Uncorrelated Ventures Founder: AI Is a Hot Mess Right Now

Summary

The transcript discusses the focus on infrastructure and crypto software, with an emphasis on the latter as a subset of infrastructure. The speaker's background in infrastructure software is highlighted, and the potential of AI as a value add to existing platforms is noted. The current state of AI investments is described as a 'hot mess' due to high valuations and crowded markets, yet opportunities exist, particularly in the tools and tool chains layer. The speaker also touches on the challenges of investing in the hardware and foundational models layers due to their nature and the involvement of larger entities. Despite the challenges, the speaker has made several seed investments and is optimistic about the prospects. The fund's strategy includes investments in crypto and crypto-adjacent startups, with a focus on decentralized infrastructure. The fund's $315 million size and its institutional backing are also discussed, as well as the speaker's concerns about the impact of high AI interest on valuations and the hope for a market adjustment to identify better investment opportunities.

Takeaways

• 🚀 The primary focus of the company is on infrastructure software, with 80% of the attention on this area and 20% on crypto.
• 🌐 The speaker's background is heavily in infrastructure software, which is a significant part of the crypto space, particularly decentralized infrastructure software.
• 💡 AI is seen as a value-add to existing software platforms and a subset of infrastructure software, providing a positive sentiment and 'feel good' value.
• 🛠️ Infrastructure software is differentiated from application software, and AI is very meme-friendly currently, with a lot of hype surrounding it.
• 📈 The speaker is interested in investing in the tools and toolchains layer of AI, despite it being crowded and high in valuations.
• 🏢 Venture investors are limited in investing in the lower layer hardware due to it being the realm of larger companies, while the foundation models layer is tough to monetize.
• 🌍 The speaker finds success in investing in seed series and series B, with a geographical focus on the U.S. market and an exception for India.
• 💰 The fund size of $315 million is considered sizable, and the LPs (Limited Partners) back the speaker's vision to invest in the AI layer despite the challenges.
• 🔄 The speaker invests in crypto and crypto-adjacent startups, particularly those working on underlying technology, sometimes through buying tokens.
• 🏦 The majority of the fund's investors are institutional, with the rest being a mix of family offices, individuals, and a university endowment.
• 📉 The speaker expresses concern about the high valuations in the AI sector but hopes for a trough of disillusionment to provide better investment opportunities.

Q & A

What are the two main focuses of the speaker's software interests?

The speaker's two main focuses are infrastructure software, which accounts for 80% of their interest, and crypto, which is 20%.

How does the speaker's background influence their focus on infrastructure software?

The speaker's background has been primarily in infrastructure software, which has led to their significant focus on it, especially in relation to decentralized infrastructure software.

What is the speaker's perspective on the current state of AI in software platforms?

The speaker views AI as a value add to existing software platforms and a subset of infrastructure software, indicating a positive sentiment towards the integration of AI in these areas.

What challenges does the speaker face when investing in AI startups?

The speaker finds the AI investment landscape to be crowded, with high valuations and fast-paced funding rounds, making it difficult to identify the right opportunities and to execute investments.

Which layer of AI investment does the speaker find most appealing to venture capitalists?

The speaker believes that the tools and toolchains layer is the best area for venture investors to focus on, despite the challenges of high competition and valuations.

How does the speaker describe the sentiment around AI currently?

The speaker describes the sentiment around AI as being very positive and 'meme friendly,' but also expresses concern that it might be too positive, leading to a potential overvaluation in the market.

What type of investments has the speaker made in the AI space?

The speaker has made seed investments in the AI space, though they acknowledge the high valuations and the competitive nature of the market.

What is the speaker's stance on investing in crypto and crypto-adjacent startups?

The speaker is open to investing in crypto and crypto-adjacent startups, particularly those focused on decentralized infrastructure, even if it means purchasing tokens as part of the investment.

How did the speaker's fund raise capital, and what was the composition of Limited Partners (LPs)?

The speaker's fund raised capital mostly from institutional investors, with the remainder coming from a mix of family offices, individuals, and a university endowment.

What economic environment is the speaker interested in?

The speaker is interested in the current economic and rates environment, likely referring to the impact of interest rates and economic conditions on investment opportunities and valuations.

What is the speaker's outlook on AI valuations in the short term?

The speaker is concerned about the high valuations and positive sentiment around AI in the short term, hoping for a trough of disillusionment to present better investment opportunities.