Welcome to the 2nd edition of Buzzworthy. We’re excited about today's edition as we were able to leverage beehiiv’s brand new AI creator suite for one of the paragraphs...can you guess which one?

It’s been a tale of two stories in public and venture markets — consumer confidence is peaking, NASDAQ is up a whopping ~35% YTD, the S&P has made up the majority of losses from the 2021 peak, and yet at the same time many investors feel there’s a disconnect, believe the worst is yet to come, and are sitting on their hands. At Lightspeed, we believe some of the best companies get formed during these turbulent times so you will see us continue to invest (a few highlighted below!) and maintain a steady hand.

Today we bring you fresh perspectives on everything from consumer VR adoption to early winners in the AI arms race to our feature story on the parallels between playing poker and playing the VC game.

Let’s jump in!

Last year, I had the pleasure of participating in Tiger Jam, a 50-person charity poker tournament in Las Vegas sponsored by Tiger Woods that raises money for students living in under-resourced communities.

As I sat down at my first table of the tournament, I began reflecting on the similarities between playing Texas Hold 'Em and investing in startups. Both involve assessing the odds, taking calculated risks, and making big bets to have a chance at big returns. Just as Vegas is a mecca for card players, Silicon Valley is a mecca for startup builders & VCs. And interestingly, many of the same principles apply…albeit with one key difference ⬇️

(1) Don't go with your gut instincts alone

As the first hand was being dealt, one of the other players puffed out his chest and bragged "I'm going all in without even looking at my cards." If he was hoping that would intimidate the rest of us, he was wrong. In a very short time he was no longer in the tournament.

In a similar vein, some investors will take the approach of investing purely on company buzz without doing the requisite diligence, which feels akin to betting without looking at the cards. While short-term this may lead to some lucky wins, in the long-run it is a challenging way to build an investment portfolio. Trusting your instincts is important, but you can't just go with your gut; you need the data to back it up.

(2) Big bets require strong conviction

One of my rules about poker is that I only go all-in if I really have a good hand (and now I have revealed how little I bluff to everyone reading!). Likewise, if you're funding a company, especially a capital-intensive one, you need strong conviction it's going to survive through the flop, the river, and the turn (or more recently Covid, a recession, and the highs & lows of a decade-plus journey). The only way to gain that confidence is by doing your due diligence.

I folded on the first 20 hands of the tournament. If my hole cards didn't look promising, I was out. I think that's also the right way to approach investing. We might pass on a thousand ideas just to find one that's worth going all-in on. It's much better to wait for pocket aces than to use up all your chips on weak hands.

(3) Don't rely on luck or chance to save the day…

As our colleague Jeremy Liew likes to say, “Lemons ripen early.” If your pocket cards aren't strong, don't rely on the river or the turn to fill that inside straight. Likewise, a poorly planned business strategy or a bad product-market fit tends to become obvious pretty quickly for startups. It's rare that companies that start out with a “bad hand” make it to Series B or C. It's always better to fold early (i.e. pivot the business or return capital) and live to play another day.

(4) …but know when to stick it out for the final card

You're running low on chips, but you're one card away from a straight flush — do you stick it out for another round of bets? In investing, this is when you decide whether to do a bridge round so the company can 'flip another card' and fulfill its early promise. This can be a good strategy but only if you know exactly where the bridge is going to.

Remember, even if you start out with pocket aces or pocket kings, you still only win two-thirds of the time. Even when you have exceptional founders, there's no certainty you'll rake in the chips in the end.

(5) You can't become good if you never play the game

You can't learn how to play cards by reading a book or watching the World Series of Poker on ESPN. You need to have skin in the game. Similarly, learning how to identify winning startups requires actually investing in some and putting your own money (into the company or into your fund). Even if you're a student, you could put together an angel syndicate with each of you investing $1,000, just to learn the ropes. In that way, you're really betting on yourself.

(6) The boys clubs → outdated and ready for a change!

During the Tiger Woods tournament I was 1 of just 3 women in the room. The other 47 players were men. Both the poker and VC industries are still very male dominated, though at Lightspeed we're doing our best to change that (~⅓ of our investment partners are women).

