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

20VC: Benchmark's Eric Vishria on Where is the Value in AI: Chips, Models or Apps | Why Nvidia Will Not Be The Only Game in Town | The Commoditisation of Foundation Models | Which AI Apps Have Sustaining Value vs Hype and Short Term Revenue

Sep 25, 2024

Eric Vishria, a General Partner at Benchmark Capital and former CEO of RockMelt, discusses the dynamic landscape of AI investments. He shares insights on the commoditization of foundation models and why Nvidia won't dominate the market forever. Eric differentiates between successful high-quality AI applications and those riding the hype wave. He also explores Benchmark's decision-making process for new deals, revealing the complexity of analyzing AI startups and the importance of understanding revenue quality in this fast-evolving sector.

01:02:11

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Eric Vishria

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Quick takeaways

Foundational models are becoming a transformative asset class in AI, requiring companies to adapt swiftly to remain competitive.

Investors must critically assess AI applications for sustainable revenue, distinguishing between genuine value and mere hype in the market.

Successful evaluation of startups hinges on the ability to identify exceptional entrepreneurs and their insights rather than relying solely on traditional metrics.

Deep dives

The Rapid Rise of Foundational Models

Foundational models are rapidly becoming the most significant asset class in human history, representing a massive transformation in artificial intelligence. This shift is expected to eclipse previous technological advancements combined, emphasizing the importance of adaptability in the tech landscape. The speaker notes the current period is both thrilling and confusing, with increased activity comparable to the heightened investment seen in the tech boom of 2010-2011. Emphasizing the urgency of understanding this evolution, companies need to harness these foundational models to remain competitive.

Extraordinary founder with do insight more important in competitive markets

00:50

Prioritize Distribution and Talent Alignment

01:10

Spreadsheet investors

01:35

Gurley: "Even great companies can be overvalued."

01:13

Intro

4min

Reflections on Startups: A CEO's Journey

4min

Navigating the Evolving Landscape of AI Investments

22min

Navigating AI Ventures: Insights and Strategies

22min

Reevaluating Investment Perspectives and AI Market Dominance

2min

Reflecting on Decisions and Mentorship

6min

Exploring User-Centered Innovations and Accessible Investment

3min

Eric Vishria is a General Partner @ Benchmark Capital, one of the world's leading venture firms. At Benchmark, Eric has served on over 10 boards including Confluent (CFLT), Amplitude (AMPL), Benchling, Contentful, Cerebras and several other private companies. Prior to joining Benchmark, Eric was the Co‐Founder and CEO of RockMelt, acquired by Yahoo in 2013.

In Today's Episode with Eric Vishria We Discuss:

1. How to Make Money Investing in AI Today:

How does Eric think through where value will accrue in the stack between chips, models and applications?
Why does Eric believe foundation models are the fastest commoditising asset in history?
Why does Eric believe that Nvidia will not be the only game in town in the next 3-5 years?

2. How to Invest in AI Application Layer Successfully:

How does Eric analyse between a standalone and deep product vs a product that foundation model will commodities and incorporate into their feature set?
How does Eric differentiate between the 10 different players all going after customer service, or sales tools or data analyst products etc?
How does Eric analyse the quality of revenue of these AI application layer companies? What does he mean when he describes their revenue as "sugar high"?

3. How the Best VC Firm Makes Decisions:

What is the decision-making process for all new deals in Benchmark?
As specifically as possible, how does the voting process inside Benchmark work?
What deal was the most contentious deal that went through? What did the partnership learn?
How has the Benchmark decision-making process changed over 10 years?

4. Does AI Break Venture Capital Models:

Does the price of AI deals and size of their rounds break the Benchmark model?
Will foundation model companies all be acquired by the larger cloud providers?
Unless multiples reflate in the public markets, does venture as an asset class have hope?
Why does AI make paying ludicrously high prices potentially rational?

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