Five venture capitalists share their thoughts on the current AI debate.

Perspectives appear to vary from cautious about a bubble to outright dismissive of one. We thoroughly discussed these viewpoints while enjoying breakfast at Coins2Day’s in-person Term Sheet gathering, held at Brainstorm AI in San Francisco on the previous day. This is Amanda Gerut, Coins2Day’s West Coast news editor, stepping in for my colleague Allie Garfinkle.

Allie welcomed five venture capitalists whose firms managed assets from $5 million up to $25 billion, and the panel offered diverse perspectives. This collective of investors is poised to allocate between tens and hundreds of millions over the coming ten years to businesses leveraging AI, with these ventures destined to be either remarkably successful or utter failures.

Here’s a roll call:

Jenny Xiao, partner at Leonsis Capital and former researcher at OpenAI, came in with a nuanced take. There’s something of a bubble, but it’s “relatively contained” in the infrastructure layer with overinvestment primarily in data centers, GPUs and in large language model companies. But right now, there’s actually underinvestment in the application layer because there are so many ways AI can make an impact in various enterprises, Xiao said. 

Vanessa Larco, former partner at New Enterprise Associates (NEA) and co-founder of new venture firm Premise, has a contrarian view. “Everyone thinks enterprise is safer,” Larco said. “But I actually think the consumer might, this time around in the current environment, be what survives.” Larco’s reasoning is that if a consumer adopts your AI product, it’s because you’re giving them something faster, “radically cheaper, or much easier to use.” Once you’ve done that and built a brand, it’s very hard for people to quit you. 

Rob Biederman, managing partner at Asymmetric Capital Partners and chairman of Catalant Technologies, had a sobering view. “In every boom, 99% or 99.9% of companies fail, and one or two of them become Amazon or Google,” said Biederman, who had to dash off to catch a flight. Only companies that can systematically create value for customers, which most of them aren’t doing right now, will survive. 

Aaron Jacobson, a partner at NEA, commented on the trajectory of technological advancement “is always overhyped in the near term and underhyped in the long term, and that will be true of AI.” Consequently, a market adjustment is inevitable, leading to periods of difficulty concerning valuations and investment, “but ultimately, in 10 years, we’re going to have a lot of really big, impactful companies.”

Daniel Dart, the originator and managing partner at Rock Yard Ventures, presented the most audacious response to concerns regarding an economic bubble. He envisions a complete market opportunity that remains beyond our current comprehension. While many anticipate self-driving Waymos supplanting Ubers, Dart foresees elementary schools and senior care facilities with Waymos on standby, which, to him, signifies that we are still in the nascent stages. 

“You’re really going to tell me there aren’t going to be any trillion-dollar companies in 2030 or 2034? No one here is going to take that bet,” said Dart. “There is going to be so much value creation that it’s like the birth of fire.”

See you tomorrow,

Amanda Gerut
Email:[email protected]
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Venture Deals

- Saviynt, an El Segundo, Calif.-based identity security platform, raised $700 million in series B funding. KKR led the round and was joined by SixthStreetGrowth, TenEleven and existing investor CarrickCapitalPartners.

- fal, a San Francisco-based AI-generated media platform, raised $140 million in Series D funding. Sequoia led the round and was joined by KleinerPerkins, NVentures, and AlkeonCapital.

- Radiala network based in New York City, established to assist individuals in obtaining cutting-edge mental health therapies, has secured $50 million in Series A investment. GeneralCatalyst led the round and was joined by SolariCapital, SLHealthCapital, FounderCollective, BoxGroup, ScrubCapital, and DiedevanLamoen.

- Relation, a London, U.K.-based firm specializing in treatments for immunology, metabolic, and bone conditions, secured $26 million in investment from NVentures, DCVC, and MagneticVentures.

- Aradigma New York City-based platform offering benefits for cell and gene therapies has secured $20 million in Series A financing. FristCresseyVentures led the round and was joined by AndreessenHorowitz and MorganHealth. 

- PrimeSecuritya platform based in Tel Aviv, Israel, and New York City, which utilizes AI to identify and reduce hazards throughout the software development process, has secured $20 million in Series A investment. ScaleVenturePartners led the round and was joined by FoundationCapital, FlybridgeVentures, and others.

- Algori, an AI-driven platform based in Madrid, Spain, that offers shopper intelligence for the fast-moving consumer goods sector, secured €3.6 million ($4.2 million) in investment from RedBullVentures, Co-invest Capital, AttaPoll, and others.

- EmpromptuAIa San Francisco-based company that assists in converting SaaS products into AI-native frameworks has secured $2 million in pre-seed capital. PrecursorVentures led the round and was joined by AlumniVentures, FoundersEdge, RogueWomenVC, and others.

Private Equity

- AppDirect, backed by CDPQ, acquired vComSolutionsa technology management system headquartered in San Ramon, California, for a corporate worth exceeding $100 million.

- JensenHughes, backed by GryphonInvestors, acquired SafetyManagementServices, a West Jordan, Utah-based fire and life safety company. Financial terms were not disclosed.

- NewStateCapitalPartners acquired a majority stake in Harrell-Fisha provider of mechanical installation and maintenance services based in Bloomington, Indiana. The financial details were not made public.

- PestCoHoldings, a portfolio company of ThompsonStreetCapital, acquired SouthwestExterminating, a Houston, Texas-based pest control provider. Financial terms were not disclosed.

- ProsperityPartners, backed by UnityPartners, acquired a majority stake in Farkouh, Furman & Faccio, a firm headquartered in New York City offering services in taxation, auditing, bookkeeping, and business advisory. The financial specifics of the arrangement were not made public.

- SEVA acquired a minority stake in Prontoa communications platform for teams, based in Lehi, Utah, catering to front–line employers and higher education institutions. The financial details of the agreement were not made public.

Exits

- ArclineInvestmentManagement acquired Altronica supplier based in Girard, Ohio, that provides ignition, control, and instrumentation systems for vital infrastructure power systems, from HOERBIGERGroup. Financial terms were not disclosed.

- BerkshirePartners agreed to acquire UnitedFlowTechnologiesan Irving, Texas-based provider of process and equipment solutions for water and wastewater systems, originating from H.I.G.Capital. Financial terms were not disclosed.

- BessemerInvestors acquired Xanitos, a Newtown Square, Penn.-based provider of environmental services, patient transport, patient observation, and linen services, from AngelesEquityPartners. Financial terms were not disclosed.

- ShareRockPartners acquired a majority stake in AMAGTechnology, a Hawthorne, Calif.-based physical security solutions provider, from AlliedUniversal.