Will AI Render Venture Capital Obsolete?

Chamath Palihapitiya, The venture capitalist (Social Capital), former AOL and Facebook exec, and All–In podcast co-host, said something interesting recently. 

One of the conversations around AI that we have not obsessed over as much as others is the whole notion of which industries will be disrupted or even gutted by AI. Will it be paralegals, junior marketing copywriters, financial advisors, or some other group?

Fortune summarized comments that Chamath shared on a recent episode of the All In podcast, which he co-hosts with Jason Calacanis, David Sachs, and David Friedberg,  that one overlooked outcome of the dramatic productivity gains we all expect to see from AI is that it may upset the apple cart in venture capital.

Ok. How so?

Cyamath said the AI productivity gains will mean that startups can get a lot farther with one or two founders than in the past, simply by automating so much of the early-stage grind with AI, that VCs will no longer be as necessary if they are even necessary at all.

 If a company doesn’t need to hire 50 developers, a marketing and sales team, and so, or at least not as early in the process as they might have needed to in the recent past, why do they need to raise money and cede equity to rapacious VCs.

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He also said that given the growing ease of launching new software businesses using AI, we should expect to see an exponential leap in the number of companies chasing the startup dream.

Here is some of what Chamath had to say on the subject. 

“There’s a lot of sort of financial engineering that kind of goes away in that world,” he said. “I think the job of the venture capitalist changes really profoundly. I think there’s a reasonable case to make that it doesn’t exist.”

Chamath’s point seemed more to be that early-stage VC investing might go away or become automated. And that hyper-lean AI-driven startups might be able to hold out longer before raising the big bucks they will likely still need to scale. 

On Brand Talk 

My colleague Mike Boland and I discussed this notion on this week’s recording of Localogy’s This Week in Local podcast. And Mike noted that this message of a hyper-automated startup world is on-brand for Chamath. 

“This reminds me of something that he has always tried to push, which is to take aspects of venture capital, and not just the investment, but what comes after that,“ Mike says on the episode, which comes out on Monday. 

“When you have a portfolio of companies that have certain repeatable or standardized or productized sort of operational functions and tools that you can apply across the board. So not only providing funding but also providing all of the functional aspects of that business that can be standardized and productized to take that off the plates of the founders.”

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