The end of Venture Capitalists?
How AI-Driven Efficiency is Transforming the Industry As We Know It
In February, Sam Altman discussed the possibility of a $1B one-person company. My friend Elaine Pofelt has been talking about this concept for years in her books, "$1M One-Person Business" and "Tiny Business Big Money." With AI making business building cheaper and technological efficiencies making everyday items more affordable despite inflation, I'm wondering: what will happen to the venture capital industry?
This situation reminds me of 2010 when I moved to LA from NYC after spending six years working at a VC firm and for one of our portfolio companies focused on medical devices. Medical devices were incredibly capital-intensive, and I believe there's still a need for big dollars in life sciences and deep tech startups with substantial R&D components. As I was learning about technology investing, the LA startup ecosystem was beginning to take off. I was fascinated that for $50,000, you could build a prototype and test it on customers. At the same time, I was confused by startups raising millions of dollars in their early days when it didn't seem necessary, nor were they ready for it. Yet, founders were determined that raising enough money would ensure their businesses' success. However, I saw time and time again that they were building something that didn't fit a specific market problem, making it expensive because they had to add many bells and whistles to please various customers.
In technology companies, those lucky enough to get into the VC club can fund grand visions, but at a cost. For everyone else, there's a real shot at entrepreneurship. But entrepreneurship is not about raising money; it's about survival. Survival against all odds – despite not being able to raise money, despite customers not understanding your business, and having no choice but to risk it all. For these companies, power is in the hands of the founder, but will they give that power away to the VCs?
If entrepreneurs return to their roots, the VC industry will have to change. If not, the VCs hold the power.
