True Ventures co-founder Jon Callaghan predicts a significant shift in how we interact with technology, suggesting the era of the smartphone as we know it may be nearing its end. Callaghan believes that within five to ten years, the ubiquitous smartphone will be replaced by more intuitive and efficient interfaces, a thesis driving investment decisions at his firm. This perspective comes as the venture capital landscape is heavily focused on artificial intelligence, but Callaghan argues the true innovation lies in human-computer interaction.
For True Ventures, a Bay Area firm managing roughly $4 billion in assets, this isn’t simply speculation. The firm has a history of successful, contrarian bets on companies like Fitbit, Ring, and Peloton, often investing when others hesitated. According to Callaghan, this success stems from a focus on identifying and backing teams building technologies that enable fundamentally new behaviors.
The Future of Human-Computer Interaction
Callaghan’s core argument centers on the inefficiency of smartphones as an interface. He contends that constantly retrieving a phone to perform simple tasks – sending a text, checking email – is disruptive and prone to error. This belief fuels True Ventures’ exploration of alternative interfaces, both hardware and software-based. The firm is actively seeking solutions that offer a more natural and seamless connection between humans and technology.
Beyond the Smartphone
This search has led to an investment in Sandbar, a voice-activated ring designed to capture and organize thoughts. Unlike other emerging devices like the Humane AI Pin, Sandbar focuses on a single, specific function: voice note recording. Callaghan emphasizes that Sandbar addresses a fundamental human need – the ability to quickly and easily capture fleeting ideas – and believes this focused approach will be key to its success. The company’s founders, Mina Fahmi and Kirak Hong, previously worked on neural interfaces at CTRL-Labs, acquired by Meta in 2019, bringing relevant expertise to the project.
Callaghan draws parallels to True Ventures’ earlier investments. Just as Peloton wasn’t simply about the bike, but about the community and behavior it fostered, Sandbar isn’t about the ring itself, but about the behavior it enables. This philosophy of investing in behavioral shifts, rather than just new gadgets, is central to True’s strategy.
However, this focus doesn’t mean True Ventures is ignoring the broader AI boom. While acknowledging the potential of companies like OpenAI, Callaghan expresses caution regarding the capital-intensive nature of the current AI infrastructure build-out. He notes the significant capital expenditure required for data centers and chips, raising concerns about the sustainability of the current investment cycle. He believes the greatest opportunities lie in the application layer, where new interfaces will unlock entirely new possibilities.
Disciplined Investing in a Capital-Intense Market
Despite the hype surrounding AI, True Ventures maintains a disciplined approach to investing. The firm typically writes seed checks of $3 million to $6 million for 15% to 20% ownership, prioritizing early access to promising startups. Callaghan states that True isn’t interested in raising massive funds, believing that significant impact can be achieved with a more focused capital base. This approach allows the firm to remain selective and prioritize investments aligned with its core thesis on wearable technology and intuitive interfaces.
This strategy has yielded strong results. Three of True’s four recent exits in the fourth quarter of 2023 involved repeat founders who had previously partnered with the firm, demonstrating the value of cultivating long-term relationships. The firm boasts 63 exits with gains and seven IPOs over its 20-year history, a testament to its ability to identify and support innovative companies.
The smartphone market itself is showing signs of saturation, growing at a modest 2% annually. Meanwhile, the market for smart devices – including smartwatches, rings, and voice-enabled assistants – is expanding at a much faster rate. This trend supports Callaghan’s prediction that we are on the cusp of a shift in how we interact with technology.
Looking ahead, the evolution of interface design will be a key area to watch. True Ventures’ continued investment in companies like Sandbar suggests a belief that voice-activated and other non-screen-based interfaces will play an increasingly important role in our daily lives. Further insights from Callaghan will be available next week on the StrictlyVC Download podcast, with new episodes dropping every Tuesday. The long-term impact of AI and the development of these new interfaces remain uncertain, but True Ventures is positioning itself to capitalize on the coming changes.
This story has been updated to reflect True Ventures’ correct assets under management. Pictured above, Sandbar’s Stream ring.
