Reddit Co-Founder & CEO Steve Huffman, in conversation with Nick Martell at Headline's annual meeting.
In October, Headline hosted our Annual Meeting (“AGM”) at the Presidio in San Francisco, bringing together our limited partners, founders, and the broader global team for an update on what’s happening in the markets and in our portfolio. The event featured insights from a diverse group of speakers, including Headline team members, portfolio company founders, and industry experts. We covered topics such as IPO criteria, founder insights gleaned from operating in the era of AI, and market opportunities and performance.
Here’s a quick snapshot of what you would have heard as a fly on the wall. We’re already looking forward to next year’s edition.
From the Headline Team:
As it has been widely discussed, the criteria for a company to IPO is more stringent than ever. It will be critical for later-stage companies to show strong revenue, scale, profitability, market leadership, and durable growth, said Mathias Schilling, Founding Partner at Headline. This means we’re seeing venture investors hold their positions longer, and Covid portfolios are taking a longer time to mature. Yet we maintain optimism as many Headliners are moving toward that higher bar. A number of our portfolio companies reported record revenue growth at scale in 2024.
Despite fears that tech is volatile, the sector continues to drive outsized returns in the public markets, according to Nancy Xiao and Trevor Neff, Partners at Headline Growth. The tech-heavy Nasdaq has outperformed the S&P 500, even post-ZIRP since 2022.
Around 70% of Headline’s software deal flow revolves around AI themes, according to Headline Partner, Jonathan Becker, and Principal, Taylor Brandt. But at Headline, the software pod is looking for companies providing enduring value. The pod is especially interested in companies at the intersection of AI and labor augmentation like Upheal, Heidi, Zive, and Mithrl; AI and commerce, like Prescient AI and YoFi; procurement and modern ERPs like Nivoda and Verse Medical; and software powering the energy transition, like Monta and Gorilla. We see AI challenging existing software companies, creating entirely new verticals, with the potential to shift pricing from seat-based to work output-based.
Headline’s consumer pod is investing in consumer obsession across the Hierarchy of Needs, and they’re closely watching major cultural trends that may impact opportunities of innovation, according to Headline Partners, Dominic Wilhelm and Jett Fein. This includes new adulthood and shifting priorities (like the shift from traditional careers to influencer opportunities, driving companies like Linktree to unicorn valuations), hyper-personalization (companies like personalized search engine Perplexity notching a $3B valuation), and new world spirituality (a shift from traditional religion to spirituality, seeing companies like Co-Star surpass 30M users).
Fintech incumbents absorb a lot of value in AI – even if it took them a longer time to embrace. For instance, JP Morgan Chase reportedly initially banned employees from using ChatGPT – but soon joined up with OpenAI. Now all of its 140K staff use an AI research analyst for various use-cases. Incumbents will benefit from AI by leaning into their established distribution, breadth of data, and customer base, said Vice Presidents, Sophia Samutin and Yusuf Janahi, while emerging fintechs will find opportunity in their agility. Headline sees opportunity investing in the new SAAS: “Service-as-a-Software,” companies capitalizing on changing business models like SPRX and Linc, as well as automation that improves margins like Payflows.
In Infrastructure, of 2023’s six areas of emphasis (AI, data analytics, cloud storage, data infrastructure, devops + software delivery, security), we’ve invested in two: data infrastructure (SqlDBM) and AI (Thread). Principal, Jacob Conger, and Vice President, Nic von Blottnitz, shared that artificial Intelligence has its own infrastructure stack – at least for now - while tooling is striving to anchor between model and customer.
From our Founders:
AI is changing the game for all businesses, but especially for small businesses and solopreneurs. Harshit Dwivedi, Founder & CEO of Aftershoot, shared that his AI for photo editing software has reduced the post-production editing timeline from 20 hours down to one hour, allowing photographers to spend much more of their time growing their businesses vs. finding, selecting, and editing photos for clients.
There’s not just a gap, but a gulf, in the economy between white-collar and blue-collar employees at the same company. More than half the global economy is built on businesses where employees are primed to feel disconnected–meaning workers don’t even have a company email address, said Martin Böhringer, Co-Founder & CEO of Staffbase. More than 60% of workers who leave jobs cite poor company communications as a primary driver for their exit. Solutions like Staffbase allow supermarket cashiers and warehouse workers to align with company goals and outcomes via their smartphone apps, increasing retention and connectedness.
Every economy is unique, with different needs to address (and opportunities to invest in). Sergio Furio, Founder & CEO of Creditas, shared that although 75% of residential real estate in Brazil is owned outright with no mortgage, citizens were drowning in credit card interest. Creditas has found a way to leverage an individual’s most critical assets – house, car, and salary – to reduce the cost of credit.
From Industry Thought Leaders:
Watch this space, AI edition! Mistral's Lead Scientist, Devendra Chaplot, said that he’s seeing the most advancement in agentic applications, particularly in coding agents. The next big leap in AI is likely to be multi-modal agents—think AI that can use computers like humans, and perhaps book your flight or find you a hotel. “This development will greatly expand what enterprises can automate,” said Chaplot. “We expect to see significant advancements in this area within the next 1-2 years.”
Lastly, everyone got the core takeaway of Brian Chesky’s famous “founder mode” doctrine wrong, according to Steve Huffman, Co-Founder & CEO of Reddit, who closed out our AGM on the day his stock jumped 40%+ due to their impressive earnings. Having sat in on that now-famous talk, Huffman said that Chesky was really emphasizing that “founder mode” just means a founder's standards must never be delegated. “To make sure things get done…don’t let the company get a mind of its own,” said Huffman. “Lots of people build growth-stage companies, and they get a middle-management mindset; kill that.” Huffman said that Silicon Valley is "littered with the carcasses” of companies that didn’t maintain ruthless standards. In fact, Reddit began acting like a public company two years before filing for IPO, which led to 2024’s most successful new market entrant.
BONUS: As a longtime San Francisco resident, Huffman shared his ultimate favorites with us.
- Where should you eat? Dejà Vu Pizza in the Mission.
- What should you do? Take Waymo for a thoroughly incredible (and Silicon Valley) experience.
- Where should you go? Visit all SF’s parks, which are bound to be near wherever you’re staying. Huffman votes for Dolores Park on the weekend, though – which is a vibe.