Venture capitalists love AI coding startups

Top News

• VCs love AI coding tools: One area where AI is impacting productivity today is software development. ChatGPT and GitHub Copilot are both popular AI-powered tools that can help developers write more code, more quickly. Venture capitalists are betting on the trend, pouring nearly $1 billion into startups working on building new and better artificial intelligence software tools to help devs, the FT reports. Mix in a recent a16z investment into Cursor, and it seems that the startup cluster forming here will need to generate multiple IPOs to prove a venture winner.

• Uber teams up with Cruise: Alphabet’s self-driving service Waymo recently announced that it has doubled its weekly paid rides to 100,000, a feat that we discussed on TWiST earlier this week. Now, Uber is linking up with GM’s self-driving company, Cruise, to “bring its robotaxis to the ride-hailing platform in 2025,” TechCrunch reports. Recall that self-driving cars are rapidly gaining market share in China, enough that they are driving new economic anxieties amongst drivers in the nation.

• Perplexity targets high-value ads to monetize AI search: AI search startup Perplexity is best-known lately for its copyright scraps with rights holders, and its plans to share revenue with them. From where will that revenue come? Advertisements, which the startup hopes will prove hugely lucrative. CNBC reports that Perplexity intends to target CPM rates (cost per thousand impressions) of $50. That’s a lofty target. Bear in mind, however, that search advertising can often have high CPM rates but more cost-effective CPC pricing. Regardless, advertising seems to be the company’s bet for at-scale monetization.

A Boom in Dev Copilots

One theme we’re tracking this year at TWiST is AI Meets Reality, which loosely encapsulates what happens when AI rubber meets the real-world road. In some cases, the results are impressive. In others, less so.

One area where it does seem that software tools built using modern AI models are having an impact is coding help. GitHub Copilot and ChatGPT are perhaps the best-known examples here, but there are a host of startups busy attacking the same problem space. So much so that — as noted above — venture capitalists have invested hundreds of millions of dollars into them.

This week, Cursor is making the most noise thanks to a $60 million Series A led by a16z, but it’s far from being the only startup of note in its domain. There’s Replit, which last raised a $97 million Series B extension at a valuation north of $1.1 billion; Magic, which raised a $117 million round earlier this year to bring its total capital base to $145 million; Augment, which last raised $227 million in an outsized Series B; Poolside AI, a French AI startup that has raised $126 million, including $100 million in a single round late last year; Cognition, which has raised $196 million; Codium, an Israeli startup with a comparatively small $10.6 million in capital raised; and Tabnine, with $57.1 million in total funding secured.

That is a big list, yeah? We could try to stack rank the various entrants, weigh their comparative strengths, and then add a few of them to the TWiST500. But given the sheer amount of founder and venture interest we’re seeing here, that seems unnecessarily restrictive.

So, we are adding the whole lot to the list because the startups in question are operating at the intersection point of AI model improvement, demand for more efficient labor, and the goal of tech companies to reduce their human-derived costs. There should be plenty of market here to go around, which means multiple winners. — Alex and Erika

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This Week in Startups

E1997: In the latest episode of Startup Legal Basics, Wilson Sonsini Partner Becki DeGraw and Jason discuss the importance of early legal counsel, common legal oversights such as cap tables and IP assignments, and the risks associated with DIY legal documents. They also dig into the financial and legal implications of mismanagement and the intricacies of pro forma cap tables and employee stock option plans (ESOPs).

E1996: The News Crew was back in action, with Jason and Alex digging into the Bolt fundraising controversy, and when founders should derisk and not. From there, the state of media-tech relations, Waymo’s rapid growth, open-source self-driving, and stablecoins were the name of the game.

E1995: Jason and Alex dug into the latest news to start the week, including data on the current state of venture investing. Both how venture investors are faring, and how founders are doing themselves. (If you ever wanted a breakdown of venture terms, this is a great show to watch). The duo also chatted through the latest Silicon Valley-media dustup, and closed with good news for founders looking to dodge a down round.

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