At the tournament, I also noticed that women tend to play slightly differently than men. I immediately bonded with the other two women (who were both professional poker players) and we were friendly & collaborative with one another, which is very similar to the women we’ve had the privilege of spending time with in Silicon Valley. Shout out to the amazing VC mum’s group, started by Midas List investor Lauren Kolodny.

(7) Make money for the right people

Our Limited Partners (LPs) are very important to us at Lightspeed — we could not be more proud to be working for (and making money for) these endowments, pension funds, and foundations. In contrast, in poker most players are making money for themselves, but when playing in the big leagues they are also making money for charities and endowments. The students living in under-resourced communities we played for in the Tiger Jam tournament are exactly the people I am passionate about making money for, just as I feel about our terrific LPs.

… and now for the key difference: don’t bluff in investing

Here's one place where card playing and capital investing diverge. You may feel confident you can convince others at the table that your pocket deuces are really aces, and you might succeed in scaring them away. But you don't want to try to bluff your way through a financing round. Unlike some poker players, the startup market never folds; eventually, you have to show your hand!

As with most Apple new product announcements, the Vision Pro unveiling last month was the milestone moment advocates for Extended Reality (XR — encompassing virtual reality, augmented reality, and mixed reality) have been looking forward to. From smart watches to smartphones to tablets to bluetooth earbuds, Apple has proven an unparalleled ability to bring major hardware innovation to the masses, effectively establishing the company as a driving force in pop culture. And there’s reason to believe they will once again be the driving force behind broader consumer XR adoption.

At Lightspeed, many of us believe the question is not if VR will be a major technology platform shift, but rather when will this shift take place. Will the V1 Vision Pro, priced at $3,499, be the product that brings this mainstream? Maybe not, at least not immediately, as evidenced by Apple projecting just 400K unit sales of the Vision Pro in 2024. For reference, the (“underperforming”) V1 Apple Watch still sold an estimated 12M units in year one. But will the rumored consumer-focused ‘Apple Vision’ (non-Pro?) strip down some of the higher end features and bring to market a more price-palatable option before the end of 2024? 2025? 2026? Never?

To understand more about consumer perspectives on the timing of VR going mainstream, we’d love to hear from you! Would you please join us in completing this short 3-question survey about VR by Monday July 31st? 

We’ll share back anonymized takeaways on an upcoming edition of Buzzworthy, and we will have much more to come on the topic of XR as Lightspeed is doing a broader thematic deep-dive which we’ll include in a future newsletter!

Building Tomorrow’s Boardroom Today: Lightspeed had the privilege of co-hosting the 4th installment of our Building Tomorrow’s Boardroom Today series alongside the Black Women on Boards team in New York City this past month. The series aims to address the lack of diversity in corporate boardrooms and explore strategies to create a more inclusive and equitable environment. More details to come soon about our 5th installment in the series planned for the Fall focusing on Latinx community.

Generative AI: Doubling down on Lightspeed’s firmwide coverage of all things AI, we unveiled The Generative Eight — a Lightspeed original research report on the talent race among top AI startups according to our internal analysis of over 3,500 startups. The report segments the landscape by headcount, previous company, educational background, and current location, and also gives a high-level look at the next generation of startups on the cusp of breaking out.

Brand Refresh: At Lightspeed, we have unwavering conviction in the companies we back, and we serve the bold founders building the future. The newly refreshed Lightspeed website showcases the stories of these talented founders (incl. Jessica Alba’s path with The Honest Company linked below!) as well as broader sector perspectives & operator resources.

Additionally, Lightspeed this week unveiled a brand new gaming showcase website, highlighting the 15+ year history of backing exceptional teams across studios, platforms, and interactive technology. And we’re just getting started!

Deal Announcements: Summer is heating up, and (contrary to prior years) so is the venture market! We’re excited to highlight recent Lightspeed’s investments into Redpanda’s $100M Series C, Typeface’s $100M Series B, Gardens’ $31.3M Series A, and last but certainly not least our very first investment in Africa — Berry Health’s $1.5M Pre-Seed financing.