Artificial intelligence has been indispensable this year. After OpenAI released ChatGPT about 13 months ago, attention turned to how such tools would impact careers and industries—and eager venture capitalists poured billions of dollars into AI startups that Can be disruptive.
But VCs can disrupt themselves, according to billionaire investor Chamath Palipitiya, a former Facebook executive and CEO of VC firm Social Capital.
“We talk about AI as a big disruptor for big companies and this and that, but AI may end up being the biggest disruptor for VCs,” Palihapitiya. said On The All In Podcast this week.
A “world where AI proliferates,” he said, “is positive for founders,” who will own more of their companies rather than handing over too much equity to VCs.
In the past, he said, a tech startup with $2 million in seed funding could hire seven people and have enough capital to survive for a year and a half. After that, hopefully, it has gained enough traction for investors to raise $10 million or $15. million in Series A funding. The downside, of course, is that in exchange for capital, VCs want equity in the company.
But AI tools give founders more leverage, Palihapitiya said, mentioning GitHub Copilot, which makes building and fixing code much easier. Startups can now hire programmers, perhaps at lower pay rates in other countries, to use such tools more quickly, he noted.
The result is that, today, a tech startup can have a team of three or four people with the same amount of seed funding and survive on that $2 million for four years instead of a year and a half. The founders can then own 80% of their company with $50 million or $100 million exit potential, “and they’ve made more money than the traditional results”.
“It’s only a matter of time,” Palihapitiya added, “until they can put two and two together in an Excel spreadsheet and figure out that owning 50% of a $100 million company costs 18% of another company.” is more than owning %. Again massively thin, or 8% or whatever.”
Now, instead of a particular group of founders competing over who can raise the most money at the highest cost, Jason Kalakanis, an angel investor, responded, he’s seen them move toward , “How can I reach profitability and how can I own as much of my company as possible?”
Palihapitiya became the face of the SPAC boom and bust a few years ago because of his involvement with special purpose acquisition companies — shell corporations listed on a stock exchange that acquire a private company, thereby leading it to an IPO. has been made public without the rigors of the process. .
This is not the first time he has considered the role of VCs in a world transformed by AI.
He said on a podcast last month that it “seems pretty reasonable and logical,” that AI productivity will lead to tens or millions of startups involving just one or two people.
“There’s a lot of financial engineering in this world that goes down,” he said. “I think the job of a venture capitalist changes really profoundly. I think there’s a reasonable case to be made that it doesn’t exist.
Credit : fortune.com