The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg

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Jun 19, 2024

Michael Eisenberg, co-founder and GP at Aleph, dives into the rapid depreciation of foundation models in AI, suggesting they may be the worst investment ever. He challenges the notion that private equity will save the M&A market and discusses the potential IPO landscape. Eisenberg raises alarms about Lina Kahn's threat to capitalism and explores the competitive dynamics between the US and China in AI. He also reflects on lessons from the dotcom era, emphasizing the need for startups to adapt in an evolving tech landscape.

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INSIGHT

AI Boom and Bust

AI is transformational but also a gold rush, similar to the dot-com boom.
Bubbles create infrastructure for future innovation but also lead to financial losses.

INSIGHT

Investor Pitfalls

Many LPs lack true portfolio diversification in AI due to overlapping investments.
"Logo chasing" and replicating models across geographies are common investor pitfalls.

INSIGHT

Value in AI Companies

Foundation models depreciate quickly; value lies in the teams, not just the models.
Software, unlike data or models, offers a more lasting asset in AI companies.

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Michael Eisenberg is a Co-Founder and General Partner @ Aleph, one of Israel's leading venture firms with a portfolio including the likes of Wix, Lemonade, Empathy, Honeybook and more. Before leading Aleph, Michael was a General Partner @ Benchmark.

In Today's Show with Michael Eisenberg We Discuss:

1. The State of AI Investing:

Why does Michael believe that "foundation models are the fastest depreciating asset in history"?
Are we in an AI bubble today? As an investor, what is the right way to approach this market?
Who will be the biggest losers in this AI investing phase?
Where will the biggest value accrual be? What lessons does Michael have from the dot com for this?

2. Where Is the Liquidity Coming From?

Why does Michael believe that it is BS that private equity will come in and buy a load of software companies and be the primary exit destination?
Why does Michael believe that IPO windows are always open? Should founders go out now? What is good enough revenue numbers to go out into the public markets?
Why does Michael believe that Lina Kahn is a threat to capitalism? How does Michael predict the next 12-24 months for the M&A market?

3. AI as a Weapon: Who Wins: China or the US:

Does Michael agree with the notion that China is 2 years behind the US in AI development?
Does Michael agree that AI could be a more dangerous weapon in wars than nuclear weapons?
Why does Michael suggest that for all founders in Europe, they should leave?
US, China, Israel, Europe, how do they rank for innovating around data regulation for AI?

4. Venture 101: Reserves, Selling Positions and Fund Dying:

Why does Michael only want to do reserves into his middle-performing companies?
What framework does Michael use to determine whether he should sell a position?
Which funds will be the first to die in this next wave of venture?
Why does Michael not do sourcing anymore? Where is he weakest in venture?
Why does Michael believe that no board meeting needs to be over 45 mins?