October 31, 2022
Photo: Brendan Smialowski/Bloomberg via Getty Images
Hello, and welcome to Protocol Enterprise! Today: how former Google CEO Eric Schmidt stokes fear of China’s AI capabilities while investing in startups competing for government contracts, why the post-Figma Adobe will only have itself to blame if things go south, and the latest investments in enterprise tech.
Eric Schmidt says the U.S. is losing a battle against China for AI supremacy. Now the AI tech investor and former Google CEO has cultivated a cadre of Washington insiders to help urge government decision-makers to spend billions to procure AI software, bolster AI research, and build the country’s computer science talent pool.
But Schmidt’s anti-China mission could bolster his own commercial AI interests. He’s already invested in AI companies that scored federal contracts while he led government groups.
Now Schmidt is also looking to the Cold War, Nelson Rockefeller, and Henry Kissinger for inspiration.
Schmidt has cultivated a large group of influential insiders to assist in disseminating his ideas in Washington.
The first in a multipart Protocol series, Schmidt’s story is about more than just conflict of interest. It is an exploration of how one of the world’s wealthiest and most prominent private sector tech moguls has planted the seeds of urgent concern that the U.S. is losing a battle against China for AI supremacy, and helping lay the groundwork for an expanding government mission predicated on misconceptions and misaligned incentives.
Valuations have become less hype-driven and more realistic; the amount of time spent on due diligence has increased substantially; and every founder needs to directly, clearly, and concisely answer the question, “Does this project have any real-world utility, and does it create economic value?”
For decades Adobe has completely dominated the creative software industry. The company’s impressive community of designers, communications, developers, and artists have propelled the company to becoming a $14.6 billion giant with no clear rival.
One emerging competitor was Figma, the web-based product design startup, that Adobe acquired in September. Although Adobe paid an astronomical $20 billion for the startup, the company believed it had no choice because Figma was a serious competitive threat.
“We were hearing on some occasions that customers were curbing the amount of growth in Adobe licenses and funneling more of their budget towards Figma,” Mizuho analyst Gregg Moskowitz told me.
But once the Figma deal closes, Adobe will have no true competition aside from startup Canva, which isn’t used much by professional designers.
Although Adobe has a history of making these types of defensive acquisitions, the company is actually pretty good at M&A, industry analysts told me. And as chief product officer Scott Belsky pointed out, his startup Behance grew 30-fold since joining the software giant.
For Adobe’s next act, the company will be focused on integrating Figma and other acquisitions, accelerating collaboration between designers and developers, and advancing emerging technologies such as generative design.
Although Adobe has struggled with organic innovation in the past, the company has the cash position, talent, resources, and ambition to define the next generation of design. Adobe will just have to stay out of its own way.email | twitter)
HealthJoy raised $60 million for its HR benefits software.
Merge raised $55 million to help businesses build customer-facing integrations.email | twitter)
Despite the economic headwinds that freaked out the stock market last week following cloud earnings results, Gartner predicted Monday that cloud spending will jump 20.7% to $591.8 billion, which would be faster than spending grew from 2021 to 2022.Thousands of poorly managed — or neglected — servers around the world running Microsoft’s Active Directory are being used to amplify DDoS attacks, according to Ars Technica.
The VC correction is proving once again that valuations are not an indicator of success. While money continues to flow, the crypto winter and VC slowdown have forced even the most committed Web3 venture capitalists (and their investors) to proceed with more caution.
Thanks for reading — see you tomorrow!