Why Investors Are Rethinking Everything for the AI Era
a16z investors David George and Aram Verdiyan explain how AI is reshaping venture capital, from portfolio construction to which fund sizes and strategies can still deliver strong returns.
The gist
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Only 20 of 3,000 US venture firms have achieved consistent 3x net returns, so LPs should concentrate capital in proven performers rather than spread across 50-70 funds.
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AI hit $100 billion in revenue in 4 years versus 15 for SaaS, which George and Verdiyan say makes it a core allocation, not a side bet.
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AI adoption sits at roughly 1-2% penetration in most enterprises, with a median spend of $12 per employee per month, leaving enormous room to grow.
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Pre-GPT SaaS companies growing at 30% face a tough exit market since they cannot IPO, PE is uninterested, and public multiples have fallen sharply.
Also mentioned
0:57
Anthropic
· "The three frontier model companies — SpaceX, OpenAI, Anthropic — represent somewhere between three and a..."
0:57
OpenAI
· "The three frontier model companies — SpaceX, OpenAI, Anthropic — represent somewhere between three and a..."
0:57
SpaceX
· "The three frontier model companies — SpaceX, OpenAI, Anthropic — represent somewhere between three and a..."
22:06
Cursor
· "For every nine companies like that, there's one really special one that's doing a couple of million in ARR..."
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