Gurley argues that investing in an index of LLMs may not be successful despite early stage AI demand.
“if you're building an index of LLMs, it may not be a very successful investment approach.”
Gurley notes OpenAI is being funded at $300-500 billion pre-money valuation by proven multi-decade investors.
“They clearly like, you're not funding something at 300,000,000,000 pre, 400, 500,000,000,000 pre if you don't already believe that.”
Gurley cites AI company jumping from $100K seed valuation to $300M Series A with $10M raised.
“I heard just this week about a company that did a seed at a 100 pre and is doing their a for 10,000,000 at 300 pre.”
Gurley says AI companies have bigger burn rates than Amazon or any company in venture capital history.
“Oh, more than Amazon ever lost. And so the the burn rates are bigger than they've ever been in the history of venture capital. And eventually, they're gonna wanna bring those in.”
Gurley cites AI company going from $100M seed to $300M Series A valuation, diluting investor ownership.
“So that venture investor that's doing 10 at 300 pre is getting, you know, you know, a tiny percent of this company relative to what people used to get.”
Gurley warns that widespread dependence on one player creates correction risk if they default on commitments.
“And that is another thing that could lead to a correction if they ever have to start defaulting on some of those commitments.”