Happy Wednesday. Hope everyone had a great MDW. I was in Charleston on the beach all weekend and I think I am the only person to ever get injured playing Bocce ball. Got a pretty mean bone bruise on my ankle. 

Anyways, this is the first version of the 250 or 60 to 4 segment. For some reason, I decided to start with the hardest level, $4 million. Today I will lay out a company that I would love to invest $4 million into and why.

If you missed the last issue and don’t know what I am talking about, give it a quick read here.

If you want to follow this mock investment fund as we built it, visit 250or60to4.com.

$4 million

Company: Tryprofound.com 

Description (from ChatGPT): Profound builds an AI-search-visibility analytics platform that helps brands understand how often, where, and in what tone large-language-model answer engines (ChatGPT, Perplexity, Gemini, Copilot, Claude, etc.) mention them and their competitors. The goal is to shift classic SEO toward “Generative Engine Optimization” so companies can win share-of-voice inside zero-click, chat-style results.

Background & Thesis

I came across Profound earlier this year after finding one of the founders, Dylan Babbs, on twitter. I immediately understood the problem and solution that they were building. Investing throughout the AI landscape is incredibly hard. You can have a spray and pray approach, where you have coverage around a large % of AI-company rounds, or you can be diligent and dive deeply into a few companies and ideas. 

Tryprofound is one that stood out to me for a few reasons. 

1. It’s piggybacking on a foundational customer habit shift 

2. It isn’t something these larger LLMs can easily replicate 

3. It drives FOMO in its current and potential customers 

Let me dive into these a little more. 

1. Piggybacking

There is a fundamental shift happening with the way that consumers search, ask, and locate information. More and more nowadays, I am seeing myself, friends, and parents use ChatGPT or other LLM’s for “google” searches over the traditional google.com route. Google still makes sense when you’re looking for a quick answer, but in situations that require follow-up questions or more detailed information, like me diagnosing myself with a bone bruise instead of a broken ankle after a bocce ball injury, a conversational search experience will outperform Google ten times out of ten.

When Google came around, Search Engine Optimization (SEO) took off and is now roughly an $85-$100b market. With consumers switching habits and moving away from search engines and toward generative engines, I will bet that this SEO spend is going to follow. 

2. Defensible

One of the elements I like about Profound is that it is defensible against the larger LLM companies such as OpenAI, Anthropic, or Perplexity. One issue that I find with a lot of new AI startups is they can easily be adopted by these larger companies at any point. Midjourney used to be a go-to for AI photo generation, now ChatGPT can just do it. Profound isn’t something that will be built by these large LLM companies, and even if they did, they would only do it for their own model. Profound shows you your presence across all models.

Biggest takeaway here is I love AI companies that are defensible against the larger LLM companies. Profound fits this mold.

3. FOMO

Fear of missing out, or FOMO, is usually something you feel when you decide to stay in while your friends go out to a pub for a few pints of Guinness (I personally would never say no to this, it’s always a lovely day for a Guinness). In this case, Profound is offering a new way for companies to measure how visible they are to consumers within a new potential customer acquisition channel. This isn’t just a small new viral app, this is a complete shift in a large consumer behavior. Profound is likely positioning their sales motion in this manner. Showing that companies like Indeed, Ramp, US Bank, Eight Sleep, and more are current customers will make others feel like they are falling behind unless they adopt this new technology. 

Investment Note 

With this, if I had the fund or opportunity, I would allocate $4 million to Profound in a Series A round. They raised a $3.5m Seed at an unknown valuation in the fall, and are currently hiring like crazy. This either means they have great revenue numbers and are not raising, have raised a Series A in stealth, or are currently raising a Series A.

So in order to properly mark this investment, we are going to do some quick math. Most Seed rounds see investors grab 20% ownership. So 20% ownership at $3.5m is a $17.5m valuation. Because AI is hot in the streets I am going to guess that they got a premium and raised at a $25m valuation. I’m also not going to mark myself at this valuation as I think it is evident they have grown since then.

So, I am going to mark my hypothetical $4m investment at roughly a $40m valuation. 

In order to see how bad (or great) I do at these investments, we are going to track them on the 250or60to4.com website. 

Song of the Week

Not much to say here except for you’re welcome.