A.I. will replace some jobs but what about venture capitalists?

The advancements in A.I have left many professionals wondering whether they will soon be replaced by machines. This has now led to the question of whether the same will be the case for the venture capital industry, specifically the people who fund the development of large language models--venture capitalists. James Currier, the general partner at early-stage venture capital firm NFX and an A.I. investor, believes that A.I. will revolutionize the startup industrial complex. He predicts that in the next 10 years, Venture firms will have to transform themselves into a combination of people and A.I.

Currier candidly states that much of what a typical Venture Capitalist does, such as reading, summarizing, and ranking, is what large language models already do extremely well. Therefore, growth-stage VCs will feel the impact of A.I. first since decisions at this stage are already made based on data. On the other hand, seed-stage VCs will be affected last since there is less data available, and intangible human elements matter most.

Although A.I. will level the playing field among investors, making the market more efficient, and lowering alpha, the best VC firms will get further ahead with a combination of A.I. and processes that give them sustainable information and operating advantages. With the next generation of A.I. tools, it is plausible that three very talented people could get to $100 million in revenue with automated workflows. For software-centric companies, A.I. can be used to replace sales, customer service, a lot of the product design and coding, bookkeeping, and legal contracts. Vision and project management will be all that’s left to do. Therefore, startups can aim for lean, three- to five-person teams run by aggressive, visionary generalists, with A.I. doing much of the legwork. While A.I. can automate many aspects of the due diligence process and help in matching projects with investment theses, it is important to acknowledge the limitations. Seed-stage VCs, as mentioned earlier, may be affected less by A.I. due to the scarcity of available data and the importance of human judgment in evaluating early-stage startups. The human element, including factors like team dynamics, vision, and market intuition, still plays a significant role in the success of startups and investment decisions.

It is important to note that the startup industrial complex may soon be behind us, and seed-stage VC investing will prevail in alpha going forward. The advent of A.I. will change the dynamics of the venture capital industry, and the best VC firms will be those that can adapt to this new reality.