Georgia, Taiwan, Thailand, Turkey, and Uzbekistan.

We realize it’s more expensive if we bring these employees to the U.S., but our startup will be more successful. How do we bring them here?

— Meaningful Moneymaking

Fund of funds are starting to play a different role for venture LPs

While traditional fund of funds have fallen out of favor, there is still LP appetite for innovative approaches. Image Credits: Getty Images

After reviewing the last few years of declining fund of funds activity, Rebecca Szkutak found that several factors are leading limited partners to look elsewhere.

“There has been way more opportunity to invest in a VC than there has ever been in the past,” said Kyle Stanford, a senior venture analyst at PitchBook.

“For new LPs coming into the market, they didn’t need to go to a fund of funds to get access.”

Pitch Deck Teardown: Super.com’s $60M Series C deck

Image Credits: Super.com (opens in a new window)

Once known as Snapcommerce, travel/fintech/e-commerce startup Super.com has acquired almost $200 million in funding, including an $85 million Series C in April 2023.

The company, which offers a credit-building cashback card, shared with TC+ the 17-slide pitch deck it used to close its latest round:

• Cover slide
• Mission slide
• Traction slide 1
• Traction slide 2
• Team slide
• Customers (interstitial slide)
• Customer profile
• Target customers / market size
• A Savings Super App (interstitial slide)
• Why Now slide
• “Why a super app” slide
• Product slide
• Product road map slide
• User behavior slide
• Solution slide (“SuperCash is core to the experience”)
• Value Proposition slide (“Personalized Experiences”)
• The Ask slide

11 VCs reveal how hard it was for their startups to fundraise in H1 2023

Image Credits: tommy (opens in a new window) / Getty Images

Alex Wilhelm surveyed 11 investors to learn about the headwinds their portfolio companies leaned into in the first half of 2023.

“From their answers, it appears a startup’s ability to fundraise in today’s climate is based on several key factors, including capital efficiency, the market and its needs,” he writes.